The coronavirus is first and foremost a health crisis, but as measures are being taken to reduce the spread of the virus throughout the community, many profitable businesses may temporarily suffer financial hardships.
The Government announced the following initiatives to assist these businesses to make it through the crisis and resume normal business.
Temporary higher thresholds and more time to respond to creditors demands
The minimum threshold for creditors issuing statutory demand on a company under the Corporations Act 2001 has been temporarily increased from $2,000 to $20,000.
The timeframe for a company to respond to a demand has been increased from 21 days to six months, which will apply for six months.
The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings has also been temporarily increased from $5,000 to $20,000 for six months. As failure to respond to a bankruptcy notice is the most common act of bankruptcy, the debtor now has six months instead of 21 days to respond, allowing them more time to consider repayment plans.
The period in which unsecured creditors cannot take further actions to recover debts, when a debtor enters voluntary bankruptcy, has been extended from 21 days to 6 months.
Temporary relief for directors from any personal liability for trading while insolvent
These are challenging times for many businesses. The ATO recognises this and will provide tailored solutions for business owners and directors who are struggling due to the coronavirus. This may include temporary reduction of payments, deferring payments or withholding enforcement actions.
We can assist you in working with the ATO if your business has fallen into financial hardship.
Information in this article has been sourced from: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf