Insolvency News Update – Are you moored in a Safe Harbour?
The increased amounts required to issue a statutory demand or bankruptcy notice, and the extensions of time to comply with those notices, are great lifelines for businesses struggling through Covid-19. Directors are also presently (until 31 December 2020) free to operate their businesses (some of which are ‘zombies’) without a personal threat of an insolvent trading claim being brought against them.
But insolvency practitioners, including Access Law Group director James Welch – Accredited Specialist in Commercial Litigation – Insolvency, are concerned that a lack of detailed knowledge and advice could see those directors caught out, and personally exposed to claims from liquidators and creditors under section 588M of the Corporations Act.
Insolvency practitioners are expecting increased demand for advice once company directors and their accountants realise that the protection from insolvent trading claims will only apply if an insolvency practitioner is appointed prior to 31 December 2020.
The Christmas period for most commences at that start of school holidays – 18 December 2020. The practical reality for directors who may be teetering on the edge of trading whilst insolvent is that those directors really only have 2 months to act. In 2 months, they must bring their accounts up to date, consider their positions, receive advice from their accountants and lawyers, and if necessary, appoint an insolvency practitioner.
Unless the Federal Government extends the protections, an appointment made after 31 December 2020 will mean that the director(s) is not protected at all. Directors need to act now to seek early advice and implement a plan to avoid exposures to personal liabilities.
The team at Access Law Group are ready to help you and your business. Act today.
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