Personal and corporate insolvency legislation [2 ed.] 9781927149447, 1927149444

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Previous edition history Personal and Corporate Insolvency Legislation

2007

Personal and Corporate Insolvency Legislation Guide and Commentary to the 2006 Amendments _________________________________________

Second edition

David Brown MA (Oxon) Associate Professor, Deputy Dean Co-Director, Bankruptcy and Insolvency Law Scholarship Unit (BILS) Adelaide Law School, The University of Adelaide

Thomas G W Telfer BA (Hons), JD (West Univ), LLM (Duke), SJD (Toronto) Associate Professor, Western University, Ontario

Wellington LexisNexis NZ Limited 2013

NEW ZEALAND AUSTRALIA ARGENTINA AUSTRIA BRAZIL CANADA

CHILE CZECH REPUBLIC FRANCE GERMANY HONG KONG GREATER CHINA HUNGARY INDIA IRELAND ITALY JAPAN KOREA MALAYSIA POLAND SINGAPORE SOUTH AFRICA SWITZERLAND

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TAIWAN LexisNexis, TAIWAN UNITED KINGDOM LexisNexis Butterworths Tolley, LONDON, EDINBURGH USA LexisNexis Group, NEW YORK, NEW YORK LEXISNEXIS, MIAMISBURG, OHIO National Library of New Zealand Cataloguing-in-Publication Data Brown, David. Personal and corporate insolvency legislation. 2nd ed. Previous ed: 2007. Includes index. ISBN 978-1-927-14944-7 (pbk). eISBN 978-1-927-14963-8 (ebook). 1. New Zealand—Insolvency Act 2006. 2. New Zealand—Companies Amendment Act 2006. 3. Bankruptcy—New Zealand. 4. Debtor and creditor— New Zealand. I. Telfer, Thomas G. W. II. New Zealand—Insolvency Act 2006. III. New Zealand—Companies Act 1993. IV. Title. 346.93078—dc 23. Copyright © LexisNexis NZ Limited 2013 All rights reserved. This work is entitled to the full protection given by the Copyright Act 1994 to the holders of the copyright, and reproduction of any substantial passage from the book except for the educational purposes specified in that Act is a breach of the copyright of the author and/or publisher. This copyright extends to all forms of photocopying and any storing of material in any kind of information retrieval system. All applications for reproduction in any form should be made to the publishers. Disclaimer Personal and Corporate Insolvency Legislation has been written, edited and published and is sold on the basis that all parties involved in the publication exclude any liability, including negligence or defamation, for all or any damages or liability in respect of or arising out of use, reliance or otherwise of this book.

The book should not be resorted to as a substitute for professional research or advice for any purpose. Enquiries should be addressed to the publishers. Visit LexisNexis NZ at www.lexisnexis.co.nz

Preface This second edition covers relevant statutory amendments and case law developments since the publication of the first edition in 2007. This preface highlights some of the important additions found in this edition. Dealing first with personal insolvency, since the publication of the first edition, new regulations, the Insolvency (Personal Insolvency) Regulations 2007 (SR 2007/333), have been proclaimed pursuant to the Insolvency Act 2006. The Insolvency Amendment Act 20091 introduced a number of substantive changes to the Insolvency Act 2006. Insolvent gifts have been entirely recast by amendments to ss 204 and 205. Section 204 now operates as an automatic avoidance provision. Where there is a gift by a bankrupt to another person within two years of bankruptcy the Assignee may cancel the transaction without having to prove insolvency. Section 205 deals with a gift made in the period beginning two years immediately before adjudication and ending five years immediately before adjudication. If the gift was made in that time period and the bankrupt was unable to pay his or her debts the transaction may be cancelled by the Official Assignee. Section 205(2) sets out a presumption on the inability to pay debts. In relation to the No-Asset Procedure, the Insolvency (Personal Insolvency) Regulations 2007 now prescribes the means test. The Insolvency Amendment Act 2009 made one change with respect to the entry criteria for the No-Asset Procedure. The combined effect of these changes is to raise the bar for entry into the No-Asset Procedure. The Insolvency Amendment Act 2009 also amended provisions dealing with termination and discharge in relation to the No-Asset Procedure. The Public Register provisions of the Insolvency Act 2006 have also been amended by the Insolvency Amendment Act 2009. A new s 449A deals with the situation of multiple insolvency events. Where a person has been bankrupt on two or more occasions, or has been a bankrupt and then discharged from the No-Asset Procedure, the information about these events will remain on the register indefinitely. The second edition also considers relevant case law developments on the interpretation of the Insolvency Act 2006 since publication of the first edition. A number of courts have interpreted s 37, which deals with the court’s discretion to

