New regulations for moratorium proposals

Debt issuers, including finance companies dealing with moratoria, will face tougher measures from 31 January next year, Commerce Minister Simon Power announced today.

Moratoria proposals are an alternative to receivership for companies that issue debt and are in financial difficulty and unable to pay their investors. Moratoria may involve capital restructuring or repayment plans.

New regulations signed off by Cabinet today require companies proposing moratoria to give investors tailored disclosure documents.  They also require companies already in moratorium to report their progress to investors.  Should a moratorium not proceed as planned, secured investors will be able to vote for a receiver to be appointed.

In the past three years, some debt issuers - usually finance companies - have encountered difficulties and proposed moratoria.

"It is vitally important that investors understand moratorium proposals and compare them with the alternatives, such as receivership," Mr Power said.

"These regulations will ensure investors can consider the views of an independent expert, the trustees, and directors.

"The new Securities (Moratorium) Regulations 2009 will require key information about the moratorium and the alternatives to be provided to investors. 

"In the past, investors have been asked to make significant decisions about their investments, based on unsuitable disclosure documents, and this is unacceptable."

The changes come into force on 31 January.