July 2, 2020
On 25 March, the Government effected changes to the Corporations Act to protect the economy from the stress of the ongoing pandemic. Understanding these changes and what hasn’t changed can help you protect against: Being held personally liable for Company debts incurred, and Losses from trading with insolvent customers and on Director / Shareholder Loans. What has changed? Relief from insolvent trading Relief has been provided to Directors who act in good faith from insolvent trading claims for the period of six months from 25 March 2020. Insolvent trading is the act of incurring debt whilst the company is insolvent, and this debt remains outstanding at the point of liquidation. A liquidator can bring an action against a Director personally for these debts. An example of how the relief will work in practice is: We have Jim who runs a chain-link fencing manufacturing business with expenses in the form of rent, wages and wire. Jim’s company becomes insolvent on 1 April 2020; however, he keeps trading until 31 December 2020 when his…