Government will implement temporary changes to the Companies Act to protect jobs and income, and to reduce COVID-19’s overall disruption to the economy.
If businesses are facing significant liquidity issues due to the pandemic, the legislation introduced will:
- reduce the risk of directors prematurely closing their businesses by giving them ‘safe harbour’ from insolvency duties under the Companies Act
- permit businesses to place existing debts into Business Debt Hibernation (BDH) until they can resume normal trading; this will give directors the opportunity to talk to their creditors about prioritising some debt payments, and deferring others for six months. BDH can only occur with the agreement of 50 per cent of a business’s creditors
- allow the use of electronic signatures where required
- allow the Registrar of Companies to temporarily extend deadlines imposed on entities under legislation including companies, incorporated societies, charitable trusts
The Finance Minister has emphasised that other protections of the Companies Act remain in place, including serious breaches of the duty to act in good faith and punishing those who dishonestly incur debts.
In addition to relief from insolvency duties, the Government’s business continuity package includes a number of grants and tax changes that are available to eligible businesses. Company owners are also encouraged to talk to their banks as they will look for ways to support cash-strapped businesses, including temporary interest-only repayments, restructuring or increasing business loans and loan consolidation. It is important that these are options are explored sooner rather than later to increase the cash “headroom” within your organisation.
If your business is operating in stressed or distressed conditions, please also reach out to one of our experts; we can provide the right advice based on your specific circumstances.