The Australian Government implemented temporary restructuring relief in March 2020 as part of its national economic assistance efforts following the global COVID-19 pandemic. The aim was to aid companies so that they could get through the pandemic, keep their operations running, and protect jobs.
The legislation passed in December 2020 extended temporary relief to eligible companies until 31 March 2021, with an additional relief of four months for companies appointing a restructuring practitioner.
To take advantage of the temporary restructure, the director of the Company must, before 31 March 2021:
- make a declaration outlining the company’s eligibility for temporary restructuring relief;
- publish notice of the making of the declaration on the Published Notices website;
- provide the Australian Securities & Investment Commission (‘ASIC’) with a copy of the declaration within five days after it is made.
The initial temporary relief shall last for three months and can be extended for another month in certain circumstances. Companies can apply for an extension of the temporary relief period beyond three months if there are reasonable grounds to believe that the company:
- is or may become insolvent (then the eligibility criteria of restructuring are met);
- a restructuring practitioner has been appointed; and
- there are no external administrators.
A company must prove that:
- steps were taken for appointment of a restructuring practitioner;
- a declaration of the company’s eligibility was met;
- a notice was published; and
- ASIC was given a copy of the declaration accordingly.
For further details regarding temporary restructuring relief, please visit ASIC’s website or contact our office.
With the Government providing specific economic support packages, many companies managed to survive 2020. However, after 31 March 2021, the Government’s JobKeeper payments come to an end, which might prove to be a challenge for many businesses in remaining afloat.
The objective behind providing the relief is to provide company directors some time to ascertain if they can restructure their company. Companies who do decide to register for temporary restructuring relief, shall benefit in:
- preventing creditors, who are owed less than $20,000, from issuing statutory demands for winding-up of the company;
- the company, in turn, gets a six-month period to respond to statutory demands;
- temporary relief from director personal liability as a result of insolvent trading.
The temporary restructuring relief is available until 31 March 2021. Company director(s) must apply before then to access the benefit in order to help their respective companies maintain control over their business and to restructure their debts.
Do you require assistance in relation to any issues discussed in this alert? If you have any queries, please don’t hesitate to contact our experienced and fast-acting Commercial Pillar at Burke & Associates Lawyers. We would welcome the opportunity to assist you.