06.05.2020

COVID-19: Insolvency Law Changes

On Tuesday afternoon the government introduced legislation to implement the changes to the Companies Act 1993 (the Act) it announced in early April.  These changes are intended to assist companies to work through post COVID-19 solvency issues and in doing so, support New Zealand’s economic recovery. 

The changes include:

  • expanding and defining the ‘safe harbour’ scheme established under the previous changes to the Act, which temporarily protects directors from adverse claims under sections 135 and 136 of the Act;
  • setting rules around the ‘business debt hibernation’ scheme previously indicated in early April.  This scheme enables businesses which have been affected by COVID-19 to place existing debts into “hibernation” for six months until they are able to start trading normally;
  • providing temporary relief for companies and other entities, including Māori governance entities, which are facing difficulties in complying with their obligations under statute or their constitutions because of COVID-19.

These changes are being effected under the omnibus COVID-19 Response (Further Management Measures) Legislation Bill. 

The omnibus bill also addresses a number of other changes including:

  • changes to commercial property law to support businesses and commercial landlords to manage situations where, because of the impact of the response to COVID-19, businesses are unable to pay their rent and landlords are unable to meet their mortgage payments.  The amendments extend the notice period and the period lessees must be in arrears before landlords can cancel commercial leases and extend the notice period before mortgagees can exercise certain rights under the mortgage, such as the right to sell or repossess the property;
  • changes to the Commerce Act 1986 to allow the Commerce Commission to authorise conduct that may technically breach the restrictions on cartel conduct, but would be of such a benefit to the public that it should be permitted.

Having passed its first reading, the bill will be referred to the Epidemic Response Committee for consideration and will be reported back to Parliament on Tuesday 12 May. 

For more information please see our two updates on the proposed changes to the Act here and here, as well as our update on the issues around defaults on leases.

If you have any questions about the proposed amendments, please get in touch with Glen Holm-Hansen, Rob McStay, Simon Cartwright, or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

construction meeting e
Referring to Other Documents and When to Bring Proceedings: The High Court Provides Useful Guidance in Issuing and Relying on Payment Schedules
The High Court has provided useful guidance for contractors in issuing and assessing payment schedules under the Construction Contracts Act 2002 (CCA) in its recent decisions in Chillex Services Ltd v...
10.07.2025 Posted in Construction
Rewriting the Risk: Lessons from John Sisk & Son Ltd v Capital & Centric (Rose) Ltd [2025] EWHC 594 (TCC)
A recent decision by the English High Court, John Sisk & Son Ltd v Capital & Centric (Rose) Ltd [2025] EWHC 594 (TCC), considered the interpretation of a risk allocation provision under a besp...
09.07.2025 Posted in Construction & Disputes
Can Contractors Terminate for Repeated Late Payment? Key Lessons from Providence v Hexagon
The decision of the English Court of Appeal in Providence Building Services Ltd v Hexagon Housing Association Ltd [2024] EWCA Civ 962 provides important guidance on a contractor’s termination right...
09.07.2025 Posted in Construction & Disputes
Property
Make Your Premises Good Again
With all the time, effort and cost that goes into taking on a new lease of commercial premises, what happens when it comes time to move on can seem unimportant. It is not surprising, then that make-go...
25.06.2025 Posted in Property
Flooded car
Flooding due to overland flow paths and damaged drainage
Persistent heavy rainfall across the country often results in damage to property due to flooding caused by overland flow paths and defective drainage.  But who is responsible for the cost of the dama...
17.06.2025 Posted in Climate Change & Property
Understanding Indirect Privacy Notification: What you need to know
The Privacy Amendment Bill (the Bill), if passed into law, will require agencies to notify individuals when their personal information is collected from a source other than the individual themselves, ...
16.06.2025 Posted in Corporate & Commercial & Employment
iStock  Succession Plan medium
Family Ties: Intra-Family Succession and Exit Planning
As the second instalment in a series of articles looking at the generational wealth transition and its impacts on business succession in New Zealand, Ben Hickson (partner, Corporate & Commercial...
16.06.2025 Posted in Corporate & Commercial & Private Wealth
SEND AN ENQUIRY
Send us an enquiry

For expert legal advice, please complete the form below or call us on (09) 375 8700.