When the COVID-19 pandemic started, many businesses and households were shocked by the impending lock-down and dramatic decrease in economic activity. In response, sweeping changes to the Corporations Act 2001 (Cth) (Corporations Act) and Bankruptcy Act 1966 (Cth) (Bankruptcy Act) to alleviate the economic pressure to affected people and businesses came into play.
Those changes are scheduled to expire on 15 October 2020. So what does that mean for you?
What was changed in March 2020?
Changes were made to the Corporations Act so that:
- a Statutory Demand could only be issued for debts over $20,000 (instead of $2,000.00); and
- a company had 6 months to respond to the demand (instead of 21 days).
Changes to the Bankruptcy Act included:
- the amount an individual could be bankrupt over was increased to $20,000 (instead of $5,000); and
- the individual now had 6 months to respond to a Bankruptcy Notice (instead of 21 days).
What we can do for you?
During the pandemic, many businesses and individuals have been owed amounts of money by suppliers or customers, however have been unable to recover these debts.
While the changes implemented by the Government were designed to give businesses and individuals a helping hand during the pandemic, many businesses and individuals have used the changes to hide or attempt to skirt their obligations to repay money.
Currently due to expire on 15 October 2020, all provisions that were changed are reverted back to their previous state, meaning that companies can be issued with a Creditors Statutory Demand for debts in the amount of $2,000, and individuals can be served with a Bankruptcy Notice for debts over $5,000.
Both companies and individuals will have 21 days to respond to a Creditors Statutory Demand or a Bankruptcy Notice respectively.
Methods of Debt Recovery
Depending on the size of the debt, circumstances and situation, there may be a number of different methods you can chose in an attempt to recover, including:
- issuing a letter of demand;
- issuing a Creditors Statutory Demand;
- issuing a Bankruptcy Notice; and/or
- commencing Court proceedings.
Depending on your particular situation, the amount you need to recover and any other relevant circumstances, one of the above (or a combination of the above) or another option may be applicable for you to recover money owing to you by another party.
How we can help
Businesses and individuals who are owed amounts of money during the COVID-19 pandemic should begin to think about options they can consider to recover money owing to them.
Please do not hesitate to contact us to obtain specific advice.
If an organisation or individual owes you an amount of money that you wish to recover, or if you require tailored advice regarding your situation, please contact Aaran Johnson on ajohnson@marsdens.net.au or Bharath Balasubramanian on bbalasubramanian@marsdens.net.au or by phoning 02 4626 5077 to discuss your situation and see how Marsdens can help you.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
