The impact of the bushfire season to now COVID-19 can be seen financially distressing for many companies. You may be concerned about how this may affect your duties as a director and being personal liable for trading while insolvent.
On 23 March 2020, the government announced measures to assist businesses facing financial difficulties under these current economic circumstances. This includes providing temporary relief for directors from personal liability for trading while insolvent.
Directors will be given 6 months relief from their duty to prevent insolvent trading. However this relief will only be related to debts incurring in the ordinary course of the business during the 6 month period (i.e. debts necessary to facilitate the continuation of the business) and will not impact the requirement to repay the debts.
These temporary measures will not affect other duties owed by the directors nor the underlying financial position or long-term viability of the business. However, directors will need to determine whether the business is suffering from temporary liquidity challenges or if there are other serious underlying issues, and consider their longer-term options. Some of these options include looking at the ‘safe harbour’ protection to help you restructure your business, considering voluntary administration or liquidation. If you would like to learn more about strategies you could use to avoid panic and financial disaster resulting from COVID-19 please click here
We recognise that these are uncertain and challenging times for your business. If you would like more information on the temporary relief measures put in place or what options are available to reduce financial distress to your company then please speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24 hour advice hotline on 1800 210 073.