A purpose of this schedule is to provide for the business, property, and affairs of an entity that is facing significant liquidity problems, or an entity that may in the future face such problems, because of the effects of the outbreak of COVID-19 to operate in a way that—

In addition, it is a purpose of this schedule to give an entity referred to in subclause (1) some temporary protections relating to its debts in order to give it an opportunity to develop, with its creditors, a longer-term approach to its liquidity problems.

However, it is not a purpose of this schedule to—

This schedule provides for certain entities to enter into business debt hibernation (BDH).

If an entity is in BDH, certain protections apply. These protections temporarily prevent certain actions being taken by the entity’s creditors and other persons (see Part 5). In summary (and subject to Part 6),—

The protections do not apply in relation to a creditor with security over the whole, or substantially the whole, of the entity’s property.

The protections start when the entity delivers to the Registrar a notice that the entity is entering into BDH (see Part 2). A copy of the notice must be sent to each known creditor.

The protection initially lasts for up to 1 month. This is to give the entity and its creditors an opportunity to consider an arrangement to deal with the entity’s situation. If the arrangement is approved by a majority of the creditors in number and value, the protection may continue for a further 6 months (see Part 3).

The process for obtaining the creditors’ approval of the arrangement is set out in Part 4. That Part also sets out the effects of an approved arrangement. In particular, the permitted scope of an arrangement is narrower than a compromise under Part 14 of the Companies Act 1993 (for example, an arrangement cannot involve any cancellation of the debts of an entity).

The protections are subject to certain rights of creditors and other persons under Part 6.

While the entity is in BDH, certain voidable transaction provisions do not apply. This is intended to encourage businesses to keep transacting with the entity (see Part 7).

This clause is only a guide to the general scheme and effect of this schedule.

This schedule applies to a company or any other kind of entity (as defined in clause 4(1)).

However, this schedule does not apply to any of the following:

In addition,—

If an entity enters into BDH before the date that applies under subclause (3)(b), nothing in that paragraph prevents the entity from continuing as an entity in BDH after that date.

In this schedule, unless the context otherwise requires,—

For the purposes of this schedule, a creditor may make an electronic vote by giving the creditor’s vote in electronic form, whether by means of an electronic communication or otherwise (for example, a vote sent by email).

In subclause (2), electronic and electronic communication have the same meanings as in section 209 of the Contract and Commercial Law Act 2017.

For the purposes of this schedule, an entity—

Any term or expression that is defined or used in another part of this Act and used in this schedule has, in relation to an entity other than a company, the same meaning as in the other part of this Act (but applied with all necessary modifications as if it were a company).

The board of an entity may agree to the entity entering into BDH if,—

For the purposes of subclause (1)(c)(ii), the director must state that, in good faith, the director is of the opinion that,—

For the purposes of subclause (2)(c), the date is—

For the purposes of the opinion required by subclause (2)(c), the director may have regard to—

Subclause (1)(a) and (c)(i) does not apply to an entity that was formed or established on or after 1 January 2020 but before 3 April 2020.

This clause provides for how an entity may enter into BDH (and receive the benefit of the protections in Part 5 of this schedule).

The entity enters into BDH by delivering to the Registrar a notice that—

The board of the entity must send to each known creditor a copy of the notice under clause 6 as soon as is reasonably practicable after the notice is delivered to the Registrar under that clause.

The notice sent to creditors under subclause (1) must—

The notice that is sent to a creditor must also specify the amount owing or estimated to be owing to that particular creditor.

For the purposes of this clause, the entity must compile a list of creditors known to the entity, setting out—

If the entity is a broker, the board of the entity must send to the FMA a copy of the notice under clause 6 as soon as is reasonably practicable after the notice is delivered to the Registrar under that clause.

If the board of an entity fails to comply with this clause, every director of the entity commits an offence and is liable on conviction to a fine not exceeding $10,000.

If a protection period has started as a result of an entity complying with clause 6, the entity may not, at any time, deliver a subsequent notice under that clause.

Accordingly, an entity may not enter into BDH more than once.

However, this clause does not apply if—

This clause facilitates a vote by the entity’s creditors to approve an arrangement proposed by the entity. See clause 15, which provides that the protections of BDH will cease after 1 month unless the creditors vote to approve the arrangement.

