Government measures in key jurisdictions 5th edition - Flipbook - Page 94
New Zealand
Insolvency
The Government made two key legislative changes to the Companies Act to prevent solvent
businesses facing temporary financial distress from being prematurely placed into liquidation.
Has the
government made
any changes
to insolvency
legislation?
The first is the Business Debt Hibernation regime, which provides businesses with an option
to place existing debts on hold until they can start trading normally again, subject to creditor
agreement. This prevents creditors from taking legal action against the company to recover
their debt for a period of six months.
Applications to use the Business Debt Hibernation scheme can be made until 31 October 2021.
The temporary Covid-19 Business Debt Hibernation provisions are scheduled to be repealed on
31 May 2022.
The second change was the Safe Harbour regime, which provided directors with security
against a legal claim for failing to meet their insolvency duties under the Companies Act as a
direct result of the impact of the Covid-19 pandemic. Under the safe harbour regime, if a
director was accused of:
•
•
reckless trading, either by agreeing to the business of the company being carried on in any
manner, or causing or allowing the business of the company to be carried on in any manner,
which is likely to create a substantial risk of serious loss to the company's creditors; or
incurring an obligation while being of the opinion that the company has, or in the next six
months is likely to have, significant liquidity problems;
she or he was able to invoke the safe harbour by showing that she or he was of the opinion that:
•
•
any significant liquidity problems over the next six months are, or will be, a result of the
effects of Covid-19 on the company, its debtors, or its creditors; and
it is more likely than not that the company will be able to pay its due debts on and after 30
September 2021.
The safe harbour regime expired on 30 September 2020. However, the Government may reinstate the regime if there is a need to do so. The temporary Covid-19 safe harbour legislation is
scheduled to be repealed on 31 May 2022.
Details of these changes are available here.
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
There has been no Government intervention in contract law, and the usual rules apply. However
there has been an increased focus on contractual small print, including:
•
questioning whether the Covid-19 Alert Level Four lockdown period was excluded from
working day provisions in a contract (not for most contracts, but for those that determine a
working day to be a day that a bank is open for business this was less clear-cut); and
•
force majeure clauses, which will suspend the performance of the contract during the
force majeure event.
Details of how a Force Majeure Clause can affect the performance of a construction contract
is available here.
In addition, the Commerce Commission (New Zealand’s competition regulator) have recognised the
greater need for commercial cooperation during the Covid-19 pandemic.
The Commerce Commission is allowing more flexibility to enable businesses to work together,
potentially share resources or otherwise cooperate to ensure consistency of supply of both products
and services required by New Zealanders.
Detail of the permitted commercial cooperation is available here.
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Government measures in key jurisdictions
