PKF Carr & Stanton, Hastings, New Zealand
08 Apr 2020
The Government are proposing temporary changes to the Companies Act to help companies who may be facing insolvency due to covid-19, to remain viable and keep New Zealanders in jobs.
Whilst it is inevitable that some businesses will go into liquidation, it is hoped that the extra measures announced on 3 April 2020 will help some businesses continue during this period and provide some extra comfort for creditors.
Many companies who continue to trade over the next six months will face significant liquidity issues, so the Government is proposing a “safe harbour” for directors regarding their insolvency duties under the Companies Act, provided:
This announcement has been welcomed by the NZ Institute of Directors, who had petitioned the Government to temporarily pause personal liability for directors in relation to a company trading whilst insolvent, due to COVID-19.
The Government are also proposing a debt hibernation period allowing companies to place existing debt into hibernation until they start trading normally again, providing:
Whilst these changes are designed to assist during this period of uncertainty, directors are not free to disregard their obligations under the Companies Act, including evasion of creditors.
Other proposed temporary changes include:
It is hoped that directors will find these temporary changes more workable and encourage business continuity, rather than closure.
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