ARITA announces key timing issue in COVID-19 temporary relief measures

By Glenn Franklin, Glenn Franklin
Business Recovery and Insolvency Partner
2 October 2020

Australian Restructuring Insolvency & Turnaround Association (ARITA) announced on 29 September 2020 that it has “become aware of a key timing issue in the COVID-19 temporary insolvency relief measures that has not been widely appreciated.”

The ARITA announcement suggests Directors would be required to place their company into Voluntary Administration or Liquidation prior to 31 December 2020 in order to qualify for the insolvent trading relief.

ARITA went on to say this issue may be subject to interpretation by the Courts. Notwithstanding, this development significantly questions the extent of the temporary measures put in place to assist financially distressed businesses.

As part of the recent Australian Government’s announcements concerning restructuring small business, the Government wished to undertake consultation on the appropriateness of permanently raising the minimum threshold at which creditors can issue a statutory demand. For temporary relief measures, this threshold was increased from $2,000 up to $20,000 for both companies and individuals.

It is important to note that should this threshold level of $20,000 become permanent, it would have implications for business including:

  • Development of trade credit policy and trade credit insurance
  • Lending policy and enforcement protocols
  • Business risk assessment
  • Restructuring small business and client strategy.

We will be watching this space closely to see what transpires. The PKF Australia team is always available to have a discussion should you require any assistance.