Insolvency relief for co-ops during the coronavirus pandemic

Updated 16 October 2020

As part of its COVID-19 response, the Government has made changes to the Corporations Act to provide relief until the end of 2020 from normal insolvent training provisions, including:

Extension of time (from 21 days to 6 months) and amount (from $2,000 to $20,000) before a ‘statutory demand’ for a debt can brought against an organisation. This means more time to manage any debts.

Directors will be relieved of their duty to prevent insolvent trading, with respect to any debts incurred in the ordinary course of business. Directors would otherwise be personally liable. Directors still need to prudently manage their co-op and should seek advice if unsure on what this means in the new context.

Generally changes to the Corporations Act insolvency provisions flow through to co-operatives registered under state or territory legislation. BCCM has written to all state and territory co-operative Registrars seeking confirmation

that a recent extension from September 2020 to December 2020 of relaxed insolvency provisions will apply to co-ops: 

• New South Wales has made a declaration to ensure the change applies for co-ops registered in those states. 
• The Australian Capital Territory and Queensland have confirmed the change automatically applies for co-ops registered in those jurisdictions.

BCCM will update this fact sheet when confirmations are received in other states and territories and if this regulatory relief is extended by the government.

More information – Temporary relief for financially distressed businesses