Temporary Relief for Financially Distressed Businesses

Temporary Relief for Financially Distressed Businesses (1)

There is a temporary increase to the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands.

  • The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company from $2,000 to $20,000. This will apply for 6 months.
  • 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 threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will temporarily increase from its current level of $5,000 to $20,000. This will apply for 6 months.
  • The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to 6 months. The extension 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 apply for 6 months.
  • To make sure that companies have confidence to continue to trade through the coronavirus health crisis with the aim of returning to viability when the crisis has passed, directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months.
  • Temporary relief from personal liability for insolvent trading will apply with respect to debts incurred in the ordinary course of the company’s business. Egregious cases of dishonesty and fraud will still be subject to criminal penalties. Any debts incurred by the company will still be payable by the company.

 

How to Apply

You don't need to apply for the temporary relief, these relief measures will apply for 6 months.