refuse an order of bankruptcy adjudication. Similarly there have been cases on the court’s discretion to refuse a proposal under s 333(3)(b) of the Insolvency Act 2006. Under that section, a court may refuse to approve a proposal if it considers that “the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors”. The Court of Appeal in Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 sets out a test to be applied under s 333(3)(b). In relation to corporate insolvency, there have been some minor legislative initiatives which impact on specialist sectors. The Insurance (Prudential Supervision) Act 2010 amended the Companies Act 1993 and Insolvency (Cross-border) Act 2006 to provide for licensed insurers to be placed into liquidation or voluntary administration, subject to Part 4.3 of the 2010 Act, either at the initiative of the Reserve Bank of New Zealand, or on application or appointment by others with standing under the relevant provisions. In 2010, the Companies Act and Receiverships Act were made subject to the Cape Town Convention and Aircraft Protocol which was signed by the New Zealand Government. This concerns the international registration of security interests over aircraft, and the amendments make the relevant provisions of the insolvency legislation subject to the Convention and Protocol. There has also been a minor amendment to the preferential claims provisions in Schedule 7 of the Companies Act. From 2009, untransferred employee payroll tax payable by the employer became a priority payment on liquidation and receivership, to be paid after wages and salary and the like, but before holiday pay, under cl 1(2)(aa) of Schedule 7. Of wider application, the prescribed maximum priority for employee preferential claims in cl 3 of Schedule 7 has been increased on two occasions, from $16,420 to $18,700 from September 2009, and from 2012, to $20,430. The major legislative change to the corporate insolvency provisions made by the Companies Amendment Act 2006, the Voluntary Administration procedure, has been relatively infrequently used. For example, from July 2011 to June 2012, there were 25 Voluntary Administration appointments as against 3,680 liquidations, (according to figures published by the Ministry of Business Innovation and Employment). This contrasts with the situation in Australia, where Voluntary Administrations have continued to prove popular at the “expense” of other corporate insolvency procedures. There are significant differences between the New Zealand and Australian Voluntary Administration provisions in two key areas. First, in Australia, appointment of an administrator

is a factor which may be used in a defence by directors to insolvent trading allegations brought later by a liquidator or the Australian Securities and Investments Commission, and also to prevent personal liability for unremitted taxes in response to a director penalty notice served by the Australian Taxes Office. Thus, directors have personal incentives to appoint an administrator in many cases. Secondly, as discussed in this Guide and Commentary, despite intense lobbying and the (then) opposition criticism, in New Zealand, but not in Australia, there is still preferential debt status for certain Inland Revenue Department tax claims on liquidation, and this is widely thought to have stultified the use of Voluntary Administrations and Deeds of Company Arrangement (DOCA) here. Lastly, as is made clear by one of the few Court of Appeal cases decided under Part 15A of the Companies Act 1993 (Voluntary Administrations), Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] 1 NZLR 235, the voting threshold for approval of a DOCA is higher than in Australia, particularly after the Court’s interpretation of the provision for the chair’s casting vote. The Court of Appeal indicated that Parliament might like to reconsider the voting threshold for approval, of 75 per cent of value which is higher than the 50 per cent in Australia. The Court of Appeal in that case also gave valuable guidance on when a DOCA might be “unfairly discriminatory or prejudicial” to a creditor or creditors, which has particularly implications for preferential creditors. Since most of the provisions of Part 15A were adopted from the Australian Part 5.3A of the Corporations Act 2001 without any amendment, Australian case law is often applicable. A landmark High Court of Australia case Lehman Brothers v City of Swan [2010] HCA 1, (2010) 240 CLR 509, (2010) 265 ALR 1 has been followed in New Zealand, and has important consequences for treatment of directors guarantees and other non-parties to DOCAs. Since 2007, there have been many applications for leave to act as a liquidator or administrator despite a prima facie “conflict” under s 280 of the Companies Act 1993. The amendments made in 2006 widened the scope of the relationships which would prima facie, without leave, prevent an insolvency officeholder taking up appointments as such. Fortunately the government seems to have finally acknowledged that this provision was cast too wide and are proposing in the pending Insolvency Practitioners Bill 2010 to remove the reference to relationships between appointees and secured creditors. A number of cases have considered the new restriction in s 241AA, and the transitional implications, on shareholder appointments of a liquidator or

