By Jacque Lethbridge - 26 Mar 2020
The Martelli McKegg team are pleased to announce that Bill Gambrill
joined the litigation team in early 2020. Bill brings a wealth of
experience in insolvency, banking and financing advice and
litigation, having practised in one of New Zealand's largest law
firms, before heading to Dubai in 2005. In Dubai, Bill's commercial
litigation practice included insolvency, conflict of laws,
financial services, real estate disputes, construction and
employment. Bill is working closely with Jacque Lethbridge focusing
on restructuring and insolvency, and general commercial litigation
and advice, which will be critical areas of legal practice over the
coming months.
Below is Bill's commentary on recent changes to insolvency law
in Australia, which policy-makers might well consider adopting in
New Zealand:
Even for those working in the insolvency field, these are
times unlike any in living memory: countries are responding to
COVID-19 in a way which, in most cases, would have been
unimaginable just a few days ago. The economic impact of those
responses will be profound, and the consequences are already being
widely discussed: a likely outcome will be, what has been called, a
"wall of insolvencies" ( https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12319089).
As part of its response, Australia has made major changes to
its substantive insolvency law, and has enacted those changes
through legislation in a matter of days (See Australian Government
Treasury: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf).
These changes include the following:
- A creditor of a company can now only issue a statutory
demand as a means of commencing winding-up proceedings if the debt
is AU$20,000 (previously it was AU$2,000);
- A creditor can now only commence bankruptcy proceedings if
an individual owes AU$20,000 (previously it was
AU$5,000);
- In both cases, the time-frame to pay any amount demanded
under a statutory demand or bankruptcy proceedings has been
extended from 21 days to six months; and
- Company directors will be temporarily relieved of their
obligation to ensure that a company is not trading while insolvent
(and the potential personal liability associated with
that).
All of these changes will be effective for a period of six
months.
While there are still some areas in which it is not clear
what the effects will be, the changes to Australian law mean that a
business which has cash-flow problems should be able to continue to
trade without the risk of immediate winding-up (for a company) or
bankruptcy (for a sole trader), and without exposing directors to
personal liability for continuing.
So far, the New Zealand Government's approach has been to
offer financial assistance to businesses, without proposing any
changes to underlying insolvency law. However, given the speed at
which developments have been occurring, it might be that the
Government does make changes to the substantive law, and does so
sooner than any of us previously thought would have been
possible.
Contacts
Jacque
Lethbridge
Bill
Gambrill