coronavirus: from where you’d rather not be
The current challenges facing businesses in Australia are immense: there’s global and national economic uncertainty, companies are reluctant to trade and customers are reluctant (and in some places, prevented) to shop, and all the while, invoices and debts still need to be paid.
With all those factors, it’s not surprising that many businesses will be facing cash-flow and solvency issues.
Insolvency is a serious matter which can have serious consequences, particularly for the directors of insolvent companies, who can become personally liable to pay the company’s debts if the company continues to trade when it shouldn’t.
But it’s not all doom and gloom. There are a number of measures that the State and Federal Governments have introduced that could greatly assist businesses that are at the tipping point.
- Increasing minimum debt for creditors to issue statutory demands (to companies) and for commencing bankruptcy proceedings (against individuals) to $20,000;
- Increasing the time to comply with a statutory demand or bankruptcy notice from 21 days to 6 months;
- Releasing directors from personal liability for some debts incurred while insolvent trading;
- Preventing landlords from terminating leases or calling on security, of small commercial leases, for non-payment of rent or other financial obligations; and
- Requiring landlords to negotiate in good faith for rent reductions (where the business has suffered drops in turnover).
If a business acts quickly and takes advantage of these measures, and seeks appropriate advice, it has a far greater chance at recovering, or at least being in a position to recover as the economy improves.
The most common comment made by insolvency practitioners of insolvent companies, is that the company may have actually had a chance to turn things around, if the directors had sought advice earlier.
If you are experiencing financial hardship, cash-flow issues, or questions of solvency as a result of the Coronavirus crisis, now is the time to seek advice.
At Valenti Lawyers, we are experienced in insolvency and restructuring, and have a number of strong relationships with accountants and insolvency practitioners who are prepared to meet with clients on a reduced-fee or no-fee basis to explore your options.
Please do not hesitate to reach out to us. We would be happy to discuss any concerns or queries you have in person, or by telephone or video conference.
***Please note, these comments are general in nature and are not intended as legal advice.