Updated: Dec 24, 2020
In March, the Australian Government implemented temporary changes to the Corporations Act and Bankruptcy Act to assist businesses survive the economic pressures of COVID-19. Details about these changes, which were due to expire on 25 September 2020, are discussed in our article “here”.
Details about these changes, which were due to expire on 25 September 2020, are discussed in our article “here”. However, the Federal Government recently announced these temporary measures have been extended to 31 December 2020.
Many economists and insolvency practitioners are critical of this extension and suggest there is an impending “default cliff” in January 2021. This means we could see an influx of companies going into administration or liquidation, where they are unable to repay their debts and no longer have the protection of these temporary measures.
If there is a default cliff in January 2021, businesses are facing a unique challenge to continue to operate, particularly because of difficulties in recovering debts and maintaining supply chains with other businesses struggling during the pandemic. The risk to businesses may be heightened, particularly because some companies and sole traders are simply using the government’s COVID-19 protections to avoid paying
What can your business do?
There are some simple things your business can do to assist with managing the debtor and cashflow process.
Review your terms and conditions and internal debt management systems:
- Your business documents such as terms and conditions and contracts have never been more important. You should review these documents to ensure you have the best possible protection for your business should a debtor become insolvent.
Follow up outstanding debts:
- It is important to track and monitor closely any outstanding debtors to avoid and/or manage conflicts
with debtors who may deny their debt is owing.
- Keeping accurate and up to date records of all debtors and creditors is a priority for businesses to cope with impending debt recovery disputes.
- All too often emotion can play into commercial decisions made by business owners and managers, which prevents them from thinking and acting clearly.
- Act quickly and take steps to ensure you business is properly equipped to deal with debt recovery disputes.
How we can help
Our debt recovery and insolvency team understands the impacts of outstanding debts on businesses and the difficult decisions that must be made to deal with these situations. We can assist in collecting outstanding debts and resolving debt related disputes in an efficient and cost effective manner.
We can also assist in reviewing your contractual documents to ensure you have the best systems in place to prevent future conflicts regarding outstanding debts and your existing supply chains.
If you require assistance in relation to your debt recovery options, please contact our debt recovery and insolvency team to discuss your options.