Extension of insolvent trading laws to 31 December 2020 – Use the time wisely
The Government has given Australian businesses an opportunity to prepare themselves for the “new normal” of business conditions when the COVID restrictions ease. That opportunity is through the extension of the time for compliance with a creditor’s statutory demand notice and the effective suspension of the duty of company directors to prevent insolvent trading.
These initiatives will assist wise business owners to use the time to restructure their businesses and put into place viable payment arrangements with creditors to remain viable in the new year.
Small businesses occupy an important segment of our business community, and it is reasonable to offer the time to enable these businesses to affordably restructure.
The great risk is that there are businesses who will not seek to restructure in this time, and just stay around “whilst they get job keeper”, prolonging their already obvious demise and making it harder for those businesses who are doing their best to survive.
Whilst a Director cannot be found to have traded whilst insolvent in this extended period, they could be found to have breached their statutory duties if acting without regard to their fiduciary duties and were found to have traded recklessly.
Business restructuring takes great focus and time, and it starts by business directors taking appropriate advice from experienced and reliable accounting and legal advisers.
Please reach out to Andrew, Anthony or Mark if you or your clients would like to have a further discussion.