The following information relates to updates to New Zealand law in relation to corporate, commercial, food & beverage regulatory law and data protection. These updates are published twice a week and are intended to be brief summaries of various corporate and commercial law changes.
For updates on global jurisdictions please click here. These updates have been provided courtesy of Bird & Bird and their firm network.
16 April 2020
- On Wednesday, 15 April the Government announced that the timeframes under which a commercial landlord could terminate a lease for non-payment of rent will be extended. Now commercial tenants must be 30 working days (instead of 10 working days) late in paying rent before a landlord can give notice to remedy the breach (i.e. rental arrears) and commercial tenants will then have 30 working days (instead of 10 working days) to remedy the breach and pay the outstanding rent. These changes to the Property Law Act 2007 are expected to be voted on by Parliament when it returns on Monday, 27 April and if approved, the changes will apply from Saturday, 4 April (being 10 days after the Epidemic Preparedness (COVID-19) Notice 2020 was issued on 25 March).
- On Monday, 13 April the Government indicated that the next steps would be for NZ to move from the current Level 4 status to Level 3. However, a decision about when to move down to Level 3 will not be made until Monday, 20 April (this is only the date of the decision not when Level 3 will come into effect). On 16 April, it was announced that at this stage "Alert Level 3" will be governing by the overarching principle that people must stay at home and in their bubble (other than for essential personal movement, being for work, school or personal local recreation). People must work from home, unless it is not possible to do so. Businesses can open premises but cannot physically interact with customers. Physical distancing of 1 metre can be in place for controlled workplace environments. Households can expand their immediate bubble to bring in close family, caregivers or support isolated people, but the extended bubble should be exclusive. Inter-regional travel is highly limited (i.e. for essential workers and other limited exceptions).
- Additional changes to the Property Law Act 2007 regarding mortgagee's rights to take action in a default situation have also been announced. Mortgagees now must give at least 40 working days (instead of 20 working days) notice to property owners (mortgagors) before the mortgagee can take possession of, or sell, a mortgaged property (whether it be commercial and residential). The notice period has moved from 10 to 20 working days for mortgaged goods.
- The Commerce Commission has issued a guidance note for consumers and businesses regarding the legal principles that apply to parties' rights and obligations under contracts (including T&Cs) for travel, trading and events affected by COVID-19.
Amendment to the update provided on 14 April 2020
The Government has indicated that on this coming Wednesday, 15 April the Minister of Finance will set out the next steps of the Government's plan to cushion the effects of the lockdown, including further measures to assist businesses. The measures mentioned have now been announced as changes to the Property Law Act 2007 relating to notice periods as discussed in the 16 April updates above. Notably, there was no announcement regarding commercial rental relief, that many SMEs and landlords had been waiting for.
14 April 2020
High Court Amendments
The High Court (COVID-19 Preparedness) Amendment Rules 2020 came into effect on Thursday, 9 April. Below is a summary of some of the new rules that have been introduced:
- Documents may be filed electronically by sending them to an electronic address (including email) either directed by the Court or notified by a Registrar. We understand that the Courts of NZ website will publicise the electronic addresses to be used soon (Rule 5.1A(2)(c) and 5.1B(1)(c)).
- A Judge may require that documents must be filed by electronic means or post (rather than physical delivery) if the Judge considers that physical delivery would disrupt the court's business or risk the safety of any persons working at court (Rule 5.1A(6)).
- Signatures on copies of documents filed electronically will be deemed sufficient and as if the document with the original signature had been filed (Rule 5.1A(3) and (4)).
- If a Registrar accepts, payment of a document filing fee can be made by providing a credit card payment authority, electronic bank transfer or a suitable lawyer's undertaking and the document will be filed once such "payment" has been made (Rule 5.1B(2)).
- If a Registrar determines, a document can still be considered to be filed without payment of the document filing fee if necessary in the "interests of justice" and in the existence of an emergency (like COVID-19) (Rule 5.1B(d)).
In addition, a number of existing Rules have been amended, including:
- A Judge may determine how counsel, parties, witnesses and other persons (for example, media) can participate at a hearing or trial, including no longer needing to be physically present and allow attendance by telephone or audio-visual link, requiring those who do attend in person to adhere to physical proximity requirements (which could include 2 m distancing) and be attired in a particular manner (which could include masks and gloves) (Rule 3.4A).
- A Judge may allow unsworn or unaffirmed affidavits in proceedings where due to the existence of an emergency (like COVID-19) getting an affidavit sworn or affirmed would cause an unacceptable delay or endanger the health and well-being of any person (Rules 9.73(4) and (5)).
