Australia is being extremely proactive when it comes to mitigating the impact of the Coronavirus outbreak. In addition to swift self-quarantine protocols and shutdowns, Australia has enacted the COVID-19 Response Act, which passed both houses of parliament.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Australia is being extremely proactive when it comes to mitigating the impact of the Coronavirus outbreak. In addition to swift self-quarantine protocols and shutdowns, Australia has enacted the COVID-19 Response Act, which passed both houses of parliament.
Lexblog reports that the goal of these laws is to protect existing businesses from insolvency. The primary purpose is to provide businesses more time to meet their financial obligations to creditors—six months in most cases. It also shields some directors from being held personally liable for financial shortfalls in their companies.
The main focus of the COVID-19 Response Act is to mitigate the impact that the pandemic is having on businesses across the spectrum. Australian government foresaw that directors will need to seek additional credit and inventory, raise equity, and take on new debt to keep businesses afloat. As many businesses are forced to employ remote workers, the need for tech and training must be addressed as well.
Not all the new regulations of the C19RA have been released to the public. But they appear to focus on reporting obligations, treatment of existing debt, and extensions of how much time must pass before non-payment on insolvency claims can be made.
Directors should be aware that unless a provision is specifically stated in the act, their usual responsibilities remain the same. The responsibilities to employees and shareholders do not change, even during a pandemic.
Given how prevalent litigation funding has become in Australia, both funders and class action law firms should take note of the recent changes.
