Covid-19 Update: Extension of protection of directors for insolvent trading

Covid-19 Update: Extension of protection of directors for insolvent trading
Posted on 22 Sep 2020

Has September’s forecasted economic cliff turned into a potential 2021 avalanche?

Changes ushered in by the enactment of the Coronavirus Economic Response Package Omnibus Act 2020 (CERPO) on 24 March 2020, were designed to alleviate pressures on companies and individuals under financial strain during the pandemic.

These changes were focus on increases to the statutory timeframes and minimum monetary thresholds for statutory demands and bankruptcy notices under the Corporations Act 2001 and Bankruptcy Act 1966 respectively. Also introduced however was temporary relief for directors from personal liability for insolvent trading. These protections were due to lift on 25 September 2020 but in early September, the federal government announced the extension of the protections to 31 December 2020.

Directors of companies need to be aware that these protections are not a total safeguard! You may still be liable for breaches of your duties under the Corporations Act and, if your company is trading insolvently, notwithstanding the extension of this protection, there are other avenues that a liquidator (should one ultimately be appointed) can explore to pursue recoveries for the benefit of the general body of creditors.

Make sure you are receiving the right advice, at the right time.

Contact one of our specialist insolvency lawyers for more information.

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