administrator where a creditor has applied for a court winding-up. The new phoenix company provisions, aimed at deterring or preventing directors from using the same or similar name to that of a failed business of which they were a director, have been little used, and in five years has generated only one contested case, Groves v TSSN [2012] NZHC 2402 decided in the last few months, which was an unsuccessful application for leave to act as a director of such a company; however, it did give valuable guidance on the policy and operation of s 386A. Since 2007 there have been few cases where the new provisions in relation to voidable transactions have been used, as much of the litigation has been on transactions pre-dating the commencement of the new provisions. However, there has been important High Court guidance on the newly introduced “running account” doctrine in Blanchett v McEntee (2010) 10 NZCLC 264, 763, (2011) NZCCLR 4 and Jollands and Joliffe v Mitchill Communications Ltd (2011) NZCCLR 20, and more recently on the scope of the amended defence in s 296(3). The Insolvency (Cross-border) Act Commencement Order 2008 brought the Insolvency (Cross-border) Act 2006 Act into force on 24 July 2008, the same date as the commencement of the Australian Cross-Border Insolvency Act 2008. Both jurisdictions have enacted the UNCITRAL Model Law into their respective laws. There have been a number of early straightforward recognition cases in New Zealand under the Model Law, and in several judgments in the litigation in Williams v Simpson, particularly Williams v Simpson (No 5) [2011] 2 NZLR 380, and (No 7) HC Hamilton CIV-2010-419-00174, 29 September and 10 November 2010. Heath J has clarified and explained a number of issues under the Insolvency (Cross-border) Act 2006, including interim relief, the scope of recognition of foreign proceedings under the Model Law and the court’s continuing power to give mutual assistance to other courts under s 8 of the Insolvency (Cross-border) Act 2006. Heath J also expounded the continued relevance of the common law principles of comity. In relation to the latter, an important judgment, Rubin v Eurofinance SA; re New Cap Reinsurance v Grant [2012] UKSC 46 was handed down by the United Kingdom Supreme Court on 24 October 2012. Finally, at the time of writing, the Insolvency Practitioners Bill 2010, which proposes to introduce a registration system for insolvency practitioners, and make other amendments in relation to the Companies Act and Receiverships Act in the area of regulation and reporting by insolvency practitioners, is awaiting its Second Reading, which was expected to occur in the latter half of 2012. Part VI

of the Commentary gives a summary of the key changes and prior policy discussion during the legislative process to date. Substantive insolvency law is not going to be greatly affected by enactment of this Bill, although there will be increased reporting to creditors and to the Registrar, and hopefully in future more detailed insolvency statistics will be collected, collated and made available as a result of the enhanced requirements. David Brown Thomas GW Telfer Armistice Day, 11 November 2012, New Zealand 1

The Insolvency Amendment Act 2010 makes only a minor change and is not considered in depth in the second edition. Section 4 of that Act amends s 35 of the Insolvency Act 2006 by repealing para (d) in the definition of execution process and substituting the following paragraph: “(d) having an interim charging order made final under rule 17.59 of the High Court Rules”.