Amendments from the 2 April 2020 update
Under Level 4, the NZ Courts are considered "essential services" and therefore, will continue to operate but only to the extent that "priority proceedings" will be heard. "Priority proceedings" are those affecting the "liberty of the individual or their personal safety and well-being, or proceedings which are time critical". Both the District and High Courts will continue to hear all civil "priority proceedings", although there is currently very limited capability to take oral evidence in either court. While at Level 4 the Chief Justice has made recommendations around the manner in which court proceedings should be handled and who may attend court (the latest recommendations were given on Wednesday, 8 April). All courts will continue to accept filing of documents in all proceedings.
An update from the Minister of Finance due on Wednesday 15 April
The Government has indicated that on this coming Wednesday, 15 April the Minister of Finance will set out the next steps of the Government's plan to cushion the effects of the lockdown, including further measures to assist businesses .
On Monday, 13 April the Government indicated that the next steps would be for NZ to move from the current Level 4 status to Level 3. However, a decision about when to move down to Level 3 will not be made until Monday, 20 April (this is only the date of the decision not when Level 3 will come into effect). Indications are that "Level 3" will still have significant restrictions and that it should be considered a "waiting" time where checks are made to ensure NZ is ready to move down to Level 2. Further details on what Level 3 and Level 2 will "look" like are going to be worked through this week.
Since the COVID-19 Level 4 lockdown it has been illegal for premises to open, with the exception of essential businesses. If a business leases property it should be reviewing any leases that it has to see what obligations it has whilst it cannot access those premises (for example, continuing to pay rent). Particularly, the 12th version of the Auckland District Law Society’s (ADLS) Deed of Lease, which was released in November 2012 and is widely used in NZ, has a “no access in emergency” clause (clause 27.5) which allows for the suspension of a fair proportion of rent and outgoings.
On Friday, 10 April 2020, the Takeovers Panel approved a specific COVID-19 exemption notice to the Takeovers Code (under the Takeovers Code (Facilitation of Capital Raising in Response to COVID-19) Exemption Notice 2020) to assist those companies who are classified as "code companies" in raising capital. A code company includes listed companies, and companies that have 50 or more shareholders; 50 or more share parcels; and has at least $30 million of assets, or at least $15 million of revenue.
6 April 2020
Temporary changes to the Companies Act 1993
On 3 April, the Government has announced its proposed temporary changes to the Companies Act 1993. The temporary changes include providing a safe harbour from directors' "insolvency duties" (sections 135 and 136 of the Act). The intention of the safe harbour is to allow directors of businesses facing insolvency due to COVID-19 to make decisions to keep on trading, and to take on new obligations, without being in breach of their duties. The safe harbour is likely to have conditions that must be met before directors can rely on it (for example, that the company was able to pay is debts when they fell due on 31 December 2019). The safe harbour change is still to be agreed by Parliament, so the likely date that this change will become law is unknown. Once agreed, it is likely that the safe harbour protection will be backdated to Friday, 3 April.
Note that other directors' duties (for example, to act in good faith and in the best interests of the company or to use care, diligence and skill) will still remain and directors will need to comply with such duties.
Business Debt Hibernation regime
Another one of the temporary changes to the Companies Act is the proposed new "business debt hibernation" (BDH) regime. The proposal will allow directors who meet a threshold (yet to be determined) to put a proposal to their creditors to put the "business into hibernation". Creditors will then have a month to consider the proposal and if at least 50% of creditors agree the company will be placed into BDH. While a business is in BDH it would be able to continue to trade, subject to any restrictions agreed with creditors, and the voidable transaction regime (where transactions can be unwound by a liquidator) will not apply (subject to certain conditions). Hibernation is likely to have the benefit of giving companies and directors time to formulate debt repayment plans. This change still needs to be agreed by Parliament, so the likely date that this change will become law is unknown.
Additional changes to the Companies Act and other legislation to support businesses:
- Electronic signatures can be used for security agreements containing powers of attorney (amendments required to Contract and Commercial Law Act 2017);
- Allowing companies to use electronic communications even if their Constitution does not permit such use;
- Excusing non-compliance with a company's Constitution due to the impact of COVID-19;
- Bringing in changes to the voidable transactions regime that reduces the vulnerable period from two years to six months, provided the debtor company and creditor are not related parties;
- Registrars will have temporary powers to relax deadlines under various legislation, including timing for holding an annual general meeting and filing annual returns by companies; and
- Registrars will have temporary powers to relax deadlines that they need to work to, for example, processing applications to reserve company names.
These changes still need to be agreed by Parliament, so the likely date that these changes will become law is not yet known
Epidemic Notice issued of the Health Act
On 3 April, the Government issued a new Epidemic Notice (under section 70(1)(f) of the Health Act) to explain what the rules are in relation to public activities. Particularly, New Zealanders have to stay in their private residences except for “essential personal movement”. Then what counts as “essential personal movement” is set out in the Notice. For example, people can go to shops that are still open but only within their territorial authority.
