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COVID-19 Credit Crisis – Where can Accountants and Advisors Turn for Help?

By Ellen Ferris, a Solicitor in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

Accountants and financial advisors are the first port of call in a financial storm. Never is that need more prevalent than now, during the COVID-19 pandemic.

Among other things, accountants and financial advisors should be able to consider discussing the following options with their clients:

  • Voluntary administration – especially the option for the statutory moratoriums gained by voluntary administration;
  • Deeds of Company Arrangement (DOCA) – including Holding DOCAs which have been recently upheld by the High Court – see here;
  • The existing Safe Harbour provisions – see here;
  • The new COVID-19 protections against insolvent trading – see our blog here;
  • Informal restructuring of companies and business (making sure you avoid the anti-phoenixing legislation – see our blogs here); and
  • If all else fails, promptly appointing a suitable qualified liquidator to wind up the company.

Accountants and advisors should advise clients early in respect of these matters. Time is critical and the stakes are high – both for advisors and directors – and advisors must be prudent in advising their clients who appear to have long term issues with solvency; it is better to speak with a specialist now for restructuring advice, rather than later. This will ensure that when things do improve, they will be in a better position to take advantage of the situation. [...]  READ MORE →

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Virgin Australia Voluntary Administration – A Superhero Tactic?

By Anica Cunanan, Law Clerk and Darrin Mitchell, Senior Associate, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

The term voluntary administration has been prevalent in the media this year, even before the significant commercial difficulties experienced during the COVID-19 pandemic. Virgin Australia is the latest major company to head down this path.

Is this the end for Virgin? Can it recover? Can the Government still bail out the company? More importantly, perhaps, should it? [...]  READ MORE →

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Impacts for Commercial Leases & Commercial Contracts

COVID-19 – Impacts for Commercial Leases & Commercial Contracts

Commercial Leases

The Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (the Regulation) commenced on 24 April 2020.  The purpose of this Regulation is to give effect to the National Cabinet Mandatory Code of Conduct for Commercial Leases (the Code) which was announced by the National Cabinet on 7 April 2020.

Key aspects of the Regulation include:

  • the Regulation applies to both retail leases and commercial leases
  • to qualify for relief, the tenant must be an “impacted lessee” – that is, they qualify for the JobKeeper program and have turnover of less than $50 million for the 2018-2019 financial year
  • a landlord cannot take any of the “prescribed actions” against an impacted lessee (such as evicting the tenant, terminating the lease, re-entering the premises, or calling on a security bond or guarantee given by the tenant) due to non-payment of rent or outgoings during the “prescribed period” (ie, 6 months after the commencement date of the Regulation which is 24 April 2020)
  • the rent payable by an impacted lessee must not be increased during the prescribed period (other than rent determined by reference to turnover)
  • a lessee will not be in breach of a lease due to an act or omission which is required under a Commonwealth or State law in response to the COVID-19 pandemic (such as shutting their business due to a COVID-19 order)
  • if requested by an impacted lessee, the landlord must renegotiate the rent payable under the lease in good faith having regard to the economic impacts of the COVID-19 pandemic and the leasing principles set out in the Code
  • the leasing principles in the Code include:
  • in any negotiations landlords must offer proportionate rent reductions (up to 100% of the rent ordinarily payable) through rent deferrals or waivers based on the reduction in the tenant’s trade during the COVID-19 period
  • waivers must be no less than 50% of the total rent reduction, and may constitute a greater proportion in the circumstances – although regard must be had to the financial capacity of the landlord to provide additional waivers above 50%
  • any deferred rent must be repaid over the balance of the lease term or 24 months (whichever is greater)
  • any reduction in outgoings must be passed on to the tenant
  • landlords cannot levy any interest or charges in relation to the rent deferrals or waivers
  • tenants must otherwise comply with the terms of the lease (as amended)
  • the landlord and tenant may agree to waive some or all of the requirements of the Regulation and Code
  • the landlord cannot take any action (such as seeking to recover possession of the premises, terminating the lease or exercising or enforcing its rights under the lease through legal proceedings) unless and until the parties have attempted mediation
  • any court or tribunal hearing a dispute over these matters must have regard to the leasing principles set out in the Code
  • a landlord may still take a “prescribed action” (such as terminating a lease) in circumstances unrelated to the economic impacts of the COVID-19 pandemic (such as where the lessee damages the premises or refuses to vacate the premises upon expiry of the lease)

Key Takeaway

Landlords should consider what financial information it is reasonable to expect a tenant to provide in support of any request for rental reduction or waiver and tenants should compile relevant information urgently if they are entering into negotiations with their landlord. It may be, for example, that a tenant’s turnover is more severely impacted than is required to qualify for the JobKeeper program. In those circumstances it would be expected that a tenant would provide detailed financial information in support. [...]  READ MORE →

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New Laws to Stand Down Employees

New Stand Down Laws

From 9 April 2020 employers are able to utilise new stand down provisions arising from changes to the Fair Work Actin light of COVID-19. These changes are temporary and are currently stated to end on 28 September 2020.

