We have previously written about the temporary protections afforded to insolvent businesses and their directors due to the financial impact of Covid-19. Some of the protections that were initially extended to 31 December 2020 have been further extended from 1 January 2021 to 31 March 2021, but with new requirements imposed.
In this article, we outline the protections afforded, as they have been amended, the eligibility criteria and how you can take advantage of the temporary restructuring relief.
Effect of previous restructuring relief provisions
To recap, the temporary moratorium announced last March in relation to insolvent businesses included:
- Increasing the threshold at which a creditor can issue a statutory demand to $20,000 from $2,000, with 6 months to respond to the statutory demand, as opposed to just 21 days; and
- A temporary moratorium on personal liability for directors for insolvent trading.
In September 2020 the Federal Government extended the relief to December 2020. Certain provisions have now been further extended to 31 March 2021, albeit with conditions attached.
Eligibility for temporary relief
From 1 January 2021, to be eligible to take advantage of the temporary relief provisions (as summarised above) there are now further strict eligibility criteria. If a company wishes to rely on the temporary relief provisions it is best that the directors obtain their own legal advice or advice from an insolvency practitioner.
How we can help
The process a company must follow to take advantage of an extension for insolvency relief is one that is complicated. One of the first things directors of distressed businesses should do if they are considering this option is contact a professional to determine whether their business is eligible for the new restructuring process.
We are a team of insolvency practitioners led by members of the Australian Restructuring Insolvency & Turnaround Association (ARITA) and registered liquidators. As such, we can assist you with this.
So, please contact us at our Brisbane or Gold Coast offices for an initial obligation-free consultation. This is the first step to take advantage of the temporary relief. We will discuss all options with you to protect you as a director and to assist with saving your business.