Covid-19 Bankruptcy

The COVID-19 pandemic has led to economic instability across Australia, with many businesses facing growing financial pressure as a result of social distancing and self-isolation.

If you or your business have been affected by the current financial landscape, then speak to one of the professional insolvency experts at Insolvency Guardian for more information about your situation and your options.

In the meantime, you can learn more here about the recent changes to legislation declared by the Australian Government.

Coronavirus-led changes to Australia’s bankruptcy laws – what you need to know

From March 25, 2020 the Australian Government introduced temporary changes to the current bankruptcy legislation that will be in effect for six months.

According to the Australian Financial Security Authority:

  • The debt threshold for creditors to apply for a Bankruptcy Notice against a debtor will increase to $20,000.
  • A debtor has up to six months to respond to a Bankruptcy Notice before a creditor can commence bankruptcy proceedings.
  • If an individual debtor applies for voluntary bankruptcy after March 25, 2020, they are protected against unsecured creditors who cannot take further action against them for six months.

How does this compare to previous bankruptcy law?

The key difference from the original legislation is the increase in thresholds and action deadlines as a means to provide more leeway to your financial situation if it has been affected by COVID-19. Specifically:

  • The debt threshold for creditors to apply for a Bankruptcy Notice against a debtor was originally $5,000.
  • Debtors previously had 21 days to respond to a Bankruptcy Notice before a creditor can commence bankruptcy proceedings.
  • Debtors who apply for voluntary bankruptcy are protected against unsecured creditors who previously could not take further action against them for 21 days.

It is important to take note of these original thresholds as the changes to bankruptcy law are only temporary.

However, if a bankruptcy notice was issued before March 25, 2020 the original legislation applies and the you will have 21 days to comply.

What does this mean for me?

Whether or not your financial situation was directly affected by the COVID-19 pandemic, the temporary changes will alleviate the immediate pressure of making a decision during a time of financial hardship.

A key purpose for these changes is to allow businesses to continue to exist throughout the short term during the pandemic. For example, if a business’ revenue stream is drastically reduced as a result of clients in isolation, then the extended deadlines may provide the necessary breathing space for clients to return and business to resume.

However, the change in laws is not an invitation for debtors to rest on their laurels. The effects of COVID-19 leaves no guarantee that some businesses will survive.

The changes in Australia’s bankruptcy laws are an opportunity to make a realistic assessment of the future. Find out more about bankruptcy here or speak to one of the professional insolvency experts at Insolvency Guardian.

Electronic business now in effect

On May 6, 2020, Treasurer Josh Frydenberg released Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 which amends the Corporations act 2001.

Under the new Determination:

  • Meetings (like AGMs) may be held using one or more technologies that give everyone entitled to attend a reasonable opportunity to participate without being physically present in the same place.
  • A company may execute an electronic document without using a common seal, as long as signatories clearly identify themselves and their intention in respect of the contents of the document in electronic communication. Signatories can alternatively sign a physical copy of the document.

So what do these changes mean?

The need for social distancing as a result of the COVID-19 pandemic has obviously made it difficult for debtors and creditors and to meet, or for several signatories to get together to sign the same physical document. This new Determination will bring new validity to digital practices, giving company officers a level of satisfaction that their roles and responsibilities in isolation have the same legitimacy as traditional ‘ink and pen’ business practices.

Essentially, if you are facing bankruptcy and are worried about the process while in isolation, you can rest assured that all steps of the administration process are valid and official, despite where they are conducted.

Signing documents

If you’re facing bankruptcy and your movements are restricted by social distancing regulations, under the Determination you can execute an electronic document without a common seal, as long as:

– Each person required to sign the document on behalf of the company signs a physical copy or counterpart of the document.


– Signatories use electronic communication which suitably identifies them and indicates their intention regarding the document’s contents.

You can sign documents by:

  • Pasting a copy of a signature into a document
  • Signing a PDF on a tablet, smartphone or laptop
  • Using cloud-based signature platforms

Copies, counterparts or electronic communication must include the entire contents of the document, but signatories do not need to sign the same physical document. Instead, a document could be signed and scanned by the first signatory and then printed and signed by the second signatory, or separate electronic signatures could be applied to fully electronic versions of the document.


The Determination also ensures that companies that are required to or wish to hold a meeting, such as a creditors meeting, may do so using technology rather than face-to-face meetings. The Determination enables a quorum, votes, notices and the asking of questions to be facilitated electronically.

The Determination also allows for information required for the meeting to be circulated and accessed electronically.

The new Determination is a temporary measure which will be in effect for six months and will expire on November 5, 2020.