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Government packages & relief from insolvent trading liability

by Mar 25, 2020Accessing Govt Financial Support, COVID-19 Resources, Managing Cashflow

Thanks to Jeanine Purdie from Business Credit Solutions for sharing this information provided by the Australian Institute of Credit Management

As part of the government’s safety net for distressed businesses, a range of measures have been announced to restrict recovery action and lessen the threat of actions that could unnecessarily result in bankruptcy and/or winding up of businesses. Below are some specifics relevant to credit professionals:

Changes to enforcement proceedings and insolvent trading

  • A temporary increase in the threshold at which creditors can issue a statutory demand on a company (from $2,000 to $20,000) and 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.

As part of the government’s safety net for distressed businesses, a range of measures have been announced to restrict recovery action and lessen the threat of actions that could unnecessarily result in bankruptcy and/or winding up of businesses. Below are some specifics relevant to credit professionals:

Support for SME’s to access finance and exemptions from
responsible lending obligations

Members should note the following measures available to support your customers:

  • Government and RBA initiatives to ensure small businesses can access finance to support their cash flow.

An exemption from responsible lending obligations for lenders providing credit to existing small business customers. This exemption is for 6 months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures.

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