Insolvent trading laws to change amid COVID-19 crisis

March 23, 2020 Roger Blow

The Federal Government has announced urgent changes to insolvent trading laws to provide companies with the confidence to continue to trade during the Covid-19 crisis that currently grips the world.

One key change is to temporarily relieve directors, for six months, of the risk of being held personally liable for insolvent trading by the company.

Others include a 10 times increase to the minimum debt amount necessary to seek the winding up of an insolvent company (from $2,000 up to $20,000) and pushing out the period to satisfy any statutory demand from 21 days to 6 months. These are significant and vital amendments given that almost overnight we have seen widespread and deeply damaging developments across almost all markets and sectors.

The ATO has also released information on temporary arrangements (including tax rebates and deferred payments) being introduced to respond to the economic crisis and new Government economic measures are being announced almost daily to try and preserve jobs and allow companies to ride out the storm.

Legal, accounting and financial advisors are needing to update their advice on a daily basis as new measures are announced and new impacts are felt from the virus measures.

Cove Legal provide specialist advice to clients facing possible insolvency outcomes or facing actual or threatened ATO debt action. If you are attempting to address director personal liability issues or an insolvency situation generally, either now or in the future, do get in contact as we would love to try and help.

https://www.afr.com/policy/economy/insolvency-law-to-be-changed-as-avalanche-expected-20200322-p54con

Roger Blow, Principal, P: +61 8 6381 0326 or E: roger@covelegal.com.au

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

COVID-19: A Financial Health Perspective

March 17, 2020 Roger Blow

These are clearly concerning times from a global health perspective and entire nations are facing, in many cases for the first time in over half a decade, a genuine risk to the lives of their immediate family and close friends.

We are all receiving detailed advice and information many times a day about slowing or avoiding the spread of the virus. Indeed we risk missing the most important guidance by having to wade through so many updates and briefings on what we should and shouldn’t be doing!

But in addition to the obvious need to protect the health of our own families and the community as a whole, there is also a need to have at least some regard for other realities which, whilst not the current priority or focus, are still going to be relevant when we emerge from this crisis: jobs, income, tax liabilities, cash flow, finance, insurance, insolvency.

All of the information and signs suggest that this will be a long battle and not something that is a mere memory come Easter. The initial medical predictions put the peak of WA’s coronavirus attack most likely falling between June and August.

So as hard as it may be when every update is focused on social distancing and using antibac gel, we do also need at this time to start thinking about how we make or change plans to address the financial needs of our businesses and community. Already some industries would have been severely impacted financially by the virus measures, such as those in the events and sport sectors. Next in line will be restaurants and bars and then businesses selling luxury items or social experiences, given that belts will be tightened probably even more so than in the GFC. And we are only weeks into this story, with likely months still to go.

At Cove Legal we have specialized for many years in assisting clients with legal disputes or problems focused around either insolvency issues or outstanding tax liabilities. The advice in that space, virus or no virus, is to have the conversations early – especially where the ATO is concerned. So many damaging financial outcomes can be either avoided or lessened with early advice, action and intervention when things start to look financially uncomfortable.

We provide guidance on potential personal liability for Directors, dealing with the ATO when an individual or company is being pursued for unpaid tax debts, negotiating payment plans for tax debts, addressing garnishee notices, director penalty notices, winding up or bankruptcy proceedings and pursuing unpaid amounts under commercial agreements.

The next 3-6 months are going to be challenging for businesses both big and small and this will likely be a global economic problem. We can’t give you more advice on the health issues but if you would like to discuss a legal health check for your business then we are keen to remain as available as possible to clients.

To assist in that objective, we are now set up to conduct client meetings by either Skype or iPhone Facetime – and the old-fashioned telephone and email of course work very well.

We are also happy to offer fixed price initial consultations at $350 plus GST for up to an hour (which represents over 40% reduction to the usual fees), so that new clients can feel comfortable that they are not handing over a blank cheque. Our objective is to give you the best advice for you to then make informed decisions. Call or email us today if you think we can help.

Roger Blow P: +61 8 6381 0326 or e: roger@covelegal.com.au

Disclosure of Business Tax Debts – A New String in the ATO’s Bow

March 10, 2020 Roger Blow

The Australian Tax Office (ATO) now has a new power to add to its already impressive arsenal, being the power to disclose the tax debt information of businesses to registered Credit Reporting Bureaus.

