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Bankruptcy & Insolvency Protection

Bankruptcy & Insolvency Protection

Bankruptcy & Insolvency Protection

Bankruptcy protection and relief from directors’ personal liability


The Federal government has announced that they will extend these temporary bankruptcy and insolvency protections, which were due to expire at the of September, until 31 December 2020.

The government announced on 22 March a package of temporary measures directed at protecting businesses against bankruptcy proceedings and insolvency:

  • A temporary increase in the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and extending the time companies have to respond to statutory demands they receive from 21 days to 6 months.
  • A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings from $5,000 to $20,000, an increase in the time period for debtors to respond to a bankruptcy notice from 21 days to 6 months, and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition, from 21 days to 6 months;
  • Temporary relief for directors from any personal liability for trading while insolvent; and
  • Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.

Temporary relief from directors’ personal liability

To make sure that companies have confidence to continue to trade through the Coronavirus health crisis with the aim of returning to viability when the crisis has passed, directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading.

It will apply for six months.

Temporary relief from personal liability for insolvent trading will apply with respect to debts incurred in the ordinary course of the company’s business. Egregious cases of dishonesty and fraud will still be subject to criminal penalties. Any debts incurred by the company will still be payable by the company.

You can find more information here.

Please see this AICD article on what directors need to know about the lifting of director liability for insolvent trading.


Liability limited by a scheme approved under Professional Standards Legislation.

The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 24 March 2020, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.

Any advice provided is not ‘financial product advice’ as defined by the Corporations Act. Ruddicks is not licensed to provide financial product advice and taxation is only one of the matters that you need to consider when making a decision on a financial product. You should consider seeking advice from an Australian Financial Services licensee before making any decisions in relation to a financial product. © Ruddicks 2020

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