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ARTICLE · 03 JUNE 2020

Bankruptcy during COVID-19

Kells
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It is still prudent for directors to be on the lookout for indicators of insolvency, and to seek assistance if required.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Cohben McMahon
Cohben McMahon
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In our previous article found here, we explained how the Federal Government has introduced certain measures safeguarding directors from personal liability in connection with insolvent trading.

While these temporary measures remain in place, it is still prudent for directors to be on the lookout for indicators of insolvency, and adequate seek assistance if required, especially as government assistance and the temporary measures are likely to start to be wound back in coming months.

What does it mean to be insolvent?

The Corporations Act 2001 (Cth) ("Corporations Act") confirms that a company is insolvent if it is unable to pay all its debts when they become due and payable. Essentially, when a company's cash flow is unable to meet its short term liabilities, provided there is no other means of obtaining financing, the company will likely be deemed insolvent.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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