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Don’t Go Chasing Waterfalls – COVID-19 Safe Harbour is (still) not Safe

The temporary safe harbour protection from director liability for insolvent trading expires on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading .

The temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). There has been some recent debate about whether the words “before any appointment during that period” of an external administrator, mean what they appear to say, namely that any appointment must take place “during that period” of the temporary safe harbour expires. [...]  READ MORE →

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Danger – COVID-19 Safe Harbour STILL Requires Early External Administrator Appointment

The Government has recently extended COVID-19 business protection measures introduced in March, including the temporary safe harbour protection from director liability for insolvent trading. These protections will now expire on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading. [...]  READ MORE →

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Insolvency Relief Extended until New Years!

By Hayley Hitch, an Associate of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

The Morrison Government earlier this year introduced the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) which came into effect on 25 March 2020 to provide relief to individuals and entities under the Corporations Act 2001 (Cth), Bankruptcy Act 1966 (Cth) and supporting legislation. These changes were due to expire on 25 September 2020, where the legislation was expected to revert back to its former position where, for example, statutory demands and bankruptcy notices required a 21 day response period. [...]  READ MORE →

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Danger – COVID-19 Safe Harbour Flaw Requires URGENT External Administrator Appointment

A fatal flaw exists in the government’s COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 24 September 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading.

At the beginning of the global pandemic the Australian Federal Government introduced temporary legislation to protect directors from liability for insolvent trading during the global COVID-19 pandemic. This safe harbour protection from insolvent trading will excuse directors for liabilty in respect of debts incurred in the ‘ordinary course of business’ during the operation of the temporary legislation, presently due to expire at the end of 24 September 2020. [...]  READ MORE →

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COVID-19 –What Debt will Scuttle Passage to the New Safe Harbours?

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

Amendments in March of this year have brought about changes to the Corporations Act 2001 which allow for an additional temporary safe harbour to protect directors from insolvent trading, –  see our blog here.

However, companies do not automatically qualify for the protection. To qualify, the debt must be incurred as follows:

  • In the ordinary course of the company’s business;
  • During the six month period starting from the date the new law commenced (being 24 March 2020); and
  • Before any appointment of an administrator or liquidator.

The evidentiary burden of proof is on the person seeking to rely on the safe harbour relief, which means that it will be up to directors to make sure they obtain and keep evidence that their debt meets the criteria. [...]  READ MORE →

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Insolvent Trading Advice for Clients Affected by COVID-19

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

In the current climate, many accountants may have clients experiencing financial distress, including directors seeking advice on how to avoid personal liability for trading whilst insolvent.

What advice should accountants be giving their clients in this environment? What advice do directors need to hear?

Insolvent Trading – The Danger

Firstly, it is important to understand how the law defines insolvent trading. The law defines insolvency as an inability to meet debts as and when they are due and payable. Insolvent trading, in simple terms, relates to debts incurred whilst a company is insolvent. [...]  READ MORE →

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DEBT COLLECTION IN A SAFE HARBOUR

Debt collection commentary by Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.

Credit Managers should be aware of the reforms made to the Corporations Act 2001 (“the Act”) that attempt to create a shield for directors of companies that believe their company is in financial stress and how it affects their debt collection strategies.

Changes in September 2017 to the Act created section 588GA and deal with specific actions taken by directors in relation to debts incurred after 19 September 2017. These reforms are commonly referred to as the “Safe Harbour Reforms”. [...]  READ MORE →