Whilst the COVID 19 crisis has brought with it great uncertain and turbulent times, there have been numerous economic announcements by the Federal and State Governments in an attempt to cushion what is likely to be a hefty blow.

It is imperative that businesses impacted by the Coronavirus have some sort of safety net to make sure that when the crisis has passed they can resume business operations. For this reason, Outcomes Assist supports the temporary relief provisions recently enacted by Parliament which will hopefully lessen the threat of actions that could unnecessarily push otherwise viable businesses into liquidation. The Temporary relief measures include:

• Creditor statutory demand on a company increased threshold from $2,000 to $20,000.

• Minimum debt for a creditor to start bankruptcy proceedings increased threshold from $5,000 to $20,000.

• Presumption of insolvency/act of bankruptcy when not responding to a demand/bankruptcy notice increased from 21 days to 6 months.

• Personal liability for insolvent trading relieved for a 6-month period.

Notwithstanding the above, and the many other economic response packages handed down, company directors would be best served by doing the following 3 things in order to consider their business’s sustainability: –

• Ensure that the company’s cash flow projections are being monitored throughout this period, taking into account the Government support it might be entitled to and adjusting for revenue downturns and ongoing costs.  Consider the changes to income over the next 12 months and if necessary, run various scenarios through the cash flow model in order to be at least somewhat prepared for what might be coming in the future.

•  Act on the information flowing out of the cash flow and other reports.  This is not the time for company directors to put their heads in the sand and wish for a miracle.   If cash is looking tight act early to try and secure further funding or consider whether a restructure is required.

• Seek advice early.   The earlier that company directors engage with their accountants and other experts in order to map out a path through this uncertain time, the more options there may be available.  Leave it too late and the decisions might be made for you – and they most likely won’t be the answers you were hoping for.

Most importantly, consider the “big picture” for the business after the next six months.   What does the “new normal” look like?   Expectations may need to be changed for those company directors that think that there will be a return to “business as usual” once “all of this” is over.

This article is intended to provide general information only in summary format on relevant issues. It does not constitute legal or financial advice, and should not be relied on as such