Nick Edwards Features in Lawyers Weekly Podcast
Hamilton Locke Partner, Nicholas Edwards features in The Lawyers Weekly Show podcast, discussing…
The NSW and the Commonwealth Government together announced earlier this week additional support measures for businesses and individuals in NSW, following the new phase of restrictions and extended lockdown in Greater Sydney.
Today, Prime Minister Scott Morrison proposed a new streamlined arrangement for COVID-19 lockdown relief around Australia, as a result of the increasing number of lockdowns caused by the Delta variant. The new arrangement will be put to the national cabinet tomorrow, 16 July 2021, and appears it will largely mimic the announcements earlier this week from the Commonwealth Government in relation to the Greater Sydney lockdown.
This article focuses on the support measures for business and individuals in NSW available at the time of this article.
Unlike 2020 at the height of the COVID-19 restrictions, at this time there have been no proposed amendments to the insolvency regime. In simple terms, this means directors are still on risk for insolvent trading and creditors may still issue a statutory demand at the revised threshold of $4,000 payable within 21 days. Directors should be mindful of the new government assistance available to them but also of the broader position of their businesses moving forward and whether additional protection through safe harbour is appropriate.
Business support payments
Expanded business grants, payroll support and tax relief to support businesses in NSW through lockdown
Support through lockdown for individuals in NSW
Many companies and businesses still carry the scars of the pandemic in the form of deferred liabilities on their balance sheet and an overall reduction in revenue. Many of these businesses have also exhausted their cash reserves weathering the economic storm of the past 12 months and are now faced with uncertainty as a result of ongoing lockdowns.
If directors are concerned the current lockdown in NSW will push their company into further distress, they should consider entering (or re-entering) the formal safe harbour regime as prescribed by section 588GA of the Corporations Act 2001 (Cth). Importantly, unlike 2020, there is no moratorium on insolvent trading liability for directors, so directors concerned about solvency should actively consider the choices available to them.
The safe harbour regime is designed to encourage directors of distressed or near insolvent companies to formulate a plan (or plans) that is reasonably likely to deliver a better outcome for the company than an immediate administration or liquidation. The provisions offer directors protection from personal liability for debts incurred directly or indirectly in connection with a course of action or plan developed to achieve a better outcome. Further details on the safe harbour process can be found here.
For businesses where there is ongoing uncertainty, directors should consider taking advantage of the safe harbour regime in conjunction with the support measures announced by the NSW and the Commonwealth Government.
Other proactive steps that directors may consider are detailed in our previous article here.
We recommend reaching out for expert advice should you have a query, or wish to consider your options, either as a company looking to understand its options or as a creditor. The Hamilton Locke Restructuring and Insolvency team have a broad range of top tier experience acting for a variety of stakeholders in distressed scenarios. For more information please contact Nicholas Edwards, Zina Edwards or Brit Ibanez.