This power was granted to the ATO on 21 February 2020 as part of the Government’s broader strategy to reduce overdue tax, encourage engagement with the ATO, and improve overall transparency. The ATO claims that the measure will ‘support more informed decision making within the business community by making large overdue tax debts more visible’. They further claim that it will address the unfair advantage which businesses obtain by failing to meaningfully engage with the ATO.

The ATO’s criteria for disclosure is:

The business has an ABN, but is not an ‘excluded entity’ (i.e. a registered charity, government entity, deductible gift recipient, or complying superannuation entity);
The business has one or more tax debts, of which at least $100,000 is overdue by more than 90 days;
The business has not effectively engaged with the ATO in managing its tax debts; and
The business does not have an active complaint with the Inspector-General of Taxation concerning the proposed reporting of the business’s tax debt information.

A business that satisfies that criteria then has 28 days from the date of the ATO notification to engage with the ATO and manage its tax debt.

This new power can have a profound commercial effect, particularly on small businesses.

Standard credit defaults generally remain as a black mark on credit reports for a period of five years and have a detrimental effect on the ability to secure or maintain financial support from banks and other credit suppliers. Whilst ATO reported tax debts will only remain visible on a credit report for as long as they meet the above criteria, the default could have disastrous effects for businesses who lose credit eligibility based on the ATO’s report.

Considering the potential ramifications of this new reporting power on a business, it remains to be seen how it will be used by the ATO with respect to debts that are in dispute. However, it does highlight the need for businesses to engage early and often with the ATO when faced with an unpaid tax debt.

Cove Legal provide specialist advice to clients facing possible insolvency outcomes or facing actual or threatened ATO debt action. If you are attempting to address director personal liability issues, director penalty notices, garnishee orders, winding up applications, statutory demands or need advice on an insolvency situation generally, speak to us today.

Roger Blow, Practice Director Ph: +61 8 6381 0326, or e: roger@covelegal.com.au

Text messages to one person still found to be defamatory

March 5, 2020 Roger Blow

The recent decision of Armstrong v McIntosh [No4] 2020 WASC 31 has found that text messages referring to the plaintiff as being ‘an evil person’ were defamatory, despite being sent to only one person.

The plaintiff claimed that the text messages, sent by the defendant to his friend, were defamatory and he sought damages, including aggravated damages, as well as an injunction to restrain the defendant from making any further publications with the same defamatory meanings.

The defendant made the allegations over a series of text messages implying that the plaintiff was evil, a liar, that he had acted in such an unchristian way that his parish priest thought ill of him, that he didn’t deserve to associate with the defendant’s family and friends and that he conspired with other people to ruin the defendant by nefarious means.

It was interesting that in assessing damages, the court considered that the means of publication was a factor. Despite text messages often being informal and spontaneous in nature, the defendant in this instance wrote long, well structured, grammatically correct messages, which would be perceived by the ordinary person as being something that was expressly considered by the defendant and not an offhand remark as he had argued they were.

The court also found that whilst the gravity of the material in the texts was serious it should be weighed up against the fact that the texts were only published to one person. For this reason there was ‘minimal damage’ to the plaintiff’s reputation and that there needed to be an ‘appropriate and rational relationship between the harm sustained by the plaintiff and the amount of damages awarded.’

The plaintiff was awarded just $6,500 in damages and aggravated compensatory damages of $1,500. The court also awarded an injunction restraining the defendant from publishing the words complained of or any similar words defamatory of the plaintiff.

This decision shows that the publication of sms messages, even to just one person, can be found to be defamatory and caution should always be taken before pressing send. For us however, the decision also provides an excellent example of a plaintiff winning their defamation action and yet being awarded damages by the Court that would no doubt have been dwarfed by the legal fees that they would have spent in pursuing the action and still considerably less than the legal fees that they will likely recover from the defendant. In pure commercial terms therefore, likely a Pyrrhic victory.

Cove Legal specialises in resolving legal disputes with particular expertise in bringing and defending defamation claims. Principal Roger Blow is recognised as a media law expert, particularly in liability arising from the use of social media. He regularly provides commentary concerning media law issues to television, radio stations and newspapers.

Roger Blow, Practice Director, P: +61 8 6381 0326 or e: roger@covelegal.com.au