A creditor issuing a statutory demand on a company is a common way for a creditor to recover unpaid monies and place the company into liquidation. The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000. This will apply for 6 months.
Not responding to a statutory demand within the specified time creates a presumption that the company is insolvent. The statutory time frame for a company to respond to a statutory demand will be extended temporarily from 21 days to 6 months. This will apply for 6 months.
The Government will make a number of changes to the personal insolvency system regulated by the Bankruptcy Act 1966 to assist individuals. The threshold for the minimum amount of debt required for a creditor to commence bankruptcy proceedings against a debtor will temporarily increase from its current threshold of $5,000 to $20,000. This will apply for 6 months.
Failure to respond to a bankruptcy notice is the most common act of bankruptcy. The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to 6 months. This extension of time will give a debtor more time to consider repayment arrangements before they could be forced into bankruptcy. This will apply for 6 months.
When a debtor declares an intention to enter voluntary bankruptcy by making a declaration of intention to present a debtor’s petition there is a period of protection when unsecured creditors cannot take further action to recover debts. This period will be temporarily extended from 21 days to 6 months. This will give debtors more time to consider the options that are best for them. This will apply for 6 months.
Creditors, many of whom are themselves small businesses, will still have the right to enforce debt against companies or individuals through the courts. The Small Business Development Corporation has created a COVID-19 assistance centre to provide dedicated guidance on available support options, including:
- information on available stimulus packages and eligibility requirements;
- advice on preparing businesses to manage impacts;
- other resources.
Tim Hayter, Principal, Mid West Lawyers
This information is general in nature and should not be relied upon as legal advice. Formal legal advice should be sought for your particular circumstances.