Marino Law | Gold Coast Law Firm

Extension of Insolvency Relief

insolvency reliefThe Federal Government has announced that the temporary insolvency relief implemented in March of this year pursuant to the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (the “Act”) will be extended for a further three (3) months to 31 December 2020.

As you will recall, pursuant to the Act, various amendments were made to the Corporations Act 2001 (Cth) and the Bankruptcy Act 1966 (Cth). Pursuant to those amendments:

  • the time within which:
  • an individual debtor is required to comply with a bankruptcy notice; and
  • a corporate debtor is required to comply with a creditors statutory demand,

has been temporarily extended from 21 days to six (6) months;

  • there are now temporary increases to the threshold at which creditors can issue a:
  • bankruptcy notice (from $5,000.00 to $20,000); and
  • creditors statutory demand (from $2,000.00 to $20,000.00); and
  • directors of corporate businesses will not be personally liable for debts incurred during defined periods during the COVID-19 pandemic as long as those debts are incurred during the ordinary course of the company’s business.

The above temporary changes were due to expire on 30 September 2020. The Federal Government will now extend that relief until 31 December 2020.

Rationale for the Extension

In extending the temporary insolvency relief, the Federal Government is attempting to give viable businesses an opportunity to recover from the financial effects of the COVID-19 pandemic rather than seeing those businesses being forced into some form of external administration.

While we understand the rationale for the extension of the temporary relief, Marino Law considers that the government’s approach simply pushes the problem into next year. While the government’s aim is to assist viable businesses, it does nothing to recognise that there are many businesses that were in trouble before the COVID-19 pandemic that will inevitably fail. We consider that a more effective approach would have been for the government to reduce the temporary monetary and time thresholds from $20,000.00 and six (6) months to $10,000.00 and three (3) months for example in the case of a corporate debtor. This would enable the economy to transition from the temporary measures in a more orderly and efficient manner.

We also consider that the government’s decision fails to properly take into account the position of businesses that are owed money. Those companies, many of which may be viable businesses that the government is hoping to assist, are at risk of failing the longer the temporary measures remain in place.


Marino Law continues to advise its clients that while businesses may benefit from the temporary measures referred to on the above paragraphs, they are now presented with an opportunity to restructure their operations so that their businesses can continue to operate once the temporary relief ends. If your business is experiencing financial difficulties as a consequence of the COVID-19 pandemic, now is the time to seek advice.

Marino Law has extensive experience acting for liquidators, administrators, lenders, brokers, financiers and creditors in the administration of all corporate and personal insolvency appointments. Our highly experienced lawyers regularly advise clients in the following areas of corporate and personal insolvency:

  • voluntary administrations;
  • liquidations;
  • business and asset sales;
  • enforcement of securities;
  • statutory demands and bankruptcy notices; and
  • debt agreements and personal insolvency agreements.

Should you require assistance in any of the above areas, please contact one of our highly experienced lawyers.

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