The new Act makes changes to the Companies Act and other related legislation to help businesses facing insolvency due to COVID-19 to continue trading, and keep New Zealanders in their jobs.
There’s also relief for companies and other entities facing difficulties in complying with their statutory obligations, or obligations under their constitutions or rules, because of COVID-19.
Business Debt Hibernation
Business Debt Hibernation allows businesses affected by COVID-19 disruptions to get a month of protection while they talk to their creditors — during this period most creditors can’t take legal action to enforce their debts, eg applying for your business to be liquidated. If your creditors agree, you can get a further 6 months of protection.Learn more about Business Debt Hibernation
Safe harbour for company directors
The introduction of a ‘safe harbour’ from sections 135 and 136 of the Companies Act 1993 provides relief to company directors facing significant liquidity problems as a result of COVID-19. This temporary provision expired on 30 September 2020.
Law changes to aid compliance
Other provisions in the Act give a range of entities relief from both statutory obligations, and obligations in their constitutions and other rules, that would be impossible, burdensome and/or impracticable to fulfil owing to the effects of COVID-19.
Entities are able to make certain modifications to their constitutions or rules (such as calling or holding meetings, rules relating to dispute resolution or waiving, suspending, deferring or reducing fees payable by members).
Entities are able to make use of electronic means (including electronic voting and the use of electronic signatures) when their constitution or rules don’t permit this.
Registrars and Ministers have been given the power to grant exemptions from certain statutory obligations (such as calling or holding meetings and auditing, assurance, or financial reporting or review requirements).
Additional changes to insolvency law
Other amendments to insolvency law are included in the Act.
Voidable transactions period of vulnerability reduced
Bringing forward an insolvency-related reform under the voidable transactions regime to reduce the period of vulnerability from 2 years to 6 months, where the debtor company and the creditor are unrelated parties.
Change in the commencement date for the Insolvency Practitioners Regulation legislation
The Insolvency Practitioners Regulation Act 2019 and the Insolvency Practitioners Regulation (Amendments) Act 2019 were originally scheduled to come into force on 17 June 2020. Cabinet agreed to allow the commencement to be deferred and they later came into force on 1 September 2020.
Electronic signatures and the Contract and Commercial Law Act 2017
Amending the Contract and Commercial Law Act 2017 so that the provisions in that Act relating to electronic signatures apply to security agreements containing powers of attorney. This change applies retrospectively from 21 March 2020.
- News item — COVID-19-related business relief measures: extensions and expiry dates, published 20 October 2020
- News item — Safe harbour for company directors to expire, published 28 August 2020
- Questions and answers, published 7 May 2020
- News item — Bill introduced to Parliament, published 7 May 2020
- News item — Initial announcement on 3 April 2020
- Cabinet paper, published 9 April 2020 [PDF 559KB]
- Cabinet minute, published 9 April 2020 [PDF 99KB]
Want to know more? Please check our websites
We appreciate that circumstances related to COVID-19 may be creating uncertainty or anxiety for you and your business. Further details will be published here as soon as these become available.
Published on 3 April 2020, last updated on 20 October 2020