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Insolvency relief in sight for businesses affected by COVID-19

Insolvency relief in sight for businesses affected by COVID-19

Posted May 05, 2020
Business

Media Release: Hon Grant Robertson Minister of FinanceHon Kris Faafoi Minister of Commerce and Consumer Affairs

Support is on the way for businesses facing insolvency due to COVID-19, with the Government introducing a package of measures in Parliament today to further boost New Zealand’s economic recovery.

“The Government is ensuring businesses affected by the economic impacts of COVID-19 can access the assistance they need to stay afloat as we get New Zealand moving again,” Minister of Finance Grant Robertson said.

Changes to insolvency and company law are progressing through the COVID-19 Response (Further Management Measures) Legislation Bill, which contains a range of measures to support business through the pandemic.

The Bill makes changes to the Companies Act to help businesses facing insolvency due to COVID-19 to remain viable by:

· placing existing debt into hibernation until they can start trading normally again,

· giving directors of companies facing significant liquidity problems due to COVID-19 confidence they can keep trading by providing a ‘safe harbour’ for their insolvency-related duties under the Companies Act, and

· providing temporary relief for companies and other entities – including Māori governance entities – facing difficulties in complying with their statutory obligations, or obligations under their constitutions or rules, because of COVID-19.

“Other measures we’re taking include extending statutory deadlines imposed on companies and other entities. In light of physical distancing restrictions, we’ll also be allowing the use of electronic signatures and other electronic communications, where necessary,” the Minister of Commerce and Consumer Affairs Kris Faafoi said.

“This relief package doesn’t give companies a free pass to ignore their obligations under the Companies Act. It does, however, provide business owners and directors who are in legitimate financial difficulty as a result of COVID-19 with practical assistance for weathering the storm.

“The solvency of New Zealand businesses is more important to our economic development and wellbeing than ever before. Supporting businesses through these challenging times means retaining jobs and income in the economy, and ensures we don’t sustain longer-term economic harm,” Kris Faafoi said.

“These changes sit alongside the Government’s other substantial support for the business sector, including the wage subsidy scheme, which is helping 1.7 million people, the Small Business Cashflow Loan Scheme, the Business Finance Guarantee scheme, and support through the tax system,” Grant Robertson said.

The first reading of the Bill will take place this afternoon. It will be referred to Epidemic Response Committee for consideration and reported back to the House on Tuesday 12 May. It will then move through the remaining legislative stages as quickly as possible.

The Bill also includes:

· Measures to support commercial tenants and landlords, who are struggling to pay rent or meet their mortgage obligations

· Changes to the parental leave scheme to allow essential workers to return to work without being disadvantaged by losing entitlements to certain leave and payments

· Changes to manage local government by-election timing so that this continues to be a fair process.

· Changes that will allow the Heart Foundation, Coastguard and Countdown Kids Charitable Trust to process their fundraising lotteries through email, phone and electronic payments.