Business Debt Hibernation (BDH)

The Government has introduced a number of support packages to help businesses to reduce the impact of COVID-19. On 3 April, the Government introduced a Business Debt Hibernation scheme to help businesses survive through the economic impacts cause by the coronavirus pandemic.

Business Debt Hibernation (BDH) was introduced by the Government on 3 April 2020 to assist businesses with reducing the impact on their ability to continue to trade and to cushion the economic impact for New Zealand. It is anticipated that legislation that is due to be passed will be backdated to 3 April.

The scheme will allow businesses to defer their debts for six months assuming that 50% of their creditors agree to support the scheme. This will allow the business the breathing space for them to continue to trade and the ability to protect jobs and incomes in the meantime.

The proposed regime is intended to:

  • encourage directors to engage with their creditors pro-actively with a view to putting together a simple proposal for putting the business into hibernation;
  • allow for the directors to retain control of the company, rather than passing control to an insolvency practitioner or enter into a formal insolvency process (such as liquidation);
  • provide certainty to new creditors that they won’t have to repay any money they receive (ie exemption from voidable transactions), so as to encourage businesses to continue transacting with businesses in Business Debt Hibernation;
  • be simple and flexible so that it can be implemented quickly and efficiently, and businesses can readily apply it to their circumstances without having to obtain legal advice.


There will be a threshold test before the business can enter into Business Debt Hibernation. Once the threshold is met, notice is given to the creditors that the company has been placed into Business Debt Hibernation. There will then be a one month moratorium once notice is given and a proposal presented to creditors, which means debts are not able to be enforced while the moratorium is in place.

The proposal will pass if 50% by number and 50% by value of creditors vote in favour of the proposal. Once the proposal is adopted, there will be a moratorium of a further six months where the business is able to continue trading as normal. Any payments and transactions within the six months the business is in Business Debt Hibernation will be exempt from the voidable transactions regime (assuming they are made in good faith, on arm’s length terms and without the intent to deprive the existing creditors of the business). This exemption does not include related parties.

If a business does not enter into Business Debt Hibernation, creditors are free to enforce their debts in the normal course.

To read the full Government press release, please click here.

If you believe that your business could benefit from entering into a BDH scheme and need assistance with this process, contact us to see how we can assist with this process.

If your business is struggling with the impacts of COVID-19, we encourage you to ask for help early. Speak to parties such as your accountant, advisor and/or your bank. The sooner you obtain expert advice and assistance, the more options you have with saving your business.


Khov Jones is a specialist insolvency and consulting firm that delivers practical solutions to clients that encounter often challenging and complex issues.

With over 20 years of commercial experience providing specialist advice we have the skills and expertise to provide robust advice to clients when it counts.

Our specialist insolvency areas include liquidations, receiverships, voluntary administration and creditor compromises. We also undertake forensic accounting assignments and consult to our clients on insolvency related matters.


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