The entity must—

The notice must be sent and received not less than 5 working days before the voting date.

The voting date must be before the expiry of the 1-month period that starts on the date on which the entity enters into BDH (see clause 14).

See section 392 (which provides for when a notice is deemed to have been received).

The notice under clause 9 must—

The notice may include any other information that the entity considers is useful to its creditors.

The information about when and how a creditor may vote on the resolution must—

Subclause (3) is subject to clauses 32 to 35 (which may prevent related creditors from voting).

An entity is not required to hold a meeting of creditors to vote on a resolution to approve the proposed arrangement.

However, if the entity decides to hold a meeting of creditors the notice sent under clause 9 must include a statement of the following (as applicable):

If a meeting of creditors is held, it must be conducted in accordance with Part 8 of this schedule (subject to the modifications, additions, or variations specified in the regulations).

An irregularity in or a failure to receive a notice under clause 9 does not invalidate a vote by creditors if—

This Part sets out when the protections in Part 5 of this schedule apply.

In this schedule, the protection period is the period during which the protections in Part 5 of this schedule apply.

Part 5 of this schedule starts to apply (and the entity enters into BDH) when the entity has delivered to the Registrar a notice under clause 6.

Part 5 of this schedule ceases to apply on the earlier of the following:

However, if the arrangement is approved under clause 23, Part 5 of this schedule continues to apply until the expiry of the 6-month period that starts on the date of the approval.

This clause is subject to clauses 16 to 22.

If the approval under clause 23 is given subject to the entity complying with 1 or more conditions and the entity materially fails to comply with any of those conditions, Part 5 of this schedule ceases to apply.

During the protection period, a creditor may request that—

The entity must comply with the request unless the entity has complied with another request under this clause from the creditor or another creditor within the previous 2-month period.

If the entity relies on subclause (2), the entity must instead, within that 5-working-day period, send to the creditor a copy of the certificates sent for the other request.

Part 5 of this schedule ceases to apply if the entity fails to comply with this clause.

This clause applies if, after the entity enters into BDH,—

Part 5 of this schedule ceases to apply, in the case of—

This clause applies if a majority of the directors of an entity that is in BDH vote in favour of a resolution for the entity to cease to be an entity in BDH before the end of the protection period that would otherwise apply.

The board of the entity may deliver to the Registrar a notice that states that the board of the entity has agreed to the entity ceasing to be an entity in BDH on a date specified in the notice (the specified date).

The specified date must be at least 5 working days after the date on which the notice is delivered to the Registrar.

Part 5 of this schedule ceases to apply on the close of the specified date.

The board of the entity must send to each known creditor a copy of the notice under subclause (2) as soon as is reasonably practicable after the notice is delivered to the Registrar.

If the board of an entity fails to comply with subclause (5), every director of the entity commits an offence and is liable on conviction to a fine not exceeding $10,000.

If approval under clause 23 is given, Part 5 of this schedule applies subject to the modifications or variations specified in the arrangement that limit or reduce the protections provided by those provisions.

Part 5 of this schedule does not apply in relation to a general security holder of an entity in BDH (or to the debts owing to the general security holder).

In particular, nothing in this schedule prevents any of the following persons from enforcing a charge referred to in subclause (4):

Subclause (2) does not limit subclause (1).

In this schedule, general security holder, in relation to an entity, means a secured creditor that—

Part 5 of this schedule does not apply in relation to excluded debts.

An arrangement is approved by creditors if the arrangement is adopted in accordance with clause 24.

This clause and clause 24 are subject to clauses 32 to 35 (which may prevent a related creditor from voting).

A resolution to approve a proposed arrangement is adopted if—

The value attributed to creditors must not include any excluded debt (and, accordingly, every amount of excluded debt must be disregarded).

A person (A) who is authorised to receive and count votes that have been made on a resolution to approve a proposed arrangement must—

If A, acting in good faith, considers there is uncertainty about—

Nothing in subclause (2), clause 27 or 28, or any other provision in this schedule prevents a court from making a determination about whether a resolution to approve a proposed arrangement was, in fact, approved under clause 23.

The person who is acting under clause 25 must not determine amounts by reference to different classes of creditor (but this does not limit clauses 32 to 35).