Preface to First Edition Until now, New Zealand has had a fairly traditional, some would say slightly outdated, mix of procedures for dealing with corporate and personal insolvency. In the case of the latter, bankruptcy is the main procedure, though limited alternatives already exist in the shape of summary instalment orders, and proposals under Part XV of the Insolvency Act 1967. In the case of companies, receivership and liquidation have been the mainstays, with statutory compromise procedures in Parts XIV and XV of the Companies Act 1993 being criticised as inadequate, and not much used. Other areas of our insolvency law, particularly voidable transactions, were not working well, as evidenced by the disproportionate flow of cases through the High Court. Finally, as between corporate and personal insolvency law, there was a lack of harmonisation, largely for historical reasons. The package of three Acts, which received Royal assent on 7 November 2006, effects a radical shift towards a more modern menu of alternatives to the lastresort procedures of bankruptcy or liquidation. The legislation aligns New Zealand insolvency law more closely with international best-practice, and also, in corporate insolvency, with Australia, under the umbrella of Closer Economic Relations with that country. In the area of corporate insolvency, a whole new rescue regime, voluntary administration, has been adapted from Australia, which will provide an alternative, much broader, protection to businesses that wish to gain breathingspace to consider rescue, or better outcomes than liquidation. The alignment of corporate voidable transactions law more closely with the Australian model will hopefully deal with some of the much-litigated uncertainties in the current law, particularly the “ordinary course of business” test. In the area of personal insolvency, an entirely new alternative to bankruptcy, the no assets procedure, has been introduced, which will provide an alternative, quicker and less stigmatised procedure than is the case with bankruptcy, particularly for the increasing number of consumer debtors who for whatever reason, find their financial affairs spiralling out of control. With regard to both personal and corporate insolvency, the Insolvency (Crossborder) Act 2006 provides for the adoption of the United Nations Commission

on International Trade Law (UNCITRAL) Model Law, giving a framework for international and bilateral cooperation between Courts and insolvency officeholders across borders, in the face of an increasing multinational or transnational element in many insolvencies. Corporate and commercial legislation can be daunting at the best of times, and all the more so when it is building on existing legislation, as well as incorporating new concepts from other jurisdictions. We have both been involved in the lengthy review process leading up to this package of Acts, and our intention was simply to give you a head start, “pathfinder” to the framework and concepts, and to the key changes, and to provide you with a portable volume of legislation. It is not a detailed commentary on all aspects of the three new Acts and to the extent that there are already answers to specific questions you may have, you will need to look elsewhere for these — our publishers can help you with that! Talking of publishers, we would like to thank LexisNexis NZ Limited, and particularly Helen Scott, for their encouragement, support, and professionalism from conception of the idea, through its gestation, to its fruition. We would also like to acknowledge the research assistance provided by Mieke Hill, a student at Victoria University of Wellington, and Marie Bruchet, a student at the University of Western Ontario. David Brown Thomas G W Telfer Christmas Eve 2006

Table of Cases References are to paragraph numbers

A Ackers v Saad Investments Co Ltd [2010] FCA 1221, (2010) 276 ALR 508 …. V.4 Agnew v CIR [2001] 1 AC 710 …. III.8 Agnew v CIR (Re Brumark) (1999) 19 NZTC 15,159, [2000] 1 NZLR 223 …. III.8 Airservices Australia v Ferrier (1996) 14 ACLC 1403 …. III.6 ALF No 9 Pty Ltd v Ellis [2010] NZCA 529 …. III.6 Aloridge Pty Ltd v Christianos (1994) 13 ACSR 99 …. III.4 Anderson (A Bankrupt), Re HC Hamilton B213/89, 14 April 1992 …. II.4 Andersons Home Furnishings Co Pty Ltd, Re (1996) 14 ACLC 1,710 …. III.5 Anntastic Marketing, Re [1999] 1 NZLR 615 …. III.6 Ansett Australia, Re [2006] FCA 277, (2006) 151 FCR 41, (2006) 56 ACSR 718 …. III.5 Ansett Australia and Korda, Re (2002) 40 ACSR 433 …. III.4, III.5 Ansett Australia and Menth v Sydney Airports Corp Ltd (2002) 41 ACSR 352 …. III.5 ANZ National Bank Ltd v Chen [2012] NZHC 2270 …. II.4 Anzani Investments Ltd v Official Assigne [2008] NZCA 144 …. III.6 Atlantic Computer Systems Ltd, Re [1993] Ch 505 …. III.4 Atlas Resources Ltd v Aull [2011] DCR 101 …. III.4, III.5 Auckland CC v Glucina [1997] 2 NZLR 1 …. II.4, III.6 Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 …. III.5

