Further, the threshold at which a creditor can take action to initiate insolvency or bankruptcy against a business or individual will be increased to $20,000, in a ten-fold increase from the normal limit. Those facing claims will also have an extended six month period to respond rather than the usual 21 days.
Businesses have also been given some breathing room over pressing concerns about complying with their obligations under the Corporations Act while trying to stop the spread of the virus and provide a safe environment for shareholders.
There have been significant concerns within corporate Australia about sticking to the law while reducing the spread of the virus and staying financially afloat. In particular, the requirement to hold annual general meetings in person might conflict with health advice to avoid gatherings of more than 100 people. The Australian Securities and Investments Commission on Friday provided guidelines warning coronavirus might temporarily affect AGMs, encouraged the use of technology and said it would not take action if the meetings were postponed by two months.
Under the stimulus changes Mr Frydenberg will take on a temporary six-month power to manage individual business situations under the Corporations Act as they arise.
“These extraordinary times require extraordinary measures and we face a global challenge like we have never faced before,” he said.
King & Wood Mallesons corporate mergers and acquisitions partner Will Heath said the insolvency and bankruptcy changes would kick the can down the road by six months, giving “businesses time to plan and the government will have to work out a bail-out package”.
“The Treasurer’s powers are needed in these extraordinary times. The Treasurer can step in to help companies who genuinely can’t comply with the Corporations Act, particularly where ASIC can’t help. I don’t think we’ve seen anything like this since World War II,” he said.
Business Council of Australia chief executive Jennifer Westacott said it was essential to keep production going in manufacturing, retail, energy, mining, resources and logistics.
“If we don’t we will make recovery even more difficult and we will see more job losses,” Ms Westacott said.
“Temporarily relaxing regulations for financially distressed businesses will give them a shield to keep employing as we make our way through this extraordinary crisis.”
Australian Institute of Company Directors chief executive Angus Armour said the “regulatory safety net” was an important step for organisations facing an evolving situation. The AICD has called for a deferral of new compliance obligations.
“The scale and impact of the coronavirus crisis will continue to present challenges to organisations across Australia and demand further innovative and decisive steps by governments to mitigate the impacts, and by organisations and boards in every sector to work through the crisis and plan for recovery,” he said.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.