Explanatory note
This Supplementary Order Paper amends the COVID-19 Response (Further Management Measures) Legislation Bill. The main changes in the SOP are summarised below.
Changes to Part 2: requirements for entities: modifications and exemptions
Broadly, clauses 11 and 14 relate to entities doing things by electronic means and modifying certain provisions in their constitution or rules. In the Bill as introduced, these clauses would have applied for an initial period expiring on the close of 30 September 2020. Clause 10 now provides for clauses 11 and 14 to apply for an initial period expiring on the close of 30 November 2020.
The same change is made in clause 26 in respect of the initial period that applies for the purposes of the exemption powers and the power to grant relief in clauses 27 and 31.
Orders in Council can provide for any or all of clauses 11, 14, 27, and 31 to continue for a further period to expire no later than the close of 31 March 2021. This power is retained but the maximum possible further period is now 4 months because of the extended initial period (see clause 43(2)).
Clause 11 contains provisions that permit things to be done by electronic means despite what an entity’s constitution or rules say. In the Bill as introduced, clause 12 prevented entities from voting by electronic means in reliance on clause 11 in the following 2 circumstances:
when voting on an amendment to their constitution or rules (unless that amendment was temporary and expired no later than the end of the initial period); and
when voting on a matter listed in clause 16. For instance, this would have prevented electronic voting in relation to the purpose or objects of the entity, rights to a dividend, and any increase in fees payable by members.
These restrictions have been removed in relation to clause 11. The effect of new clause 12 is that voting, or any other part of a voting process, can occur by electronic means in reliance on clause 11 if a majority of an entity’s governing officers believe, on reasonable grounds, that the provisions in the entity’s constitution or rules relating to the integrity of the voting process are or will be substantively complied with and will not be substantively compromised as a consequence of the vote. Governing officers must sign a certificate to this effect. New clause 12(2) contains matters to which they must have regard when forming their beliefs.
Clause 13 imposes conditions on doing things by electronic means in reliance on clause 11. For example, in terms of the clause 13(1)(a) conditions, for some things to be done electronically, a person’s consent is required and consent can be inferred. New clause 13(1A) also provides for a situation where an entity can treat a person as having consented to use, provide, accept, and receive information and electronic signatures by email.
Clause 14 gives an entity the ability, by notice in writing signed by the majority of its governing officers (or its governing officer, if it has only 1) to make temporary modifications to its constitution or rules in certain circumstances. If the modification relates to a method or form of voting, new clause 14(2)(ea) requires the governing officers to believe, on reasonable grounds, that the integrity of the voting process is substantively maintained or enhanced.
The amendment to clause 15(1)(a) is a clarification consequential on the existing drafting of clause 30(1)(a).
Clause 16 lists matters in constitutions and rules that cannot be modified under clause 14. The amendments to clause 16 insert, as matters that may not be modified, the number or the need for a quorum, rights of access to courts or tribunals or arbitral tribunals, and any alteration or addition to the constitution or rules made by an order of a court.
The amendments to clause 42 are mainly consequential on the deletion of clause 12 in the Bill as introduced. A regulation-making power is included for administrative matters that may be required (for example, transitional or application provisions if lists of what may be modified are changed).
Change to Part 4 of Schedule 2: amendment to Contract and Commercial Law Act 2017
Clause 19 of Schedule 2 inserts new section 218A to 218D. New section 218A modifies subpart 3 of Part 4 of the Contract and Commercial Law Act 2017 so that the subpart applies to deeds that create a power of attorney in connection with a security interest. The effect of that modification is to enable such deeds to be executed remotely without the need for execution in the physical presence of witnesses.
In the Bill as introduced, the modification would have applied from the day after the date on which the Bill receives the Royal assent. The amendments in this SOP provide for the modification to also apply retrospectively, to such deeds made on or after 21 March 2020.
Changes to Schedule 3: Commerce and Consumer Affairs: new Schedule 12 inserted into Companies Act 1993
New Schedule 12 of the Companies Act 1993 contains the safe harbour provisions that relate to 2 director’s duties.
