The scheme is designed to address any power imbalance between stressed farm businesses and their creditors. Creditors will be required to offer mediation to eligible farmers before they can take action on a debt default. Farmers can also request mediation at any time.
The scheme will come into operation on July 1 and MPI has begun considering applications from mediation organisations wanting to take part.
“We’ve already heard from leading mediation organisations that are interested in participating. If an organisation is approved, it will then make sure the mediators are trained for the new scheme,” MPI agriculture and investment services deputy director-general Karen Adair said.
The scheme will help provide a way forward when a farm business comes under financial stress.
“It will ensure a fair mediation process takes place with an independent, neutral mediator and all the key people around the table.
“This provides the best chance that everyone involved can reach agreement on a good way forward. This may be a way to turn things around or, in some cases, to wind down the business.”
Mediation creates a safe environment for farmers. It gives them a chance to work constructively with creditors through debt problems. It might not always save the farm business but it can allow farmers to make a dignified exit or it might allow the parties to explore options for turning things around.
They will have up to 60 working days to complete the mediation process unless both agree to extend it.
If creditors don’t want to take part in mediation a farmer can apply for a prohibition certificate. It means the creditor can’t take enforcement action on the debt for six months. After the six-months the creditor will have to offer mediation before taking enforcement action.
If a farmer declines to take part in mediation the creditors can apply for an enforcement certificate, which will allow the creditor to proceed with enforcement action in line with the terms and conditions of the loan agreement. The certificate has a duration of three years from the date of mediation concluding. The farmer will not be able to initiate further mediation processes in relation to that debt during this period.
Where possible a mediation agreement is produced at the end of the mediation process. It sets out the agreed actions for future management of the debt. The agreement must be agreed to by both sides and is binding.
Lenders benefit, too, because it brings a transparent and timely process to work through debt issues.
One feature of the scheme will be that, if a farmer prefers, mediation can be based on tikanga Maori protocols.
“This could help get better engagement and outcomes. We are working with mediators who are experienced and knowledgeable in tikanga to set this up.”
The scheme means a more level playing field for farmers who are tackling financial issues. Otherwise, there is a significant power imbalance when they deal with creditors.
