Parliament considers insolvency relief for businesses

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Wellington, May 5, 2020

Finance Minister Grant Robertson and Commerce & Consumer Affairs Minister Kris Faafoi

The New Zealand Parliament is currently discussing a new package of measures to support businesses facing insolvency due to Covid-19.

Prime Minister Jacinda Ardern told a media conference this afternoon that following the first reading today, the Bill will be considered by the Epidemic Response Committee chaired by Leader of the Opposition Simon Bridges.

The Bill will return to Parliament on Tuesday, May 12, 2020 for further action.

“I hope that it will be passed as soon as possible,” she said.

Finance Minister Grant Robertson said that the proposed measures aim to ensure that businesses affected by the economic impacts of Covid-19 can access the assistance that they need to stay afloat as the economy is revived.

Some provisions

The Covid-19 Response (Further Management Measures) Legislation Bill 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 (a) placing existing debt into hibernation until they can start trading normally again (b) giving directors of companies facing significant liquidity problems due to Covid-19, the confidence that they can keep trading by providing a ‘safe harbour’ for their insolvency-related duties under the Companies Act, and (c) 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.

Not a free pass

Commerce and Consumer Affairs Minister Kris Faafoi said that other measures include extending statutory deadlines imposed on companies and other entities.

“In light of physical distancing restrictions, we will also be allowing the use of electronic signatures and other electronic communications, where necessary,” he said.

Mr Faafoi said that the relief package does not give companies a free pass to ignore their obligations under the Companies Act.

But it however provides practical assistance to business owners and directors who are in legitimate financial difficulty as a result of Covid-19 to weather 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 that retaining jobs and income in the economy, and ensures that we do not sustain longer-term economic harm,” Mr Faafoi said.

Complimentary measures

Mr Robertson said that the proposed changes compliment other support packages announced for the business sector, including the Wage Subsidy Scheme, which he said is helping 1.7 million people, the Small Business Cashflow Loan Scheme, the Business Finance Guarantee scheme, and support through the tax system.

The Bill also includes (1) Measures to support commercial tenants and landlords, who are struggling to pay rent or meet their mortgage obligations (2) 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 (3) Changes to manage local government by-election timing so that this continues to be a fair process (4) Changes that will allow the Heart Foundation, Coastguard and Countdown Kids Charitable Trust to process their fundraising lotteries through email, phone and electronic payments.

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