The Government has received submissions on the Business Payment Practices Bill (Bill) which will establish a disclosure regime requiring certain large businesses to disclose how long they take to pay invoices. This follows the introduction of similar schemes in Australia (2021) and the United Kingdom (2017). The Bill aims to provide transparency of business-to-business payment practices, to enable better informed choices as to whether to engage with certain large entities.
The Bill is currently being considered by the Economic Development, Science and Innovation Committee (Committee) after being introduced by then Minister of Small Business Stuart Nash. The Bill passed its first reading in November 2022 with the support of Labour, National, the Greens and Te Pāti Māori. The report of the select committee is due by 27 April 2023.
Entities with more than NZD33 million in revenue (including GST) for two or more consecutive accounting periods will be required to disclosure information about their payment practices twice a year. If the entity has subsidiaries, disclosures will need to be made for the group as a whole, and for each individual large business. These reporting entities will have to disclose the time taken to pay invoices and the proportion of invoices paid in full, as well as other information relating to payment practices and policies. A Business Payment Practices Registrar (Registrar) will be responsible for compliance.
Regulations are being developed by MBIE, which sought feedback on what payment practices information would be most useful to business when deciding who to do business with, how disclosure periods for reporting entities should be set by the regime’s Registrar, and whether any groups of entities should be exempt from the regime.
Entities will be required to certify their information disclosures and the data will be published on a publicly searchable register. This information will remain on the register for seven years.
Submissions to the Committee expressed concern with some aspects of the bill. These included that:
- Disclosure Period: reporting twice annually was overly frequent, as other jurisdictions have less frequent reporting periods, such as bi-annually in the United Kingdom and Australia, and annually in Poland and Spain.
- Director Signoff: directors have a governance role and would likely not have any direct knowledge of the information required to be disclosed. It was suggested that the sign off required would be better suited to management.
- Related Party Transactions: the Bill in its current form would capture related party transactions, which some submitters suggested be excluded.
- Revenue Threshold: the Bill provides for a revenue threshold of NZD33 million, which is higher than the NZD100 million revenue threshold used in Australia.
- Onerous Publication Requirements: companies will be required to publish payment practices information on their own website for seven years, which is unlike other public filing requirements.
We view this Bill as a positive development which has the potential to ease the burden that late and overdue payments have on small businesses. However, we consider the submissions to be well founded, and raise important issues which should be remedied in select committee so as to avoid creating an onerous compliance requirement for many businesses.
We will watch with interest as to how this Bill changes and progresses in a political environment of renewed focus on government priorities.
The Bill can be accessed at this link.
This article was co-authored by Tom Kennedy, a Solicitor in our Corporate team.
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