Businesses in the local channel that may be facing insolvency due to the disruption caused by the ongoing coronavirus pandemic could be in for some relief, with the government introducing a new package of in Parliament as part of its efforts to buoy the economy.
The new package of measures introduces changes to insolvency and company law via 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.
It is also designed to give directors of companies facing significant liquidity problems due to COVID-19 additional confidence that they can keep trading by providing a ‘safe harbour’ for their insolvency-related duties under the Companies Act, and
Additionally, the new measures provide temporary relief for companies and other entities – including Māori governance entities – that may be facing difficulties in complying with their statutory obligations, or obligations under their constitutions or rules, because of COVID-19.
“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.
Minister of Commerce and Consumer Affairs Kris Faafoi, meanwhile, noted that although the relief package doesn’t give companies a “free pass to ignore their obligations under the Companies Act”, it does 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,” Faafoi said.
The Bill comes after the government pushed through its COVID-19 Response (Taxation and other Regulatory Urgent Measures) Bill, which gives businesses more than $3 billion in tax refunds as they deal with the economic impact of the virus.
“This response delivers the single biggest government support package to businesses via the tax system in modern New Zealand history, and more is yet to come,” Revenue Minister Stuart Nash said late last month, when the legislation was being hurried through Parliament.
“As the Prime Minister and Finance Minister have said we are constantly monitoring the situation for business and adjusting our support as required. Just yesterday we indicated additional support will be coming for commercial leases.
“We will keep supporting business and jobs where we can to cushion the blow of the virus and ensure New Zealand is well positioned for recovery,” he added.
The latest legislation comes off the back of other tax changes involving a $2.8 billion support package for business, which came in just before the lockdown, and other measures outside of the tax system, including up to $12 billion in wage subsidies.