B Baker v Westpac Banking Corporation CA212/92, 13 July 1993 …. II.4 Bartlett Researched Securities Pty Ltd, Re (1994) 12 ACSR 707 …. III.5 Bear Stearns, Re 374 BR 122 (Bkrtcy SDNY, 2007) …. V.4 Benton v Priore [2003] 1 NZLR 564 …. III.4 Bertrand, Re [1980] 2 NZLR 72 …. II.4 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 …. III.6 Brash Holdings Ltd, Re (1994) 13 ACSR 793 …. III.4 Brash Holdings Ltd v Katile Pty Ltd (1994) 12 ACLC 472 …. III.4, III.5 Bridgecorp Ltd (in rec and in liq) v Nielsen [2010] 1 NZLR 820 …. II.4 Burns and Agnew v Commissioner of Inland Revenue (2011) 25 NZTC 25,594, (2011) 9 NZBLC 103,284, (2011) 10 NZCLC 264,885 …. III.8

C Callis, Re, Callis v Pardington (1996) 7 NZCLC 261,211 …. II.4, III.6 Cambridge Gas Transport Corporation v Official Committee of Unsecured Creditors of Navigator Holding Plc [2006] UKPC 26, [2007] 1 AC 508, [2006] 3 All ER 829 …. V.1, V.2 Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309 …. III.4 Carter Holt Harvey Ltd v Fatupaito (2003) 9 NZCLC 262,285 …. III.6 Clark v UDC Finance Ltd [1985] 2 NZLR 636 …. II.4 Claybrook Enterprises Ltd (in liq), Re, Rea v Wolfgram (2009) 10 NZCLC 264,593, [2010] NZCCLR 6 …. III.6 Commissioner of Inland Revenue v Castor Bay Villas Ltd (2008) 23 NZTC 21,779, (2008) 10 NZCLC 264,334 …. III.6 Commissioner of Inland Revenue v Compudigm (2011) 25 NZTC 25,110 …. V.5

Commissioner of Inland Revenue v Kecamaho Haulage Ltd (2008) 10 NZLC 264,370, (2008) 23 NZTC 21,889 …. III.6 Commissioner of Inland Revenue v Park Estate Ltd HC Auckland CIV-2010441-117, 23 September 2010 …. III.4 Commissioner of Inland Revenue v Park Estate Ltd HC Napier CIV-2010-441117, 26 August 2010 …. III.4 Commissioner of Inland Revenue v West Coast Brewery Ltd [2012] NZHC 1185 …. III.4 Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd [2005] FCA 902, (2005) 145 FCR 220, (2005) 23 ACLC 1328 …. III.5 Countrywide Bank v Dean [1998] 1 NZLR 385 …. III.6 Crawford v Pardington [2012] NZHC 1829 …. III.4 Cresvale Far East Ltd v Cresvale Securities Ltd (2001) 37 ACSR 394 …. III.4 Cripps v Lakeview Farm Fresh Ltd [2006] 1 NZLR 238 …. III.6 Cutting v Gitmans [2010] NZCCLR 34 …. II.4

D Daisytek ISA, Re [2004] BPIR 30 …. V.4 Dalhoff and King Holdings Ltd, Re (1991) 5 NZCLC 66,974 …. III.5 Dallinger v Halcha Holdings Pty Ltd (1996) 14 ACLC 263 …. III.4 D’Aloia v Commissioner of Taxation (2003) FCA 1336 …. III.6 David Meek Plant Ltd, Re [1994] 1 BCLC 680 …. III.4 Diamond Press Australia Pty Ltd, Re [2001] NSWSC 313 …. III.4 Dominion Income Property Fund Ltd v Takeovers Panel CA229/06, 26 October 2006 …. III.4 Doody v Body Corporate 343562 [2012] NZHC 25 …. II.4 Double v Marketing Pty Ltd, Re (1995) 16 ACSR 498 …. III.4 Douglas, Re [1959] NZLR 1214 …. II.4 Downey v Crawford (2004) 51 ACSR 182 …. III.4

