Businesses are facing major challenges amid COVID-19 pandemic leading to massive job cuts. In light of the challenges, the Australian Government has announced temporary changes to insolvency laws to help businesses and individuals manage the current economic crisis.
Companies: Insolvent trading
Directors will be relieved of any personal liability from their duty to prevent insolvent trading for a period of 6 months. This applies to debts incurred in the ordinary course of business and companies will still be liable for debts. Dishonesty and fraud cases will still be prosecuted.
Companies: Statutory demands
The threshold at which creditors can issue a statutory demand will be increased from $2,000 to $20,000 for a period of 6 months. Further, the time limit to respond to a statutory demand will be increased from 21 days to 6 months.
The threshold amount for issuing a bankruptcy notice against an individual will be increased from $5,000 to $20,000. The time limit to respond to a bankruptcy notice will be increased from 21 days to 6 months. These will last for a period of 6 months.
If you would like further information, please do not hesitate to contact one of our experienced litigation solicitors on 9963 9800 or via email at firstname.lastname@example.org.
If someone owes you $5,000 or more, you are able to apply to the Official Receiver for a bankruptcy notice. A bankruptcy notice is a formal notice of demand which requires the debtor to pay you within twenty one (21) days from the date of being served with it. If the debt remains outstanding after this time, the debtor has committed an act of bankruptcy.
A bankruptcy notice is issued by the Official Receiver and a fee of $470 is payable at the time of making the application and applies whether or not the Official Receiver issues the bankruptcy notice.
The debt must be based on a judgment or order for at least $5,000 which is no more than six (6) years old. A bankruptcy notice can be based on more than one judgment or order issued to the same creditor as long as the combined total is more than $5,000.
As part of the process of making someone bankrupt, a creditor must establish that a debtor has committed an “act of bankruptcy”. These acts are set out in section 40 of the Bankruptcy Act 1966. The most common act relied on is non-compliance with a bankruptcy notice.
Interest on the judgment can be claimed in the bankruptcy notice if:
- Interest is allowed by the terms of the judgment or rules of the Court in which the judgment was given.
- The amount of interest is specified.
- The details of the interest claimed are included in the application for a bankruptcy notice showing how the interest was calculated and the relevant legislation relied on in terms of post-judgment interest rates.
Prior to lodging an application, a creditor should undertake a search of the National Personal Insolvency Index (NPII). The NPII is a permanent electronic register of personal insolvency proceedings in Australia maintained by the Australian Financial Security Authority. A NPII search will show whether the debtor is already bankrupt or party to a debt agreement or personal insolvency agreement.
A sealed copy of the judgment must be lodged with the Application.
The endorsed bankruptcy notice application must be served on the debtor within six (6) months of it being issued by the Official Receiver. This time can be extended by the Official Receiver and there is a fee involved to do this.
Failing compliance with the bankruptcy notice within twenty one (21) days of being served with it gives the creditor grounds to initiate proceedings in the Federal Court of Australia or Federal Circuit Court of Australia.
A debtor can apply to the Federal Court of Australia or Federal Circuit Court of Australia to have the twenty one (21) days of compliance extended or to have the bankruptcy notice set aside.
The bankruptcy notice and supporting judgment/s are not available for public inspection until the creditor makes an application to the Federal Court of Australia or Federal Circuit Court of Australia for the debtor named in the notice to be made bankrupt.
If someone owes you money, please contact us today about the options available to you to recover it.