The board of the entity must, as soon as practicable, prepare a certificate of the result of the vote, including—

The certificate is evidence of the outcome of the vote (unless the contrary is proved).

If the board of an entity fails to comply with subclause (1), every director of the entity commits an offence and is liable on conviction to a fine not exceeding $10,000.

The board of the entity must ensure that, as soon as practicable,—

If the entity is a broker, the board of the entity must send to the FMA a copy of the notice and statement referred to in subclause (1)(b) as soon as is reasonably practicable after the notice and statement are delivered to the Registrar.

If the board of an entity fails to comply with subclause (1) or (2), every director of the entity commits an offence and is liable on conviction to a fine not exceeding $10,000.

An arrangement approved by the creditors of an entity in accordance with this schedule is—

This clause is subject to clauses 21 and 30.

The arrangement must not have the effect of—

For the purposes of subclause (1)(b), the arrangement may have the effect of—

For the purposes of subclause (1)(b), the arrangement may also—

Subclauses (2) and (3) are subject to subclause (1)(a) (that is, the arrangement must not have the effect of cancelling all or part of a debt).

A provision of the arrangement that contravenes this clause is of no effect to the extent of the contravention.

Nothing in this clause limits the application of Part 5 in relation to the creditor.

An arrangement approved under clause 23 may be varied—

A variation made as referred to in subclause (1)(a) must be notified to the Registrar and can have no effect before that happens.

The provisions of this schedule apply to any arrangement that is varied in accordance with this clause.

A variation may not purport to extend the length of the protection period.

The entity (and the person who is acting under clause 25) must disregard a related creditor’s vote on a resolution to approve a proposed arrangement unless the court orders otherwise.

A related creditor may apply to the court for an order that its vote be taken into account.

A related creditor that intends to apply for an order must,—

The court may make an order that a related creditor’s vote be taken into account only if satisfied that ordering that the applicant’s vote (or the applicants’ votes) be taken into account—

In this schedule,—

If the entity (or the person who is acting under clause 25) considers that a creditor that votes on a resolution to approve a proposed arrangement is a related creditor, and the creditor has not sent a notice under clause 32, the entity or person must (unless the court orders otherwise)—

The court may, on the application of the creditor, order that the creditor’s vote be taken into account if satisfied that the creditor is not a related creditor.

The creditor must make any application under this clause to the court within 5 working days of receiving the notice.

If the court orders, under clause 32 or 33, that a creditor’s vote be taken into account, the court may also do 1 or more of the following:

Despite any application under clause 32 or 33, the outcome of the vote on the resolution is valid and effective unless the court orders otherwise.

Subclauses (2) and (3) apply in relation to a resolution to approve a proposed arrangement if,—

Despite clause 32(1) or 33(1), the outcome of the vote on the resolution is valid and effective unless the court orders otherwise under subclause (4).

The board of the entity must, as soon as practicable after becoming aware that this subclause applies to the resolution, send a notice of that fact to every known creditor.

The court may, on the application of the entity or a creditor, do 1 or more of the following:

If the board of an entity fails to comply with subclause (3), every director of the entity commits an offence and is liable on conviction to a fine not exceeding $10,000.

On the application of the entity, the court may—

Subclause (1)(b) does not apply in relation to—

The court may order that a creditor is not bound by an arrangement, or make any other order that it thinks fit, if the court is satisfied that—

An arrangement is not unfairly prejudicial to a creditor merely because the creditor is a secured creditor (or has a preferential claim under Schedule 7) and other creditors are not secured creditors (or do not have a preferential claim).

An application under this clause—

A person must not, during the protection period for an entity in BDH, enforce a charge over the property of the entity, except—

This clause is subject to Part 6.

During the protection period for an entity in BDH, the owner or lessor of property that is used or occupied by, or is in the possession of, the entity must not take possession of the property or otherwise recover it, except—

During the protection period for an entity in BDH, a proceeding against the entity in connection with a debt or in relation to any of its property must not be begun or continued, except—

This clause does not apply to a proceeding against the entity in connection with—

In this clause, proceeding means a proceeding in the High Court or any other court, a tribunal, or an arbitral tribunal.

