TEMPORARY CHANGE TO INSOLVENCY RULES

Back to previous page

SUMMARY
Temporary change to insolvency rules to allow businesses to continue trading.

POLICY
The Government is proposing several temporary measures to lessen the risk of a surge in insolvencies and allow more businesses to trade through this difficult period. These measures include:

  • a temporary six-month increase to the threshold at which creditors can issue a statutory demand on a company under the Corporations Act 2001 from $2000 to $20,000

  • a temporary extension to the statutory timeframe for a company to respond to a statutory demand from 21 days to six months. This extension will apply for six months

  • a temporary increase to the threshold at which creditors can initiate bankruptcy proceedings against a debtor who is not incorporated from $5,000 to $20,000. This will apply for six months

  • a temporary extension to the period that a debtor has to respond to a bankruptcy notice from 21 days to six months. This will apply for six months

  • a temporary extension to the period under which an unsecured creditor cannot take further action to recover

  • debts when a debtor declares an intention to enter voluntary bankruptcy from 21 days to six months. This will apply for six months

  • giving directors temporary relief from personal liability for insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This relief will apply for six months but will not apply to egregious cases of dishonesty and fraud.

To enable the government to respond to other issues at a time where Parliamentary sittings will be disrupted, the government proposes giving the Treasurer a temporary instrument-making power in the Corporations Act 2001 to temporarily amend provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the crisis. 

The instrument-making power will apply for six months. Any instrument made under this power will apply for up to six months from the date it is made.

MORE INFORMATION
Refer to the Treasury website page for more information and worked examples.

Back to previous page.