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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:

https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf

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 & Associates Lawyers, we, together with our partners, are qualified to provide quality commercial, business and litigation advice. For more information, please contact Rosy Roberts, Associate, Meghan Warren, Principal, Amelia Nagel, Associate, on rroberts@burkelawyers.com.aumwarren@burkelawyers.com.auanagel@burkelawyers.com.au respectively, or by contacting our office on + 61 3 9822 8588.

Contacts

Meghan Warren

Principal

Meghan Warren

Principal
LL.B GAICD B.Bus (FinPlan)
Meghan is one of the few lawyers in Australia admitted in the State (Victoria) and Federal jurisdictions of Australia, and as an Attorney at Law to the New York State Bar in the United States.

Kristy Muhlhan

Principal

Kristy Muhlhan

Principal
LL.B (Hons) GRAD DIP. L.P., GAICD.
Since 2014, she has been an owner and Principal of the firm and has mastered a broad range of essential commercial and business skills which go hand in hand with the work she does for...

Rosy Roberts

Principal

Rosy Roberts

Principal
LL.B (Hons) B.A GAICD
Rosy has extensive experience in Litigation & Alternative Dispute Resolution having represented clients in all Victorian State Courts and the High Court of Australia. She is also a VCAT appointed Administrator.

Anthony Burke

Consultant

Anthony Burke

Consultant
B.A LL.B DIP.FIN. MGT
Tony is an LIV accredited business law specialist and a VCAT appointed Administrator. In 2008 he was President of the Law Institute of Victoria and served for two years as a director of the Law...

Stewart Davis

Associate

Stewart Davis

Associate
LL.B (Hons) B.Com
As well as property law, Stewart has had exposure to VCAT administration matters and commercial law, particularly servicing developer clients.

George Hanger

Associate

George Hanger

Associate
LL.B BA
George was admitted to legal practice in May 2015 after completing a Bachelor of Arts at the University of Melbourne and a Bachelor of Laws at Monash University.

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