An entity is not liable in damages for a refusal to give an approval or consent for the purposes of this schedule.

During the protection period for an entity in BDH, an enforcement process in relation to the entity’s property must not be begun or continued except with the permission of the court and in accordance with the terms that the court imposes.

This clause applies to a sheriff or registrar or other appropriate officer of the court (a court officer) who receives written notice that an entity is in BDH under this schedule.

During the protection period for the entity, the court officer must not—

The court officer must deliver to the entity any property of the entity that is in the court officer’s possession under an execution process (whenever begun).

The court officer must pay to the entity all proceeds or money of a kind referred to in subclause (2)(b) or (d) that—

The costs of the execution or attachment are a first charge over property delivered under subclause (3) or proceeds or money paid under subclause (4).

In order to give effect to a charge under subclause (5) on proceeds or money the court officer may retain, on behalf of the person entitled to the charge, so much of the proceeds as the court officer thinks necessary.

The court may, if it is satisfied that it is appropriate to do so, permit the court officer to take action, or make a payment, that subclause (2) would otherwise prevent.

A person who buys property in good faith under a sale under an execution process obtains a good title to the property as against the entity, despite anything else in this schedule.

During the protection period for an entity in BDH, except with the court’s permission and in accordance with the terms that the court may impose, a guarantee of a liability of the entity must not be enforced against—

In this clause,—

This clause applies if, before the start of the protection period, a secured creditor, receiver, or other person, for the purpose of enforcing a charge over the property,—

Nothing in clause 38 prevents the secured creditor, receiver, or other person from enforcing the charge in relation to the property.

This clause applies if perishable property of an entity in BDH is subject to a charge.

Nothing in clause 38 prevents the secured creditor, a receiver, or a person appointed (at any time) as mentioned in paragraph (a), (b), or (d) of the definition of enforce in clause 4(1) from enforcing the charge, so far as it is a charge over perishable property.

This clause—

On an application by the entity, the court may order the secured creditor, receiver, or other person not to perform specified functions or exercise specified powers, except as permitted by the order.

The court may make an order only if satisfied that what the entity proposes to do during the protection period will adequately protect the secured creditor’s interests.

An order—

Clause 38 does not prevent a person from giving a notice under the provisions of a security agreement.

This clause applies if, before the protection period, a receiver or other person, for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it,—

Clause 39 does not prevent the receiver or other person from performing a function, or exercising a power, in relation to the property.

Nothing in clause 39 prevents a person from taking possession of, or otherwise recovering, perishable property.

This clause applies if,—

On an application by the entity, the court may order the person not to perform specified functions, or exercise specified powers, in relation to the property, except as permitted by the order.

The court may make an order only if satisfied that what the entity proposes to do during the protection period will adequately protect the interests of the owner or lessor.

An order—

Nothing in clause 39 prevents a person from giving a notice to an entity under an agreement relating to property that is used or occupied by, or is in the possession of, the entity.

The provisions referred to in subclause (2) do not apply to a transaction by an entity in BDH if—

The provisions are—

A transaction between an entity and another party (P) is on arm’s-length terms if the terms—

In this clause, transaction includes a disposition within the meaning of section 345 of the Property Law Act 2007.

Section 92 of the Limited Partnerships Act 2008 applies subject to this clause.

This Part applies only if a meeting of creditors is held for the purposes of this schedule.

However, this Part applies subject to the modifications, additions, or variations specified in the regulations.

A meeting of creditors may be held in 1 or more of the following ways:

If the meeting of creditors agrees, the chairperson may adjourn the meeting from time to time and from place to place.

An adjourned meeting must be held in the same place unless another place is specified in the resolution for the adjournment.

An adjournment does not extend the protection period (and, in all cases, the voting date must continue to be before the expiry of the 1-month period that starts on the date on which the entity enters into BDH).

A person appointed by the directors of the entity must act as chairperson of the meeting, but if no such person is appointed or is able to act, the creditors participating must choose one of their number to act as chairperson of the meeting.

The person convening a meeting under clause 55(c) must do everything necessary that would otherwise be done by the person chairing a meeting.

The chairperson or convenor does not have a casting vote.

A quorum for a meeting of creditors is present if—

A creditor may exercise the right to vote either by being present in person or by proxy.

