COVID-19 Entity Response

COVID-19 Response (Further Management Measures) Legislation Bill


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Law changes to help businesses through COVID-19
Introduction
	The Bill will now be considered by the Epidemic Response Committee and reported back to the House on Tuesday 12 May. It will then move through the remaining legislative stages as quickly as possible.
	The Bill makes changes to the Companies Act and other related legislation to help businesses facing insolvency due to COVID-19 to continue trading, and keep New Zealanders in their jobs.
	There’s also relief for companies and other entities facing difficulties in complying with their statutory obligations, or obligations under their constitutions or rules, because of COVID-19.
	Key amendments in the support package include:
	•	a ‘business debt hibernation’ period allowing companies and other entities to enter into agreements with creditors in relation to existing debt
	•	a temporary ‘safe harbour’ from personal liability for directors of companies facing insolvency owing to COVID-19
	•	enabling Registrars to issue exemption notices in relation to compliance with statutory obligations
	•	providing relief for entities that cannot comply with rules in their constitutions and rules because of COVID-19
	•	allowing electronic means to achieve compliance, such as holding meetings electronically, and the use of electronic voting and signatures, when these are not permitted by an entity’s rules.
Business Debt Hibernation
	The COVID-19 Business Debt Hibernation regime will enable companies and other business entities affected by the pandemic to place existing debts into hibernation for up to 7 months.
Law changes to aid compliance
	Other provisions in the Bill give a range of entities relief from both statutory obligations, and obligations in their constitutions and other rules, that would be impossible, burdensome and/or impracticable to fulfil owing to the effects of COVID-19.
	These provisions:
	•	enable the use of electronic means (including electronic voting and the use of electronic signatures) when an entity’s constitution or rules don’t permit this.
	•	allow entities to make certain modifications to their constitutions or rules (such as calling or holding meetings, rules relating to dispute resolution or waiving, suspending, deferring or reducing fees payable by members).
	•	give Registrars and Ministers the power to grant exemptions from certain statutory obligations (such as calling or holding meetings and auditing, assurance, or financial reporting or review requirements)
Who the provisions apply to
	The provisions apply to:
		•	building societies
		•	charitable trust boards
		•	companies
		•	credit unions
		•	firms
		•	friendly societies
		•	incorporated societies
		•	industrial and provident societies
		•	limited partnerships.
	The provisions also apply to the following Māori governance entities:
		•	assembled owners (under Te Ture Whenua Maori Act)
		•	a mandated iwi organisation (under the Maori Fisheries Act)
		•	a Maori Association (under the Maori Community Development Act)
		•	a Maori land trust
		•	a Maori incorporation
		•	a body corporate or the trustees of a trust appointed to administer a Maori reservation, and
		•	a Maori Trust Board.
	The provisions relating to electronic means and modification also apply to post-settlement governance entities.
How long the provisions will be in force
	The modification and exemption provisions have retrospective effect from 21 March 2020 when New Zealand moved to Level 2 of the COVID-19 alert system. All provisions apply until 30 September 2020, unless this date is extended by an Order in Council, by up to 6 months.
Who will oversee the provisions
	For the electronic communications and modification provisions, the relevant authorities are the responsible Registrar or agency. For the exemption provisions, the relevant authorities are the responsible Registrar or Minister.
	For all entities other than the Māori governance entities, the responsible Registrar is the Registrar who acts under the legislation under which the entity is registered or incorporated.
	For the Māori governance entities:
	•	The responsible registrars/agencies for the purposes of the electronic means and modification provisions are:
		° The Chief Registrar of the Māori Land Court for entities under the Te Ture Whenua Māori Act
		° Te Puni Kōkiri for Māori Associations and Māori Trust Boards
		° Te Ohu Kaimoana for mandated iwi organisations
	•	The responsible registrars or Ministers for the purposes of the exemption provisions are:
		° The Minister for Māori Development (for entities under the Te Ture Whenua Māori Act, the Māori Community Development Act and the Māori Trust Boards Act)
		° The Minister for Fisheries (for entities under the Māori Fisheries Act)
	•	The Chief Judge of the Māori Land Court is also empowered to grant relief to entities under the Te Ture Whenua Māori Act in relation to provisions that are usually set by the Court (e.g. terms of trust deeds).
	•	An entity may have more than one responsible Registrar if, for example, they are also an incorporated society.
What are an entity’s obligations?
	When using electronic communications, electronic signatures and/or modification provisions, an entity must:
	•	keep a record of their use and the reasons why (decided by a majority of governance officers)