Prime Minister, Rt Hon. Jacinda Ardern's request to New Zealand business community
Prime Minister, Jacinda Ardern, has asked businesses to start planning for how they would operate under a drop in alert level. But NZ remains at Alert Level 4.
2 April 2020
Collect, use and disclosure of an individual's personal information
The government's declaration of a state of emergency triggered the operation of the Civil Defence National Emergencies (Information Sharing) Code 2013 under the Privacy Act 1993. This means that an agency may collect, use or disclose an individual's personal information, without needing the individuals consent, but provided that collection, use or disclosure relates to the government's response to or recovery from the COVID-19 pandemic and the disclosure is to a public sector agency or organisation involved with managing the pandemic.
One example of how this might apply is that an agency can now disclose employee information to the Ministry of Social Development (with employees' consent) in order for it to access the NZ government's wage subsidy scheme. This Code will remain in force for an additional 20 days after the Government declares that NZ is no longer in a "state of national emergency".
The NZ Privacy Commissioner (John Edwards) has released a statement confirming that the Privacy Act 1993 and Telecommunications Information Privacy Code 2003 already contain provisions that allow telecommunications providers to provide the Ministry of Health with customer data (including location data) where the telcos “believe on reasonable grounds that it is necessary to prevent or lessen a serious threat to public health”.
At this stage, phone location data is not being provided to the Ministry of Health for the purposes of preventing or lessening the spread of COVID-19. However, based on global trends (for example, South Korea, China and Israel) this is very much a wait and see situation.
Even if location data is shared (for contact tracing purposes) with the Ministry of Health by telecommunications providers,those providers would need to comply with Rules 10 and 11 of the Health Information Privacy Code in using and disclosing that information. While those providers may be permitted to share location data with the Ministry for the purposes of preventing or lessening the spread of COVID-19, it would be very unlikely that those providers would be able to release any information that identifies a person (e.g.identifiable information on whether or not someone is under-going testing, is infected or has recovered) to the general public (although once disclosed to the Ministry, the Ministry may fall within one of the exceptions in the Code that does permit the use and disclosure of information that identifies a person to others in circumstances where identification is unavoidable and necessary to prevent or lessen the spread of COVID-19).
Oaths and Declarations
At level 4 it is unlikely that oaths and declarations can be taken in the usual manner. In these circumstances the High Court Rules allow for the validity of a document to be determined “in the manner that the court thinks is best calculated to promote the objective .” Which in this case would be the proving of the document. The New Zealand Law Society has set out steps to take in the absence of being physically present to take an oath or declaration.
While at Level 4 the Chief Justice has made recommendations around the manner in which court proceedings should be handled, who may attend court, and what matters will have priority before the court.
Provisions for businesses providing essential services (grocery)
The Minister of Commerce and Consumer Affairs has encouraged the Commerce Commission to be flexible to allow businesses to work together in ways that will allow them to provide things like grocery products and other essential goods and services to NZ in a fair and equitable way.
Ministry of Finance Solvency Scheme
The Minister of Finance has worked with the banks to allow banks to ease financial stress on solvent firms affected by COVID-19. The scheme will include a limit of $500,000 per loan and will apply to firms with turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided at competitive transparent rates. The Government will carry 80% of the credit risk with the other 20% being carried by the banks.
NZ Companies Office Filing Deadlines
For the foreseeable future, the NZ Companies Office (NZ CO) are not taking any enforcement action for any companies who fail to comply with filing deadlines.
Food and Beverage Regulatory Law
Supply, delivery, distribution and sale of food, beverage and other key consumer goods
Level 4 restrictions overseen by the Ministry of Business, Innovation and Employment include permission for any entity involved in the supply, delivery, distribution and sale of food, beverage and other key consumer goods essential for maintaining the well-being of people to continue to trade, subject to complying with Level 4 requirements. This means that some businesses involved with fast moving consumer goods, other than supermarkets, can continue to operate.
These include "dairies" (NZ local small grocery stores) and sellers of alcohol who hold an off-licence, can meet the legislative requirements for remote sales and can arrange the contactless delivery of the alcohol to consumers.
Non-essential businesses, including butchers, bakeries, greengrocers, are required to remain closed as similar products are readily available in supermarkets. Level 4 restrictions include that every restaurant, café and bar must close all aspects of their operation and must remain closed for the duration of the Level 4 lockdown.
25 March 2020
New Zealand Government declared a state of national emergency
On 25 March 2020, the NZ government declared a state of national emergency under the Civil Defence Emergency Act 2002 (NZ Civil Defence notice).
From 11:59 pm on that Wednesday, all non-essential businesses (including takeaway food services) were required to close their premises and cease operations (unless they could operate at home) for at least four weeks. The delivery of food that is not pre-cooked is permitted to continue because it has been deemed to be similar to supermarket deliveries of groceries. However, Ministry of Business, Innovation and Employment has confirmed that cooked food delivery services are non-essential businesses and therefore, must close.