By Anica Cunanan, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group
The unprecedented financial impact of COVID-19 has forced the laws surrounding insolvencies to change – well at least temporarily. Analogous to the process of containing the virus, the Government is currently deciding on temporary changes to also flatten the curve of the inevitable insolvencies following this pandemic.
The Treasurer has been given a temporary instrument-making power in the Corporations Act 2001, for a period of six months, in order to provide temporary relief to distressed businesses. This was announced by the Government on 12 March 2020.
By way of summary these changes may include the following:
- A temporary increase in respect of the debt for which creditors may issue a statutory demand – from $2,000 to $20,000;
- Further, extension of the time for compliance with a statutory demand – from 21 days to six months;
- An increase in the threshold for initiating bankruptcy proceedings;