COVID-19: Relief for Directors

International and domestic governments are currently implementing a range of economic measures in an effort to mitigate the effects of COVID-19. There is no doubt that this virus has had, and will continue to have, an adverse impact on global economies.

In order to survive unwelcome market upheavals, it is imperative that businesses have appropriate process in place to resume their usual operations on the other side of this crisis. As lockdown measures are likely to increase and with constant changes in the regulatory environment, directors must continue to think carefully about their duties to act in the best interests of the company, seeking to lessen the negative impact of COVID-19, which could force the company into insolvency and compel winding-up.

In response to the COVID-19 crisis, the Australian Government ("the Government") has, as outlined by Treasury, introduced an Economic Support Package which provides relief to both individuals and businesses for the purpose of preventing insolvency during this time with the hope that normal business operations can resume once the crisis passes.

To support Australian business, the Economic Support Package provides:

  • an increase of the threshold from $2,000 to $20,000 at which creditors can serve a statutory demand on a company under the Corporations Act 2001 (Cth) ("the Act");
  • an increase of the statutory timeframe for a company to respond to a statutory demand from 21 days to six months;
  • relief for directors from any personal liability for trading whilst insolvent; and
  • allowance for temporary flexibility in the Act to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the COVID-19 crisis.

As it currently stands, these temporary measures are to be in place for an initial 6 months.  Extensions may be considered if necessary.

Please follow this link to Treasury's Fact Sheet:

It is important to note that the Government has stipulated that the abovementioned relief only applies to debts incurred in the ordinary course of business and not where misleading, deceptive, and/or fraudulent conduct is involved.

During this uncertain time, it is prudent to avoid risk, particularly financial, and obtain legal advice in order to protect your interests and that of your company.

At Burke Lawyers, together with our partners, are qualified to provide quality commercial, business and litigation advice. For more information, please contact Meghan Warren or Rosy Dean (nee Rosy Roberts) on +61 3 9822 8588 or email our team HERE.

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