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How will the COVID-19 extension of temporary changes to insolvency laws impact your business?

Laura Bazouni, ||

The Australian Government has recently announced that it will be extending the temporary insolvency and corporations legislation in light of the COVID-19 pandemic. Originally scheduled to end in late September 2020, the measures originally introduced in March 2020 have now been extended to 31 December 2020.

The measures have been outlined below together with an overview as to how this may impact you and your business.

Statutory demands:

  1. Issuing a statutory demand is the first step a creditor can take to wind up a company. Failure to comply with the statutory demand creates a presumption of insolvency which creditors can rely on to progress to the next stage of the process. A statutory demand can be issued by a creditor, if the company owes the creditor a debt greater than $2,000. The amendments have increased the threshold amount of the debt from $2,000 to $20,000;
  1. The time to comply with statutory demands has also be extended from 21 days to 6 months. This will give the company more breathing time to pay and eliminate the stress of facing wind up proceedings.


  1. Individuals could be faced with bankruptcy proceedings if they owe a creditor a debt more than $5,000. The amendments have increased the threshold for a creditor to commence bankruptcy proceedings from $5,000 to $20,000.
  2. The time for an individual to respond to a bankruptcy notice has also be increased from 21 days to 6 months as well as the period of protection for a debtor once they make a declaration of intention to present a debtor’s petition from 21 days to 6 months;
  3. This will give individuals requisite time to consider and negotiate payment arrangements with their creditors before being forced into bankruptcy.

The extension of these measures has been designed to shield otherwise viable businesses and individuals from the ongoing economic impacts of the COVID-19 pandemic. The extension of these temporary measures might be delaying an inevitable surge in companies becoming insolvent or individuals declaring bankruptcy or otherwise a saving grace for those able to survive the economic impact of COVID-19.

Creditors can still enforce their debts against companies or individuals through the Courts to recover outstanding debts and consider alternative enforcement options which are not impacted by the proposed amendments.

Coleman Greig will continue to monitor the situation, if you require assistance, please do not hesitate to contact a lawyer in Coleman Greig’s Litigation and Dispute Resolution team, who would be more than happy to assist you today.


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