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.
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.