The Covid-19 pandemic has been a time of extreme economic disruption in New Zealand’s history. It has developed at such a rapid rate that in a matter of just a few weeks, businesses are having to entirely transform their everyday operations to protect their workers and follow public health advice.

Your over-riding responsibility as an employer is to ensure that you do not expose your employees to risk, and therefore, if you are continuing to trade as an essential business, or recommence trading in due course, you must follow government guidelines with regard to health and safety at all times.

We have put together some information and resources below specifically for employers to help assist you in this time of business uncertainty. There are many legal, financial and other updates that are available now and being updated regularly - we suggest subscribing to one of two for each type of service provider to enable you to be updated on the issues that effect you, your business and the industry that you work in.

For comprehensive advice on the effects of Covid-19 and business, visit Institute of Directors Covid-19.

Government Support and Information

• Unite Against Covid-19

• Ministry of Health

• Work & Income

• Ministry of Social Development

• Inland Revenue

• Office of Ethnic Communities

• Regional Business Partner Network

Non Government Information and Support

• Manaaki.io

• Employer & Manufacturers Association

• Restructuring & Insolvency & Turnaround Association

• BDO New Zealand

• MyHR

Business Rescue & Insolvency

For the latest changes to insolvency reform for the purposes of helping companies remain in business as a going concern visit:

• companiesoffice.govt.nz

• Bell Gully (LATEST ON COVID-19 INSOLVENCY REFORM)

• Dentons Kensington Swan

• Deloitte - Business Rescue Options

Workplace Closures, Restructuring and Redundancies

With COVID-19, employers will inevitably have to consider changes that involve workplace closures (temporarily or permanently) or reduce headcount (temporarily or permanently). 

Even though the employer may wish to rely on COVID-19 being a Force Majeure event, to avoid unfair dismissal claims, employers would be well advised to adopt (even in shortened form), their internal procedures, or the Workplace Change Process outlined by Employment New Zealand.

Because COVID-19 will most likely be classed as a Force Majeure event, it is likely that an employer will have rights to terminate employment without notice and/or avoid payment of redundancy pay, or pay in lieu of notice. Appropriate selection (assuming not all staff are made redundant) would in our opinion still need to be followed to some degree to avoid unfair dismissal claims from arising. 

Temporary closure, downsizing or mothballing of a business are all events that could arise as a result of COVID-19, and hence an employer will have discretion to decide what is best for their business operation. This may mean an employee’s rights will be curtailed to a large degree by this extraordinary event. 

Take legal advice before undertaking any restructuring work that will effect your obligations as an employer, as failing to do so could give rise to significant liabilities, which could be otherwise avoided if handled correctly.

Have a read of this great Restructuring & Redundancies White Paper produced by MyHR in response with the Covid-19 crisis.

Companies Act - Insolvency Reforms (See latest update from Bell Gully)

On 3 April 2020, the New Zealand Government announced a revision to the insolvency provisions of the Companies Act 1993 for the purposes of aiding directors to preserve their business as a going-concern during the crisis and beyond. The revisions (yet to be approved via formal legislation) will be retrospective (i.e. backdated to 3 April 2020) and will include the following:

• allowing directors of companies facing significant liquidity problems a ‘safe harbour’ from insolvency duties under the Companies Act

• enabling businesses to place existing debts into hibernation until they are able to start trading normally again (see Business Debt Hibernation below)

• allowing the use of electronic signatures where necessary

• enabling the Registrar of Companies the power to temporarily extend deadlines imposed on companies, incorporated societies, charitable trusts and other entities under legislation

• giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules.

A company will be able to seek a Business Debt Hibernation (“BDH”) which is for the purposes of:

• encouraging directors to talk to their creditors with a view to putting together a simple proposal for putting the business into hibernation;

• allow for the directors to retain control of the company, rather than passing control to an insolvency practitioner;

• provide certainty to new creditors that they won’t have to repay any money they receive, so as to encourage businesses to continue transacting with businesses in BDH;

• be simple and flexible so that it can be enacted quickly, and businesses can readily apply it to their circumstances without having to obtain legal advice.

Key features of the proposal are that:

• a threshold will need to be met before a company is able to access the BDH regime by putting a proposal to its creditors;

• creditors will have a month from the date of notification of the proposal to vote on the terms of the proposal, with the proposal going ahead only, if 50% (by number and value) agree;

• a one month moratorium (“freezing”) will kick in to prevent enforcement of debts from the date the proposal is notified to creditors, and a further six month moratorium if the proposal is passed.

Although the proposed changes negate the need for a company to formally appoint an insolvency practitioner for the purposes of entering the BDH regime, we would recommend that expert advice and assistance is sought to: 

1.     ensure eligibility; and

2.     as a means of demonstrating to creditors that the directors have sought professional advice; and

3.     are acting on that advice.

To ensure you get the right restructuring and insolvency advice from the experts visit  https://www.ritanz.org.nz/search/. For full particulars of the changes and status of the legislation visit the companies office website here.