New clause 1AA as inserted in Schedule 12 sets out the purpose of the schedule. The purpose relates to giving directors of companies that are facing significant liquidity problems because of the effects of the outbreak of COVID-19 more certainty about their duties when agreeing to the business of the company being carried on or causing or allowing it to be carried on and when agreeing to the company incurring obligations. Clause 1AA also provides for what the schedule is not intended to do—which relates to not facilitating the ability of companies that have no realistic prospect of continuing to trade or operate in the medium or long term to defer decisions to liquidate to the detriment of their creditors.
In the Bill as introduced, clause 3 of this schedule provided that directors of companies incorporated on or after 25 March 2020 could not access the safe harbour provisions. That date has been amended to give access to directors of some companies incorporated before 3 April 2020.
New clauses 8(2)(a) and 9(4)(a) require the Minister of Finance and the Minister of Commerce and Consumer Affairs to have regard to the purpose of the schedule when deciding whether to recommend regulations.
Changes to Schedule 4: Commerce and Consumer Affairs: new Schedule 13 inserted into Companies Act 1993
New Schedule 13 of the Companies Act 1993 establishes the COVID-19 business debt hibernation regime (BDH).
Clause 3 is amended to provide that Schedule 13 does not apply to operators of designated settlement systems or licensed derivatives issuers.
A definition of enforce has been moved from clause 44 to clause 4(1).
The definition of excluded debt in clause 4(1) has been clarified. The protections in Part 5 of the schedule do not apply to excluded debts. In summary,—
the term now includes salary, wages, and other employment debts. Previously, these amounts were referred to separately:
the term has been amended to ensure that it does not include interest or penalties on pre-existing debts or other amounts that fall due for payment on or after the entity enters into BDH if the obligation to pay the amount was entered into before the entity enters into BDH. This reflects the intent of the Bill that enforcement of pre-existing obligations are covered by the protections (and that this may include, for example, rent payable under an existing lease).
A new definition of voting date has been added to clause 4(1). This is basically the last date on which creditors may vote on a proposed arrangement under the schedule. The definition will clarify certain time periods in Schedule 13. For example, the notice to creditors about the vote under clause 9 must be sent and received not less than 5 working days before the voting date. In addition, under clause 15, the protections in Part 5 of Schedule 13 cease to apply at the close of the voting date, if the proposed arrangement is not approved.
Clause 5 is amended so that directors no longer need to make statutory declarations when agreeing to the entity entering into BDH. Instead, the directors need to sign certificates that state the required matters.
Clause 6 is amended to require an entity to notify contact details to the Registrar when it enters into BDH.
Clause 7 is amended to require an entity to give a notice to the FMA when it is entering into BDH if the entity is a broker. A similar change is made to clause 27 to require the broker to notify the FMA of the results of voting on a proposed arrangement.
Clauses 18 and 71 are amended to clarify that an entity in BDH can enter into receivership or be put into liquidation (at which point, the protections in Part 5 cease to apply).
New clause 18A allows an entity to voluntarily come out of BDH by delivering a notice to the Registrar. The board of the entity must send a copy of the notice to each creditor.
Various changes are made to clarify how Schedule 13 applies to general security holders. A general security holder is a secured creditor that is entitled to a charge on or over the whole, or substantially the whole, of the property of the entity. The main change is in clause 20 to clarify that the protections in Part 5 of the schedule do not apply at any stage in relation to a general security holder (or to the debts owing to the general security holder). Accordingly, a general security holder can still enforce their charge (and take other actions to enforce payment of the debts owed to it).
Clause 23 relates to voting on a proposed arrangement. It requires a majority in number and value of the creditors to vote in favour of a resolution in order for it to be approved. The amendment clarifies that the value attributed to creditors must not include any excluded debt (and, accordingly, every amount of excluded debt must be disregarded).
Clause 35 is clarified to provide that the court’s powers under that clause to stay proceedings or prevent other actions do not apply in relation to excluded debts or debts owed to general security holders.
Clause 43, which relates to guarantees, is amended to include a definition of relative.
Clauses 46(3) and 50(3) may have allowed certain BDH protections to apply retroactively before the entity enters into BDH. These provisions have been deleted to remove this effect.
