Mayne Wetherell has produced a guide to doing business in New Zealand to provide overseas investors, and their advisers, with information about investing here.
The guide summarises inbound investment, immigration, investment structures, financial services regulation, tax, securities, takeovers, intellectual property, employment, land law, and trade practices.
Useful links to market events and commentary.
Reserve Bank proposes reinstating LVR restrictions
The Reserve Bank of New Zealand- Te Pūtea Matua (RBNZ) is seeking views on its plan to reinstate loan-to-value ratio (LVR) restrictions on high-risk lending with effect from 1 March 2021. LVR restrictions are used to reduce the risks to financial stability caused by higher-risk lending. RBNZ Deputy Governor and General Manager of Financial Stability Geoff Bascand stated that the restrictions were removed in April to best ensure credit could flow and avoid an adverse impact on the mortgage deferral scheme implemented in response to the COVID-19 pandemic. LVR restrictions set a ceiling on the percentage of new mortgage lending that banks can offer at high LVRs. The RBNZ is proposing to reinstate the LVR restrictions at the same level as prior to the onset of COVID-19, where a maximum of 20% of new lending is allowed at LVRs above 80% for owner-occupiers, and 5% of new lending at LVRs above 70% for investors. The RBNZ is accepting submissions on the proposal until 22 January 2021, with the decision to be issued in February.
Government extends Business Debt Hibernation scheme
The Government is extending the Business Debt Hibernation (BDH) scheme to 31 October 2021. Grant Robinson stated that the Government introduced the scheme earlier this year as part of relief measures aimed at cushioning the economic impacts of the pandemic. The scheme allows businesses that meet the necessary criteria to place their existing debts on hold for up to seven months. He further noted that debt hibernation is not designed to prevent companies with no realistic prospect of continuing to trade from going under.
Supreme Court rules property developer breached duties
A Supreme Court ruling has underlined the need for company directors not to breach their duties towards other creditors if the company is in or near insolvency. The court has upheld a High Court decision which ruled the director of a property development company, Debut Homes, breached three of his director’s duties and must contribute towards the company's liquidation. The court’s panel of judges said when a company became insolvent, there were ''statutory priorities for the distribution of funds to creditors, and mechanisms to ensure these are not circumvented''. ''If a company reaches the point where it is clear that continued trading will result in a shortfall to creditors and the company is not salvageable, then continued trading will be in breach of section 135, unless formal or informal mechanisms in the nature set out above are used.'' Directors also had an obligation under section 136 to not enter into debts where there were ''no reasonable grounds to believe the company will be able to perform its obligations when they fall due''. The situation was made worse by his conflict of interest, ''having given personal guarantees of the secured debts owed by Debut''. It confirmed the general security agreement should be set aside and compensation made, as well as costs of $25,000.
Companies Office: Safe harbour for company directors for ends 30 September
The temporary ‘safe harbour’ provisions for company directors insolvency-related duties has now expired. The ‘safe harbour’ from ss 135 and 136 of the Companies Act 1993 was outlined in the COVID-19 Response (Further Management Measures) Legislation Act 2020 and was intended to provide relief to company directors facing insolvency as a result of COVID-19. It was due to and did expire on 30 September 2020 as planned.
Reserve Bank: Maintaining monetary and financial stability and delivering on our commitments
The Reserve Bank (RBNZ) has released its annual report for the 2019-2020 year. In the recent press release the RBNZ outlines its ‘highlights’ included in this year’s Annual Report, including; 1) successfully launching a new payment and settlement system, 2) Completing our bank capital requirement decisions; 3) Supporting work to modernise the Reserve Bank’s governance, operating powers and objectives through new Reserve Bank legislation and 4) Agreeing a new Funding Agreement for the next five years. The report states that the surplus for the year is $371 million. While this is an increase of $128 million on the previous financial year, the RBNZ have recommended, and the Minister of Finance has agreed, that no dividend will be paid to the Crown for 2019-20, given the uncertainty about further actions that might be needed to achieve its policy objectives and the impacts of COVID-19 on the New Zealand economy.
Insolvency Practitioners Register Goes Live
The recently enacted Insolvency Practitioners Regulation Act requires all insolvency practitioners to be licensed, and meet regulated minimum standards of honesty and competence, in order to take on any insolvency engagement (e.g. liquidation, receivership or administration). The publicly accessible Register identifies if an insolvency practitioner is licensed and has relevant information on their professional history, allowing businesses to make informed decisions about insolvency engagements. The Registrar of Companies has published minimum standards, conditions and requirements for ongoing competence for the licensing of insolvency practitioners, and minimum standards for the accreditation of bodies.