The government has given directors a six month respite from any personal liability for trading while insolvent as part of its economic response to COVID-19.
The move is designed to give directors confidence to trade through the health crisis without pressure to enter their organisation into administration if there is a chance it might be insolvent. Egregious cases of dishonesty and fraud will still be subject to criminal penalties, the government's fact sheet states.
Read more on the lifting of director liability for insolvent trading
Additionally, the threshold for a creditor to issue a statutory demand on a company has been raised from $2,000 to $20,000. A company is deemed to be insolvent if it fails to pay a creditor who has issued a statutory demand, unless that demand is set aside by a court.
The government has also given the Treasurer new powers under the Corporations Act to exempt businesses from other regulatory requirements. The requirement to hold a physical Annual General Meeting was a potential example that the government cited when announcing the package of measures.
The AICD has strongly welcomed the announcements, which support organisations as they face the unprecedented disruption of the COVID-19 crisis.
The regulatory relief comes alongside further stimulus that brings the total announced so far by the government to 9.7 per cent of GDP or $189bn over the forward estimates.
Some of the key financial measures are:
- Financial support for eligible SMEs and NFPs (turnover below $50m) including cash payments of up to $100,000 (note: NFPs had been excluded under the first stimulus).
- SME Guarantee Scheme whereby the Commonwealth will guarantee 50% of new loans issued by eligible lenders to SMEs (up to a total $20bn Commonwealth commitment).
We will update members with further analysis as details are confirmed.