We are expecting August and September to be interesting months with the electioneering that will be taking place, we will see promises from all parties on how they will be spending our taxes if they are elected and hopefully some more details on their plans for how they will guide the economy post covid. The latest unemployment rate figures have been released for the June 2020 quarter showing 4.0%. This is down 0.2% on the first quarter for the year. While the politicians will crow that this is well down on treasurers estimates for the same time frame there was an additional wage subsidy extension introduced which has assisted businesses in keeping people employed with 400,000 employees still utilising the…

On 1 September 2020, the remaining provisions of the amendments to the Companies Act 1993, and Insolvency Practitioners Regulation Act 2019 (IPRA) will come into force. Some changes that creditors, directors, shareholders, and their advisors need to know about are: Restriction on Shareholders or Board Appointing Liquidators The 10-working day window for shareholders to appoint liquidators from service of winding up proceedings is gone. Once a company has been served with Winding Up proceedings brought by a creditor, the company’s shareholder(s) or board will be unable to appoint liquidators unless they have the consent of the creditor who is pursuing the winding up proceeding. For shareholders needing or wishing to appoint liquidators we encourage them to start the process as…

June 2020 saw the New Zealand Government declare the country “virus free” after 17 days of no new COVID-19 cases and a move to Level 1 on 9 June 2020, ahead of schedule. With the exception of border control restrictions, all COVID-19 related restrictions imposed during Lockdown were lifted. The post-Lockdown experience for SMEs has been varied. Some have seen incredible community support and are feeling confident about their futures, notwithstanding the difficult quarter they have just experienced. Others are struggling to adjust to the post-Lockdown economy and many are being confronted with difficult decisions on what their businesses will need to look like, if those businesses are to survive in the medium term. If you want to have a…

The country is in the process of working its way back from the economic standstill that most industries experienced as a result of the Level 4 lockdown. For those that traded at Level 3 and Level 2, they had to shift their business models to meet the COVID-19 trading requirements. Many of those requirements squeezed margins. In the coming months, many business owners will need to look at their businesses and decide whether to continue to trade going forward. While the Government has provided some support, recovering from lockdown is just one more hurdle for businesses that have been experiencing year on year increases in operating expenses and the minimum wage, both of which have made tight margins even tighter.…

In May 2020, non-essential services reopened for trading. New Zealand moved from Level 4 to Level 3 on 27 April 2020 and the drop down to Level 2 happened on 13 May 2020. The “new normal” at Level 1 started on 9 June 2020. Because of the Government assistance that has been provided to businesses, we anticipate that the economic effects of the Lockdown will be seen over a longer period of time than in previous economic slowdowns. Many businesses experienced a surge in trading activity when they reopened at Level 3 and another spike in revenue at the start of Level 2 but few businesses have seen consistent revenue week on week since reopening. The budget announcement was made…

There has been a lot of commentary around what the COVID-19 global pandemic is doing to countries’ economies. Some economists are predicting a global economic downturn to be the worst recession since the Great Depression and most are expecting this downturn to be worse than the GFC. Today, 14 May 2020, New Zealand is moving from Level 3 to Level 2 and a lot of businesses are re-opening for the first time since the Level 4 lockdown came into effect seven weeks ago. In the weeks and months ahead, we will find out what effect the lockdown has had, so now would be a good time to look at the NZ insolvency figures to April 2020 and how those figures…

The directors of a company have all the powers to decide what will be done, when it will be done and how – but with that power goes the responsibility to the company and its shareholders, to the company’s creditors and last, but not least, to themselves. The Responsibility to Others As a director, whether that be as the sole director of a small company or one of many in a large company, you have duties imposed on you under legislation, such as the Companies Act 1993 (“the Act”), and the company’s constitution. In any circumstances, you must firstly comply with the duties imposed by legislation, which are set out in sections 131 to 138A of the Act. Your first…

On 3 April 2020, the Government announced that it would be making changes to the Companies Act 1993 to provide insolvency relief for businesses affected by COVID-19. Yesterday, 5 May 2020, the first reading of the COVID-19 Response (Further Management Measures) Legislation Bill) took place. That bill introduces, amongst other measures: Reducing the voidable transaction and voidable charge period for non-related parties to six months (Schedule 2) The safe harbour provisions for directors (Schedule 3) The COVID-19 business debt hibernation (Schedule 4) Extensions to the periods mortgages and rent can be in arrears before default notices can be issued and enforcement action can be taken under the Property Law Act 2007 (Schedule 14) Both the Safe Harbour provisions and the…

Businesses in New Zealand are facing challenging times. Directors of companies are pulled in all directions - employees to care for, bills to pay and creditors chasing them for payments. Directors are not alone in feeling the extreme levels of stress, fear and anxiety. Directors however should not now be prolonging the inevitable where they had no viable business pre Covid-19 and if post Covid-19 there is no reasonable prospect of the company recovering from the current circumstances. If circumstances are dire, the shareholders should be looking to appoint a liquidator to avoid debt increasing and further harming creditors. Liquidation does not necessarily mean the end of trading altogether. Often the business is sold and sometimes there is an opportunity…

A survey carried out in 2017 by Franchising New Zealand identified the fact that New Zealand had, at that time, the highest proportion of franchises per capita in the world. With around 630 franchise brands, it was estimated that they made up about 7% of the small businesses in New Zealand, employed over 124,000 people and contributed $27.6 billion to the New Zealand economy, plus an additional $11.1 billion in motor vehicle sales and $7.4 billion in fuel sales. We could not find any more recent figures, but which ever way you look at it, franchises make up a significant portion of businesses in New Zealand. As with other business models, there have been individual franchisees fail before Covid-19 came…

With the upheaval being caused to many SMEs by the Covid-19 lockdown and the potential for many of those SMEs to fail, the risk to people who have provided personal guarantees (PG’s) for company debts increases. The support packages for companies being provided by the Government and the major trading banks is good news for the employees, because of the 12-week wage subsidy package, and for those businesses that can meet bank lending requirements to access the business finance guarantee scheme or possibly can use the debt hibernation and tax packages. But the position for those companies that have other significant overheads and possibly were loss making startups or were already struggling, and for the individuals involved with those companies…

Government Resources:https://treasury.govt.nz/news-and-events/newshttps://www.beehive.govt.nz/release/further-measures-support-businesseshttps://www.beehive.govt.nz/release/business-finance-guaranteehttps://www.companiesoffice.govt.nz/news-and-notices/insolvency-relief-for-businesses-impacted-by-covid-19/An Australian perspective: Australian Covid-19 Insolvency Law changes: article here The Legal Perspective:We share general notes from Lowndes Jordan on:• Leases • The Government's Insolvency Response • Force Majeure/Frustration The following articles from Stace Hammond also provide insight on key topics:• Director duties • Implications for commercial contracts • Lease rent abatement • Enforceability of guarantees • Proposed Companies Act changes And the following article from Dentons Kensington Swan also provide insight on:• Relaxing insolvency related director duties These articles provide a summary of the tax relief measures:• Anthony Harper Tax Relief Measures: • IRD• NZ HeraldWage Subsidy:The COVID-19 Wage Subsidy is available to employers, contractors, sole traders or people who are self-employed. More information is found here• This…