A proxy for a creditor is entitled to attend and be heard at a meeting of creditors as if the proxy were the creditor.

A proxy must be appointed by notice in writing signed by the creditor, and the notice must state whether the appointment is for a particular meeting or a specified term not exceeding 12 months.

No proxy is effective in relation to the meeting unless a copy of the notice of appointment is delivered to the entity not less than 2 working days before the start of the meeting.

A creditor entitled to vote at a meeting of creditors held in accordance with clause 55(a), (b), or (c) may exercise the right to vote by casting a postal or an electronic vote in relation to a matter to be decided at that meeting.

A creditor may cast a postal or an electronic vote on all or any of the matters to be voted on at the meeting by sending, by post or electronic means, information that indicates their vote to a person authorised to receive and count those votes in relation to that meeting, so as to reach that person not less than 2 working days before the start of the meeting or, if the meeting is held under clause 55(c), not later than the date named for the return of the voting information.

The proposed arrangement that is voted on at a meeting must be the final proposed arrangement described in the notice sent to creditors under clause 9 (that is, the arrangement must not be varied).

A body corporate that is a creditor may appoint a representative to attend a meeting of creditors on its behalf.

A meeting of creditors may regulate its own procedure (except as provided in this Part and in the regulations (if any)).

An irregularity or a defect in the proceedings at a meeting of creditors does not invalidate anything done by a meeting of creditors, unless the court orders otherwise.

The court may, on the application of a creditor of the entity, make an order under subclause (1) if it is satisfied that substantial injustice would be caused if the order were not made.

Section 391 provides for how a notice or other document must be sent to a creditor of an entity under this schedule (regardless of whether the entity is a company).

However, section 391(1) applies for the purposes of this schedule as if it also permitted a notice or other document that must or may be sent to a creditor (C) who is a natural person to be sent by email to an electronic address if—

Neither an entity becoming an entity in BDH nor anything in or effected by, or done under, this schedule—

If 1 or more rights of a person (A) cannot be enforced against an entity in BDH (B) for a period because of any provision in this schedule and B has a right under a contract, an agreement, or an arrangement against A for a new advance of money or credit, that right of B cannot be enforced during the same period.

An entity that wishes to rely on a protection in Part 5 of this schedule in a proceeding has the burden of proving—

If a notice is delivered to the Registrar under clause 6, 19, 28, or 70, the Registrar must do either or both of the following:

The power under subclause (1) includes, without limitation, the power to arrange for information to be registered in the New Zealand Business Number Register established under section 18 of the New Zealand Business Number Act 2016 (and, if the information is registered, it must be treated as being public primary business data for the purposes of that Act).

This schedule does not prevent—

See, however, clause 18 (which provides for protections to cease).

The board of the entity must, within 5 working days after an event referred to in subclause (1)(a) to (e) occurs, deliver to the Registrar a notice that advises the Registrar of that event.

If the board of an entity fails to comply with subclause (3), every director of the entity commits an offence and is liable on conviction to a fine not exceeding $10,000.

If an arrangement is approved under clause 23, the court may, on an application, make any order that the court thinks fit with respect to the extent, if any, to which the arrangement will, if the entity is put into liquidation, continue in effect and be binding on the liquidator of the entity.

If an arrangement is approved under clause 23 and the entity is subsequently put into liquidation, the court may, on an application, make any order that the court thinks fit with respect to the extent, if any, to which the arrangement will continue in effect and be binding on the liquidator of the entity.

An application under—

This clause applies if the Crown is a creditor of an entity that has entered into BDH.

Nothing in section 65K of the Public Finance Act 1989 prevents the Crown from voting to approve an arrangement under this schedule (including an arrangement that would have the effect of deferring the payment of an amount).

The schedule applies despite anything to the contrary in the Construction Contracts Act 2002.

This clause applies to the extent that an arrangement approved under clause 23 involves 1 or more payments being made to the Commissioner of Inland Revenue.

The arrangement must be treated as being an instalment arrangement under section 177B of the Tax Administration Act 1994 when the arrangement is approved under clause 23.

The instalment arrangement ceases to be in force at the end of the protection period.

The Tax Administration Act 1994 applies to the instalment arrangement—