Ceasing a Director
The ASIC has announced that from 18th February 2021 onwards there will be new requirements in regards to ceasing a company director in accordance with the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 which was passed by Parliament in February 2020.
The announcement which was made on 9th February 2021, outlines that companies are no longer able to cease the last remaining director on ASIC records, unless a replacement director has been appointed. The three exceptions to this rule are; if the last director has passed away, the officeholder never consented to the appointment or if the company is being wound up or under external administration.
Furthermore, if a director’s date of cessation is notified to ASIC more than 28 days after the effective date, then the effective date will be replaced and overridden with the lodgement date. Late lodgement fees will still apply in this scenario, and an application fee will be charged should directors apply to ASIC or the Court to change the date of resignation.
The purpose of these changes is to prevent illegal phoenix activity by holding directors accountable, preventing directors from inadequately backdating their resignation or leave their company without any directors.
Increasing the Statutory Demand Threshold
As a response to the covid-19 pandemic, on 25th March 2020 the federal government temporarily raised the threshold of which a statutory demand can be issued from $2,000 to $20,000.
The Government also temporarily expanded the timeframe that creditors had to respond to a statutory demand from 21 days to six months.
The expiry date for this relief was 31st December 2020. On this day the threshold for which a statutory demand could be issued revered back to it’s original threshold of $2,000.
The Treasury is now deliberating about whether or not the current monetary threshold at which a statutory demand can be issued by a creditor should remain at $2,000 or should be permanently raised to a higher amount.
The minimum threshold at which creditors are allowed to issue a statutory demand on a company could potentially rise by five times from its current amount as the Treasury ponders about aligning it with the personal bankruptcy threshold. The personal bankruptcy threshold, was doubled from $5,000 at the start of 2021.
The Treasury believes that it is important for there to be harmony between the two thresholds as this “can provide desirable consistency between the two different regimes, supporting individuals who run small businesses that need to engage with both regimes where their business is in financial distress”.
The following considerations are being taken into account whilst deliberating about raising the statutory demand threshold: confusion that might result from indexing the threshold to keep in line with inflation;
Commercial costs of issuing and defending a demand at or near the current permanent minimal threshold amount of $2,000; Alignment with personal bankruptcy threshold; and the impact on creditors and debtor companies. For example, increasing the threshold may lead creditors to manage their risk of non-payment through less generous credit terms, such as higher interest rates or shorter payment period. The Treasury’s consultation will conclude on Friday 5th March 2021.
Craig Dangar from C&D Restructure and Taxation Advisory says that “there is a definite need for the statutory demand threshold to be raised as the current $2,000 is simply too low, the costs of undertaking an action too high and it is an incentive for the system to be misused if there is a delinquency, alternatively if there was a low-cost option then the threshold would be appropriate” says Mr. Dangar.
Personal Bankruptcy Threshold
On 24 March 2020, the Commonwealth Government temporarily raised the threshold to issue a bankruptcy notice from $5,000 to $20,000 as a consequence of the COVID-19 pandemic.
The Attorney-General and Minister for Industrial Relations, Christian Porter made an announcement on 18th December 2020. In this statement the minister outlined that there would be a permanent lift of the threshold to $10,000 from 1st January 2021 onwards.
When deciding upon the new threshold Christian Porter revealed that the government had taken into account the changing value of money and the changes to debt levels since that time, and was informed by consultation with stakeholders.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we understand that the insolvency waters are rough and finding advice that focuses on you and your business can be difficult. For advice that is independent and without agenda give the team at C&D a call on 07 36086800 or schedule a meeting here via Calendly. We focus on commercial and practical solutions and are not afraid to have the tough conversations.
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