	•	as soon as is practicable after their use, make reasonable efforts to notify members of the matter
	•	notify the responsible Registrar or agency (or Registrars if there is more than one for a particular entity) — this does not apply to a firm or post-settlement governance entity.
	When the responsible Registrar or agency receives a notification, they will make the information publicly available on the relevant register, and in any other way they see fit.
	When using the exemption power, the responsible agency or Minister will engage with the appropriate people, given the nature of the exemption — with some exceptions (including that it is not reasonably practical, or the urgency of the situation requires the exemption to made as soon as practicable).
How the provisions may be used
Electronic communications
	The use of electronic communications where otherwise not permitted, requires that the majority of the entity’s governing officers believe in good faith that it is not reasonably practicable to carry out the task by non-electronic means. These tasks are:
		a. having or recording information in writing
		b. calling or holding meetings
		c. voting (though there are some matters that electronic voting can’t be used for)
		d. giving or receiving information
		e. making or keeping new records
		f. providing access to records or information held by or on behalf of the entity
		g. signing any instrument
		h. retaining any information.
	See also
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Modifications to constitutions or rules
	An entity may modify certain provisions in its rules if a majority of its governing officers believe in good faith that it is not reasonably practicable to comply with those provisions as a result of COVID-19. The provisions that may be modified are:
		a. calling or holding meetings
		b. a method or form of voting
		c. giving or receiving information
		d. making or keeping new records
		e. a method or form of dispute resolution
		f. a method or form of disciplinary procedure
		g. a waiver, suspension, deferral, or reduction of fees or other amounts payable by members of the entity to the entity
		h. a deferral of auditing, assurance, or financial reporting or review requirements
		i. use of electronic means to do any matter listed in the section above
		j. other procedural or administrative processes.
	The following provisions may not be modified:
		a. the purpose or objects of the entity
		b. the powers of the entity (other than a procedural or administrative power)
		c. the sale, transfer, or other disposition of real or personal property
		d. voting rights or rights to a dividend or other distribution
		e. the duties of the governing body or governing officers (other than a procedural or an administrative duty)
		f. fees or other payments (other than a waiver, suspension, deferral, or reduction of fees or other amounts payable by members of the entity to the entity)
		g. any matter that has a material detrimental effect (direct or indirect) on the substantive rights or powers of any creditor or other person
		h. any matter that is prescribed by regulations
		i. any other matter that is not listed above.
Exemptions from compliance obligations
	Under the exemption provisions, the responsible registrar or Minister may grant exemptions from the following statutory obligations:
		a. calling or holding meetings (including procedures at meetings)
		b. a method or form of voting
		c. giving or receiving information
		d. making or keeping new records
		e. rights to inspect or access information or records
		f. a method or form of dispute resolution (excluding rights of access to courts)
		g. a method or form of disciplinary procedures
		h. auditing, assurance, or financial reporting or review requirements
		i. any other matter specified by regulations.
	The Chief Judge of the Māori Land Court may grant relief without an application in relation to the following:
		a. the terms of a trust set out by order relating to a Māori land trust
		b. the terms of an order incorporating a Māori incorporation
		c. the terms of a trust set out by order relating to a Māori reservation.
Additional changes to insolvency law
	Other amendments to insolvency law included in the Bill are:
		Voidable transactions period of vulnerability reduced
		Bringing forward an insolvency-related reform under the voidable transactions regime to reduce the period of vulnerability from 2 years to 6 months, where the debtor company and the creditor are unrelated parties.
		Change in the commencement date for the Insolvency Practitioners Regulation legislation
		The Insolvency Practitioners Regulation Act 2019 and the Insolvency Practitioners Regulation (Amendments) Act 2019 are scheduled to come into force on 17 June 2020. Unpredictability associated with COVID-19 means that implementation has to be deferred.
		To cater for unexpected COVID-19 related delays, Cabinet has agreed to allow the commencement of the Insolvency Practitioners Regulation Act 2019 and the Insolvency Practitioners Regulation (Amendments) Act 2019 to be deferred for up to 12 months.
		Electronic signatures and the Contract and Commercial Law Act 2017
		Amending the Contract and Commercial Law Act 2017 so that the provisions in that Act relating to electronic signatures apply to security agreements containing powers of attorney.

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