Temporary reforms to directors' duties in New Zealand passed in response to the COVID-19 pandemic are shortly due to roll off.
In May this year, Parliament enacted the COVID-19 Response (Further Management Measures) Legislation Act 2020 (the Act), which introduced a raft of changes intended to support businesses during the COVID-19 pandemic. A useful change, summarised in our earlier update (available here), was a 'safe harbour' from personal liability for directors for actions taken which may otherwise breach the insolvency duties under the Companies Act 1993 (in sections 135 and 136 of that Act).
The period during which this safe harbour applies is ending on 30 September 2020. Under the Act, this period may be extended, with a longstop date of 30 September 2021. However, the New Zealand Companies Office has indicated that an extension is unlikely to occur, though the Government can quickly re-instate the relevant provisions if necessary.
Despite the pressures of the COVID-19 trading environment and the stresses of the most recent Alert Level 3 lockdown, formal insolvency appointments (receivership, liquidation and voluntary administration) have remained at low levels over recent months, but with some companies taking up the new Business Debt Hibernation protections. Predictions in this environment however, remain uncertain.
In Australia, broader-ranging relief from insolvent trading laws remains in force for now, but may also come to an end this month. Polly Pope and Matt Kersey will be providing a trans-Tasman view of COVID-19 insolvency law reform, including these issues, with Samantha Kinsey of King & Wood Mallesons next week. To register your interest in attending the session please click here.
If you would like to discuss the removal of the safe harbour protections, please contact one of our experts below.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.