Extension to amendments to insolvency and bankruptcy laws
In March 2020, the Commonwealth Government made significant changes to Australia’s bankruptcy and insolvency laws.
The changes were set to expire on 25 September 2020. However, due to the on-going impact of COVID-19, these changes will be extended until 31 December 2020.
Insolvency is when a company or person cannot pay debts when they are due.
What do these temporary changes mean?
Bankruptcy of Individuals
• In order for a debtor to be placed into bankruptcy, the creditor must first file and serve a Bankruptcy Notice.
• Previously, a debtor would have 21 days to respond to a Bankruptcy Notice i.e. pay the debt or dispute the Notice. Under these changes, a debtor now has a period of 6 months to respond.
• Typically, a Bankruptcy Notice could only be issued if someone owed more than $5,000.00. Under these changes, a Bankruptcy Notice cannot be filed by a creditor unless a person owes more than $20,000.00.
• The most common way to ‘wind up’ a company (i.e. put into liquidation) is to first issue a Statutory Demand, pursuant to the Corporations Act 2001.
• Previously, a company would have 21 days to respond to a Statutory Demand. Under these changes, a debtor now has a period of 6 months to respond.
• Typically, a Statutory Demand could only be issued if someone owed more than $2,000.00. Under these changes, a Bankruptcy Notice cannot be filed by a creditor unless a person owes more than $20,000.00.
These changes to both insolvency and bankruptcy are intended to “provide regulatory relief for businesses that have been impacted by the Coronavirus crisis…”
You can see the Commonwealth Treasurer’s official statement here.
We will provide further updates as they arise.
Commercial and Civil Disputes
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• Debt recovery
• Contract and commercial disputes
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• Shareholder disputes
• Will and estate disputes
• Disputes relating to land and property
• Business and company structures (including trusts)
• Retail and commercial leases
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