 

Core Requirements

The new provisions enable employers to issue a “jobkeeper enabling stand down direction” to relevant employees where all of the following apply:

  • the direction was given after the commencement of the new stand down laws to not work on a day(s) on which the employee would usually work, or to work for a lesser period than the period which the employee would ordinarily work on a particular day(s), or to work a reduced number of hours (compared with the employee’s ordinary hours of work)
  • when the direction was given, the employer qualified for the jobkeeper scheme
  • the employee cannot be usefully employed for the employee’s normal days or hours during the stand down period because of changes to business attributable to the COVID‑19 pandemic or government initiatives to slow the transmission of COVID‑19
  • the implementation of the direction is safe having regard to (without limitation) the nature and spread of COVID‑19
  • the employer becomes entitled to one or more jobkeeper payments for the employee for a period that consists of or includes the jobkeeper enabling stand down period or for periods that, when considered together, consist of or include the jobkeeper enabling stand down period

Other Requirements 

Like most laws, there are exceptions, qualifications and additional rules that need to be met, and disputes can be referred to the Fair Work Commission. [...]  READ MORE →

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COVID-19: Will my hearing go ahead? – Part 2

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

We are continuing our series on whether a global pandemic will allow (or force) an adjournment of pending court proceedings.

In Kahil v R [2020] NSWCCA 56 Senior Counsel for the accused sought leave to withdraw from appearing for a co-accused on the 7th day of an estimated 3 week criminal trial. This was because he was aged 69, had a “compromised immune system” and was concerned about his exposure to one of the co-accused (his client) who he described as “fluey”. Counsel had tried to be tested for the COVID-19 coronavirus over the weekend and had been refused because “he did not qualify for a test”. [...]  READ MORE →

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COVID-19 and Corporate Insolvency: New tax legislation directors need to know

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

In the light of the COVID-19 outbreak, the Federal Government has acted to ameliorate some risks to directors. This includes recently introduced risks to directors.  Directors should be aware of new amendments to the Taxation Administration Act 1953 (Cth) (“the TAA”). The amendments include:

  1. New rules about post-dating ASIC notification of a director resignation;
  2. An estimates regime for GST payments;
  3. Application of the Director Penalty Notice (“DPN”) regime to account for the estimates regime for GST payments; and
  4. Retention of tax refunds for failing to comply with obligations.

Director Resignations

These new rules provide that any notification of a director resignation lodged with ASIC 28 days after the resignation date will only be effective from date of notification. This means that even if a director resigned several years ago, he or she will remain a director (with all of the liabilities associated with such appointment) until their resignation is lodged with ASIC. Therefore, directors who resign should ensure that they lodge a Form 370 with ASIC as soon as possible. If they fail to notify ASIC within 28 days, they may find themselves liable in respect of any non-compliance by the remaining directors. [...]  READ MORE →

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National Cabinet Mandatory Code of Conduct (Code) for Commercial Tenants and Landlords released on 7 April, 2020

How can we assist you?

The Code for Commercial Tenants and Landlords released on April 7th by the National Cabinet contains complex provisions that if not properly understood by you, could lead to an outcome for you that is sub-optimal and which could penalise your business financially for many months to come.

In this article we have provided a summary of the main provisions contained within the Code however, we encourage you to seek assistance. Our Commercial Leasing Team is ready to assist you to negotiate with your Landlord/Tenant. [...]  READ MORE →

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COVID-19 – Is your visa about to expire? Are you unable to leave Australia?

From 3 April 2020, temporary visa holders will have an additional pathway to remain in Australia under the Temporary Activity visa subclass 408 – specifically, you will be able to apply and be granted the 408 visa “if”:

  • you are in Australia; and
  • you are unable to depart Australia due to the current pandemic; and
  • you hold a visa that would expire within the next 28 days or your visa has already expired in the last 28 days; and
  • you are unable to make a valid visa application for any other temporary visa.

Usually for the subclass 408 visa you need an endorsement letter from an eligible sponsor, however, if you apply in respect of the COVID-19 event you do not need to be endorsed in writing.

Once granted, this visa will allow you to stay in Australia for the duration of the pandemic. [...]  READ MORE →

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COVID-19 – What do Force Majeure and Frustration mean for contracts?

Due to the economic downturn caused by COVID-19,  Matthews Folbigg Lawyers has been receiving a lot of enquiries from clients seeking advice in relation to contracts with a view to either getting out of their contracts or alternatively, seeking to enforce their contracts.

Two relevant legal concepts in this landscape are force majeure and frustration.

Force Majeure

Force majeure is a French term meaning “superior force”.

Many contracts contain a force majeure clause, the key features being:

  • a set of defined events referred to as an “event of force majeure” – this could include war, terrorism or natural disasters, but could also include events relevant to COVID-19, such as epidemic, pandemic, or acts or restraints by government authorities

  [...]  READ MORE →

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COVID-19: Changes to Council Meetings and Other Businesses

In response to the COVID-19 pandemic, the Commonwealth and the NSW state governments have taken unprecedented measures to prevent the spread of the virus.

At the time of writing this blog, these measures include the requirement for ‘social distancing’ in the form of maintaining a distance of 1.5 metre from one another, restricting gathering in public spaces to 2 people except in limited circumstances, and requiring owner of premises for indoor gathering to ensure there are at least 4 square metres of space. [...]  READ MORE →

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Code of Conduct for Commercial Tenancies – Released

By Anica Cunanan, Law Clerk at Matthews Folbigg Lawyers

Undeniably, the financial impact of COVID-19 has triggered a myriad of changes to the laws. The National Cabinet has released a mandatory Code of Conduct in relation to the commercial property sector. This sets out the principles to be applied to adjustments to rent during the COVID-19 pandemic.

The Code is based upon a series of good faith principles to be applied to commercial tenancies during this unprecedented time. It will apply to those tenants who are eligible for the JobKeeper programme, with annual turnover of up to $50 million (“SME Tenants”). [...]  READ MORE →

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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. [...]  READ MORE →