Winding up and bankruptcy in 2021: What is the state of the law now?
You will no doubt be aware that significant changes were implemented in 2020 to statutory demand and bankruptcy notice procedures to accommodate the impact of COVID-19 on struggling companies and individuals.
The coronavirus legislation[1] supplemented by the extending regulations[2] meant that between 25 March 2020 and 31 December 2020:
The minimum debt amount for statutory demands increased from $2,000 to $20,000;
The minimum judgment debt amount for bankruptcy notices increased from $5,000 to $20,000;
The compliance timeframe for both statutory demands and bankruptcy notices increased from 21 days to 6 months.
The coronavirus legislation also made changes to both the statutory demand and bankruptcy notice forms.
For the most part, the changes were temporary. Given that no new extending legislation has since been passed, from 1 January 2021:
The minimum debt amount for statutory demands has reverted to $2,000;
The minimum judgment debt amount for bankruptcy notices decreased, although not back to $5,000. New legislation now prescribes the statutory minimum as $10,000[3]; and
The compliance timeframe for both statutory demands and bankruptcy notices reverts to 21 days.
Undoubtedly, the use of the statutory demand and bankruptcy notice procedures will increase sharply in 2021 now that the temporary regime has largely been retracted.
However, special care will need to be taken to ensure correct forms are used, since the changes made to the statutory demand and bankruptcy notice forms have not been repealed.
If you have debts that need to be recovered, contact Tony Scoglio on (07) 3833 2100 to discuss how we can best help you do so.
[1] The Coronavirus Economic Response Package Omnibus Act 2020.
[2] The Corporations and Bankruptcy Legislation Amendment (Extending Temporary Relief for Financially Distressed Businesses and Individuals) Regulations 2020.
[3] The Bankruptcy Amendment (Bankruptcy Threshold) Regulations 2020.