Government Initiative: Business Debt Hibernation

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Business debt hibernation helps businesses affected by COVID-19 to manage their debts. To be eligible your business must be: the right type, viable and formed or established before 3 April 2020.

Who is eligible?

Eligible business types include:

  • Charitable trusts
  • Companies (NZ and overseas)
  • incorporated societies
  • Limited partnerships (NZ and overseas)

Sole traders are not eligible. For more information on eligibility click here.

The business is considered viable if:

  • as at 31 December 2019, the entity was able to pay its debts as they became due in the normal course of business
  • the entity is not already in liquidation, voluntary administration, or other similar processes
  • the board (or equivalent) believes it’s more likely than not that the entity will be able to pay its due debts on and after 30 September 2021, taking account of financial forecasts and other criteria

How does it work?

  1. You set up an arrangement for your existing debts, eg paying your creditors only a percentage of what you owe them on time and delaying the rest.
  2. You get up to a month of protection while you set up the arrangement, meaning most creditors can’t enforce their debts, eg applying for your business to be liquidated.
  3. If your creditors agree, you get a further six months of protection.

Use the business debt hibernation decision tool to find out if it’s a good option for your business and if so, how to get started.

Protections generally apply for 1 month and then an additional 6 months if the creditors approve the arrangement.

Is business debt hibernation right for my business?

Before you consider this as an option, you may want to consider alternatives. Speak to our team and have a cash flow forecast prepared. Debt hibernation does not free you from the obligation of paying back your debts as agreed.  You must meet certain legal obligations throughout the process to prevent getting into further financial trouble.

There are a number of factors to consider and we are happy to meet with you and discuss this.

All necessary forms and a decision tool can be found here.

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