The moratorium period began on Maand is due to expire on Decem(although the government may choose to extend this period). (c) before any appointment during this period of an administrator, or liquidator, of the company. (ii) any longer period that begins on the day this section comes into force and that is prescribed by the regulations for the purposes of this subparagraph and (i) the 6 month period commencing on the day this Section begins or
(a) in the normal course of business of the company and
Subsection 588G(2) does not apply to a person and a debt incurred by a corporation if the debt is incurred:. The newly created Section 588GAAA of the Act states: The Coronavirus Response Act created a new safe harbor to temporarily relieve administrators of their duty to prevent insolvent transactions during the pandemic. 588H).Ī director may also be protected by “safe harbor” provisions, if debts are incurred while the company is carrying out a course of action which is reasonably likely to lead to a better result than the external administration (s. taken all reasonable steps to prevent the debt from arising (s. did not participate in the management of the business or. the director had reasonable grounds to believe that the company was solvent. 206C).Ī director can contest a contravention action if: 1317G) or may be excluded from management companies (art. Solvency is defined in Section 95A(1) of the Act as the ability to pay all debts as they become due.Ī director who does not prevent a company from incurring debt, knowing that there are reasonable grounds to suspect an insolvent business (or in circumstances where a reasonable person in a similar position would have known of reasonable grounds) violates section 588G(2) of the Act.Īccordingly, the administrator may be held personally liable for the payment of an indemnity (art. there are reasonable grounds to suspect that the company is or will become insolvent because of the debt incurred. the company is insolvent at the time it incurs the debt (or becomes insolvent because of the debt incurred) and. In accordance with article 588G of the Companies Act 2001 (Cth) ( Law), an insolvent transaction occurs when: Here is our breakdown of the law we drafted at the time. The Coronavirus Response Act temporarily relieved administrators of their personal obligation to prevent insolvent transactions. To avoid unnecessary bankruptcies and insolvencies…this bill provides a safety net to help businesses continue to operate during a temporary period of illiquidity, rather than going into voluntary administration or liquidation and a safety net for individuals to help them manage their debts and avoid bankruptcy.” The Explanatory Memorandum to the Coronavirus Response Act, said “ he economic impacts of the Coronavirus could see many people at risk of bankruptcy and Australian businesses at risk of insolvency. The Coronavirus Response Act temporarily amended Australia’s insolvency laws, to provide flexibility for businesses and individuals facing short-term financial hardship during the pandemic. In March 2020, as part of its response to the pandemic, the federal government adopted the Comprehensive Coronavirus Economic Response Package Act 2020 (Cth) ( Coronavirus Response Act). The government’s response to the pandemic Directors of companies at risk of insolvency should seek legal advice regarding their potential liability. Many commentators believe that administrators can only avail themselves of the temporary relief if they appoint a liquidator or administrator before the moratorium expires. This relief is due to expire on December 31, 2020. Administrators have been temporarily relieved of their obligation to prevent insolvent transactions during the COVID-19 pandemic.
0 kommentar(er)
