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COVID-19 and Corporate Insolvency: What should directors do?

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

During the COVID-19 outbreak, insolvent trading laws have been relaxed. But this does not mean there is no risk to directors. In reality the breathing space has simply been extended to allow directors to work out a solution. In our previous blog in this series, we discussed the obligations on directors when their companies are or might become insolvent. This blog explores what directors should do about it.

Voluntary Administration

Company directors who fear that a company is or may become insolvent and who might not be protected by the amendments should give consideration to appointing a voluntary administrator (“VA”). Appointing a VA puts in place a moratorium on enforcement action by creditors while the VA investigates the affairs of the company and reports to creditors, including even certain enforcement action by lenders and landlords. Further, director exposure to liability for insolvent trading ceases from that day forward, while the possibility of the company continuing to exist is kept alive.
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Privacy Law Update: A $1.7 Million Obligation

New laws have come into effect on 12 March 2014. The changes provide a new set of rules for businesses and organisations concerning the maintenance and recording of an individual’s personal information. Any businesses that do not meet the requirements of the act may face fines of up to $1.7 million for corporations or $340,000 for individuals.

The new laws define the ways in which the privacy of an individual must be handled.

Some notable changes include:

  • focus on a person’s ability to access and change their personal information;
  • quality and accuracy of information collected;
  • use of information collected; and
  • disclosure of information collected.

Notably, there is an exemption that applies for some business operators which meet certain requirements. Contact us to find out more about the exemptions.

For companies that provide credit or deferred payments, a second set of rules relates to credit information obligations and the information that must be provided for credit reporting purposes.
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