Insolvency rules relaxed for 6 months

John Kavanagh
Look, you can trade insolvent
The threshold at which a creditor can issue a statutory demand on a business debtor is being increased. And the time companies have to respond to statutory demands has been extended.

Treasurer Josh Frydenberg announced yesterday that the minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act would rise from A$2000 to $20,000.

The statutory timeframe for a company to respond to a statutory demand will be extended from 21 days to six months. This change will apply for six months.

Not responding to a demand within the specified time creates a presumption that the company is insolvent.

Directors are personally liable if a company trades while insolvent. The Treasurer said directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of a company's business. This change will apply for six months.

To assist individuals, the government will also make changes to the personal insolvency system.

The threshold for the minimum amount of debt required for a creditor to initiate proceedings against a debtor will temporarily increase from its current level of $5000 to $20,000. This change will also apply for six months.

The time a debtor has to respond to a bankruptcy notice will be increase from 21 days to six months.