Coronavirus update: extension of temporary relief for insolvency and bankruptcy
The Federal Government has, consistently with expectations, announced that the temporary relief which has been in place for insolvency and bankruptcy will be extended until 31 December 2020.
WHAT THIS MEANS FOR COMPANIES
Since 25 March 2020, the following temporary changes have applied in relation to the issue of creditor’s statutory demands:
- The minimum amount of the debt must be $20,000 (increased from $2,000).
- The company debtor has six (6) months to respond (increased from 21 days).
The temporary changes were due to expire on 25 September 2020. You can read more here about the changes that have applied to companies since 25 March 2020. The above changes to the issue of creditor’s statutory demands will be extended until 31 December 2020 (as soon as regulations are passed).
WHAT THIS MEANS FOR INDIVIDUALS
Since 25 March 2020, the following temporary changes have applied in relation to the issue of bankruptcy notices:
- The minimum amount of the judgment must be $20,000 (increased from $5,000).
- The individual debtor has six (6) months to respond (increased from 21 days).
The temporary changes were due to expire on 25 September 2020. You can read more here about the changes the changes that have applied to individuals since 25 March 2020. The above changes to the issue of bankruptcy notices will be extended until 31 December 2020 (as soon as regulations are passed).
LIKELY IMPACTS ON YOUR BUSINESS
In the current climate, businesses should exercise greater caution in their commercial dealings with companies and, measures should be put in place to reduce the risk of being unable to recover debts owed by those companies that are less than $20,000.
Here are some tips:
- If possible, consider not supplying goods and services on credit (or reducing the amount of any credit limit that is given).
- Request payment on delivery.
- Ask your customer to provide additional forms of security for payment.
- Do not issue a creditor’s statutory demand unless your business is prepared to wait at least 6 months for payment.
- Pick up the phone and regularly speak to your customers about the payment of your invoices.
- Put in place a process to follow up outstanding invoices and apply this process consistently.
- Take steps to commence court action to recover outstanding debts now (obtaining a court judgment is a good first step), so that there will be no delay to enforcement.
- Get advice about other options you have to enforce debts owed by companies.
WE’RE HERE TO ASSIST
ESY Lawyers is a commercial boutique firm based in Sydney solely focused on resolving commercial disputes.
We regularly assist to recover outstanding debts owed to businesses. Unlike debt recovery agents, we do not charge a commission based on a percentage of the debt that is recovered. For most debt recovery matters, we offer fixed fees for certainty and peace of mind.
There is an array of other options available to enforce debts owed by companies (in addition to the issue of a creditor’s statutory demand).
For more, contact us today for an initial general consultation so we can discuss your circumstances and review your options together.
Disclaimer: This article is current as at 8 September 2020 and is intended to provide general information in summary form only. The contents do not constitute legal advice. Formal legal advice should be obtained for your specific matter.