With the world now in the midst of a global pandemic, businesses are facing disruptions across all aspects of their operations and in the marketplace.
These disruptions are challenging for everyone in different ways — but for some businesses, it means confronting a very stark reality: heading into the zone of insolvency for reasons outside their control.
In quick succession, we have seen a huge and, in some cases, the unprecedented commitment of support from government at both Federal and State level. The Federal Government has cast a wide net beyond tax measures, looking at ways to help businesses survive, including recent amendments to insolvency and corporations laws that provide temporary relief for directors of companies in financial distress.
The new measures, which will operate for six months unless further extended, specifically provide a blanket moratorium for directors in respect to insolvent trading liability for debts incurred in the ‘ordinary course of the company’s business’.
For many company directors, this will come as a welcome relief — with less immediate pressure to appoint an administrator or liquidator to protect their personal position. As a result of the measures, combined with positive steps taken by government, banks, lenders and the ATO to provide funding and cash flow support to businesses, it is expected that there will be less formal insolvencies in the short-term as businesses look to take every available step to stem the cash burn, take a breath and assess options.
