Getting Insights from Accountants in Sydney
During the onset of the COVID-19 pandemic, the government implemented crucial changes to insolvency laws to address the challenges businesses face. These modifications included safeguards against insolvent trading liability, which are set to conclude on 31 December 2020. Accountants in Sydney can provide valuable insights and guidance regarding these time-sensitive regulations.
As currently legislated, this protection would cover any debts incurred by the company between 25 March and 31 December 2020 (the safe harbour period), but only if directors take protective action by appointing an administrator or liquidator before 31 December 2020. In other words, directors could be personally liable under the insolvent trading rules for debts incurred during the safe harbour period unless they appoint an administrator or liquidator by 31 December 2020.
The above may be an unintended outcome of the emergency amendments, and we understand that insolvency industry bodies have made representations to Treasury about a legislative solution.
In the meantime, company directors should consider whether their company can continue to meet its debts as and when they fall due. If not, they should take urgent steps to seek alternative safe harbour protection by:
- Seeking traditional safe harbour protection under section 588GA of the Corporations Act. A director’s guide on this protection can be found on the Australian Institute of Company Directors website.
- If Traditional Safe Harbour protection isn’t feasible, it may be necessary to appoint an administrator by 31 December 2020.
We do not want to be the prophet of doom. Still, suppose your business is struggling with the effects of the COVID-19 crisis. In that case, you need to think seriously about your position, especially with the risk you may be exposed to as a company director after 31 December 2020.
If you have any concerns about your company’s solvency, please contact us urgently so we can help guide you through the options.
Kreston Stanley Williamson Team
*Correct as of November 2020
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.