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Temporary Changes to Legislation following COVID-19

Following the outbreak of the COVID-19 pandemic, the Australian Government announced that it will be making temporary changes to the Corporations Act 2001 and to the Bankruptcy Act 1966 as a measure to provide temporary relief for financially distressed businesses.

The temporary changes are as follows:


  • the statutory minimum threshold required for a creditor to issue a statutory demand is increased from $2,000 to $20,000;

  • the timeframe for a company to respond to a statutory demand is increased from a period of 21 days to 6 months;

  • the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor is increased from $5,000 to $20,000;

  • the timeframe for a debtor to respond to a bankruptcy notice is increased from a period of 21 days to 6 months;

  • the period of protection for a debtor who declares an intention to enter voluntary bankruptcy by making a declaration of intention to present a debtor’s petition is increased from a period of 21 days to 6 months.

These temporary changes are expected to apply for a period of 6 months.

Notwithstanding the temporary changes, creditors may still enforce a debt against a company or an individual through the Courts.


Consideration should therefore be given to the best method to seek recovery of debts from creditors of your company given these increased timeframes.

Personal Liability of a Director to Prevent Insolvent Trading

In addition to raising the statutory thresholds and extensions of time, the changes will temporarily relieve a company director of their duty to prevent the company from trading whilst insolvent for any debts that are incurred in the ordinary course of the company’s business.

However, egregious cases of dishonesty and fraud will still be subject to criminal penalties.

This change is expected to apply for a period of 6 months.

For further details on the announcements set out above, you may access a copy of the Australian Government’s Temporary relief for financially distressed businesses Fact Sheet by clicking this link.

If you wish to discuss the impact of temporary changes to your business, please do not hesitate to contact Perry Thomas Lawyers on 03 8375 9638.

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