Clause 54 gives an exemption from provisions about voidable transactions. The exemption has been narrowed so that it no longer applies to section 293 of the Companies Act 1993 (which relates to voidable charges). The exemption continues to apply to section 292 of that Act (which relates to insolvent transactions).
Clause 66 has been amended to allow an entity to send a notice by email to a creditor who is a natural person.
New clause 72A confirms that section 65K of the Public Finance Act 1989 (which restricts the Crown’s ability to lend money) does not prevent the Crown from voting for an arrangement under the schedule.
Change to Schedule 5: Corrections
The amendments to Schedule 5 alter new section 139A of the Corrections Act 2004 to restrict the use of audio links in proceedings under sections 133 to 138 of the Corrections Act 2004 to circumstances where it is not reasonably practicable for the participant to attend in person and video link is either unavailable or unable to be used. Also, a provision is added to clarify who may seek a determination that the use of an audio link is contrary to the interests of justice (to ensure consistency with comparable provisions in the Courts (Remote Participation) Act 2010).
Changes to Part 2 of Schedule 6: amendments to the Courts (Remote Participation) Act 2010
The amendments to clause 5 of Schedule 6 alter new section 8A of the Courts (Remote Participation) Act 2010 by removing the ability to use audio links in sentencing and by adding a provision clarifying who may seek a determination that the use of audio links is contrary to the interests of justice in the particular case (to ensure consistency with section 8(4) of the principal Act).
Change to Schedule 11: Health
Clause 4 of Schedule 11 inserts new section 6A into the Mental Health (Compulsory Assessment and Treatment) Act 1992 (the Act) to ensure that examinations and other assessments under the Act can be undertaken by audiovisual link if it is not practicable for the person to be physically present. The amendment to clause 4 of Schedule 11 clarifies that judicial examination by audio link only, as provided for under the amendment in this Bill to the Courts (Remote Participation) Act 2010, is not permitted under new section 6A.
Changes to Schedule 12: Housing
Schedule 12 amends section 88 of the Unit Titles Act 2010 to ensure that members can attend body corporate meetings (and body corporate committee meetings) by audio or audiovisual link.
The changes in the SOP to clause 2 of Schedule 12—
reflect the proper term for the rules of bodies corporate; and
provide for the amendment to section 88—
to apply retrospectively from 25 March 2020; and
to remain in effect through to the end of the 12-week period that starts on the date on which the Epidemic Preparedness (COVID-19) Notice 2020 expires or is revoked.
New Schedule 14A: Land Information
New Schedule 14A amends the Rating Valuations Act 1998 (the Act) to enable the Valuer-General to relax the time frame by which a territorial authority is required to undertake the general revaluation of its district valuation roll. Section 9 of the Act requires a territorial authority to revise its district valuation roll at intervals of not more than 3 years by revaluing every rating unit within its district to ensure that the roll represents values current as at the date of the revaluation.
Clause 2 of new Schedule 14A amends section 9 of the Act to enable the Valuer-General, at the request of a territorial authority, to extend the time frame for the revaluation to a date not later than 1 year after it was originally due. However, the Valuer-General must be satisfied that the territorial authority is unlikely or not reasonably able to revise its district valuation roll so that it represents values current as at the date of the revaluation because of constraints on—
the practicality of carrying out physical inspections; or
the availability and reliability of market evidence or other information that the Valuer-General may require under section 10 of the Act.
Change to Schedule 16: Police
Schedule 16 amends the Arms Act 1983 (the Act).
The change in this SOP to clause 2 of Schedule 16 inserts new section 65I(8A) into the Act to provide legislative assurance that the fee payable by a holder of an extended licence (a licence that expires on a date between 25 March 2020 and 25 September 2020 and which, under new section 65I(5), continues in force for a further 4 months after that expiry date) who applies during the extended period of their licence for a replacement new licence is the same as the fee they would have been liable to pay had the application been made on 24 March 2020.
Changes to Schedule 17: Workplace Relations and Safety
Schedule 17 inserts a new Part 3B into the Parental Leave and Employment Protection Act 1987 (the Act).
The change in this SOP to clause 2 of Schedule 17 inserts new section 30JMA into the Act to clarify that COVID-19 response work is not a return to work to which section 42 of the Parental Leave and Employment Protection Act 1987 applies.