Zone of Insolvency

Zone of Insolvency

Tag Archives: COVID-19

Directors Can Stop the Zombie Company Pandemic

Posted in Australia

Will the real zombie please stand up? The opportunity for directors to take controlIn the article, “Will the real zombie please stand up? The opportunity for directors to take control,” Scott Atkins and Dr Kai Luck continue their analysis of the risk that global fiscal stimulus and support measures in response to COVID-19 will be used by some entities to continue trade even when they have no realistic prospect of long-term profitability.

There are personal liability laws for directors that should now provide directors with an incentive to seek assistance from expert restructuring advisers to assess a company’s viability and, if its downturn is endemic, to look to formal insolvency options.

Directors who … Continue Reading

The new pandemic: Zombie companies will eat Australia’s COVID-19 economic recovery

Posted in Australia

The new pandemic: Zombie companies will eat Australia’s COVID-19 economic recoveryIn this article, Scott Atkins and Dr Kai Luck consider how the extraordinary government fiscal and stimulus measures introduced in response to COVID-19 may provide an incentive for so-called zombie companies—those that were facing endemic operational and liquidity issues pre-crisis and that have no realistic prospect of successful trade in the long-term—to continue on for the next 6 to 12 months, preventing the recycling of important capital needed to reinvest in the innovative new business ventures that will drive economic recovery and eventual growth.… Continue Reading

COVID-19: From black swan to boiling frog

Posted in Australia

COVID-19: From black swan to boiling frogScott Atkins and Dr Kai Luck examine in this article how underlying corporate governance and risk failures may have contributed to boards being caught so off-guard by COVID-19 and how COVID-19 ‘tunnel vision’ (focused only on pandemic-related business continuity and risk management plans) may lead to companies being exposed to equally devastating risks in other contexts—including climate change and cybersecurity—as the economic recovery period commences across the globe.… Continue Reading

Don’t panic this pandemic: new safe harbours for directors in COVID-19

Posted in Australia, Singapore, UK

In recognition of the significant economic impact of COVID-19, several jurisdictions have passed (or propose to pass) legislation to provide temporary relief for directors of businesses in financial distress, and hopefully mitigate some of the economic effects of the COVID-19 pandemic.

Australia

Relevant Act: Coronavirus Economic Response Package Omnibus Act 2020 (Cth)

Length of Grace Period: 6 months from 25 March 2020 (unless extended by legislative instrument)

The minimum debt which can form the basis for a statutory demand has been increased from AU$2,000 to AU$20,000. The period within which the debt must be paid or an application made to … Continue Reading