Temporary legislation passed in May 2020 introduced a ‘Business Debt Hibernation’ process. As part of the Government’s plan to accelerate the economic recovery from COVID-19, rules allowing affected businesses to put their debts on hold were extended by 10 months.
The Business Debt Hibernation scheme was due to expire on 24 December 2020 but is now available through to 31 October 2021.COVID-19 Response (Further Management Measures) Legislation Act 2020New Zealand Legislation
Business Debt Hibernation allows businesses affected by COVID-19 disruptions to apply for an initial month of protection while they talk to their creditors — during this period most creditors can’t take legal action to enforce their debts, e.g. applying for your business to be liquidated. If your creditors agree, you can get a further 6 months of protection.
At least half of the business’s creditors must agree to the arrangement the business proposes. While a business is in Business Debt Hibernation it can continue to trade, subject to any restrictions agreed with creditors as a condition of entering into hibernation.
Business Debt Hibernation is available to a wide range of businesses (including companies, trusts and partnerships) who were registered or existed prior to 3 April 2020, and satisfy a number of other conditions. It does not extend to licensed insurers, registered banks, non-bank deposit takers and sole traders. Sole traders who become insolvent are instead subject to the Insolvency Act 2006 (which covers personal insolvency) because there is no separation between the trader’s business finances and their personal finances.
Find out if business debt hibernation is an option for you
business.govt.nz has a comprehensive BDH tool that provides information on how to place a business in Business Debt Hibernation.
- Learn about each step in the process
- Use the step-by-step tool and read case study examples to help you decide whether business debt hibernation is an option for you
- Access the forms to enter business debt hibernation and templates to help with your creditor proposal
- Understand key legal requirements so you don’t get it wrong.
You don’t need a login to use this tool.Use the BDH tool on business.govt.nz
The above information is a summary of the basic Government information regarding BDH and it is advisable to take specialist professional advice.
