28 April 2020 | Reading time: 2 minutes
In recognition of the financial hardships faced by Australian businesses over the upcoming months, the Australian Government has enacted the Coronavirus Economic Response Package Omnibus Act 2020 (CERP Legislation) to provide:
Duration of temporary measures.
These temporary measures are intended to apply for 6 months from 25 March 2020 (or any longer period that is subsequently prescribed). This will hopefully avoid a potentially unprecedented wave of insolvencies.
Key amendments for businesses.
The CERP Legislation has introduced the following key measures:
1. Statutory demand.
2. No personal liability for directors.
Welcome relief for distressed businesses.
COVID-19 is creating uncertain impact on businesses and cashflow positions. These relief measures will be a welcome relief to distressed corporate boards.
Impact on suppliers and debt recovery.
On the other hand, these temporary relief provisions will impact on creditors who would ordinarily rely on the statutory demand process as a debt enforcement tool.
Creditors and suppliers should therefore consider their options for debt recovery in the current environment. They can continue to pursue debtors through the courts to obtain judgment. However, a more immediate measure will be for suppliers to be more vigilant with their trading counterparties and consider adjusting their trading terms to address this risk.
For details of all of our COVID-19 tips and updates, visit the Bespoke COVID-19 Hub.