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COVID-19 DEBT HIBERNATION

The Government is introducing legislation to change the Companies Act to help businesses facing insolvency due to COVID-19 to remain viable, with the aim of keeping New Zealanders in jobs.

A safe harbour is granted to directors of solvent companies, who in good faith consider they will more than likely be able to pay its debts that fall due within 18 months.

It essentially provides some certainty to creditors.

The changes allow directors to enter into a debt hibernation scheme with the consent of creditors.

Some Company Law changes are: 

 

  • Debt hibernation is binding on all creditors if a vote of 50% by number and value is obtained;
  • Creditors will have 1 month from the date of proposal to vote during which time there is a moratorium on the enforcement of debts;
  • If passed, a further 6 months moratorium will be available;
  • To access debt hibernation a threshold will need to be met 

 

This is not intended as legal advice and do not act upon anything contained in this article unless you first seek independent legal advice and consult your accountant or insolvency practitioner.