Dunphy v Sleepyhead [2007] NZCA 241, [2007] 3 NZLR 602 …. III.4

E Edmonds Judd v Official Assignee [2000] 2 NZLR 135 …. II.4, III.6 Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 …. II.4 ESS Production Ltd v Sully [2005] 2 BCLC 547 …. III.7 Eurofood IFSC Ltd (Case C-341/04, 2 May 2006) …. V.4 Excel Freight, Re (1999) 8 NZCLC 261,827 …. III.6 Expile Pty Ltd v Jabb’s Excavations Pty Ltd [2004] NSWSC 284, (2004) 22 ACLC 667 …. III.5

F Farmer v Rowley [1992] 2 NZLR 195 …. II.5 FE Investments Ltd v Kilsser [2010] 2 NZLR 217 …. II.5 Fidow, Re [1989] 2 NZLR 431 …. II.4 First Independent Factors and Finance Ltd v Churchill [2006] EWCA Civ 1623 …. III.7 Fleming v Rokos HC Auckland CIV-2010-404-006590, 16 May 2011 …. II.4 Foster v Pakuranga Earthmovers Ltd (in liq) HC Auckland CIV-2007-404005622, 18 February 2008 …. III.6 Fournier v The Ship “Margaret Z” [1997] 1 NZLR 629 …. V.1 Foxcraft v The Ink Group Pty Ltd (1994) 15 ACSR 203 …. III.4

G Gavigan v Australasian Memory Pty Ltd (in liq) (1997) 8 NZCLC 261,449 …. V.5 Gifkins, Re HC Auckland CIV-2009-404-281, 25 May 2009 …. II.5 Gough v Fraser [1977] 1 NZLR 279 …. II.4

Graham v Pharmacy Wholesalers (Wellington) Ltd CA37/04, 17 December 2004 …. III.6 Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] NZLR 235 …. III.4, III.5

H Hamilton v National Australia Bank (1996) 14 ACLC 1201 …. III.4 Hardistey v Barney (1696) 90 ER 525 …. II.4 Hieber v Reddington [2011] NZCA 679 …. III.5 Higgs v P & W Painters Ltd [2008] NZCA 433 …. III.6 HIH Casualty and General Insurance Ltd, Re [2008] UKHL 21, [2008] 3 All ER 869 …. V.2 Hill v David Hill Electrical Discounts Pty Ltd (2001) 37 ACSR 617 …. III.4 Hobbs, Re (1999) 6 NZBLC 102,718 …. III.6 Huntleigh Downs Ltd v Fisk HC Wellington CIV-2009-485-001498, 11 August 2009 …. III.6

I Icon Digital Entertainment Ltd v Westpac NZ Ltd HC Auckland CIV-2007-404007124, 20 November 2007 …. III.6 IRC v Walsh [2005] 2 BCLC 455 …. III.7 Island Bay Masonry, Re (1998) 8 NZCLC 261,652 …. III.6

J J & B Records v Brashs Pty Ltd (1994) 13 ACSR 680 …. III.4 Java 452 Pty Ltd, Re (1999) 32 ACSR 507 …. III.4 Jennian Services Ltd v Jennian Homes North Shore Ltd HC Auckland CIV2008-404-1495, 28 March 2008 …. III.4 Jeong v TPC Korea Co Ltd HC Auckland CIV-2009-404-006704, 15 October

2009 …. V.4, V.5 Joeleen Enterprises Ltd, Re, Blanchett and Fatupaito HC New Plymouth, CIV2008-443-000485, 3 October 2008 …. III.6 Jollands and Joliffe v Mitchill Communications Ltd [2011] NZCCLR 20 …. III.6

K KEL Builders (Queensland) Pty Ltd v Brett Nash Electrics Pty Ltd [2001] QSC 178 …. III.6 Kelly v Structured Finance Ltd [2009] 2 NZLR 785 …. II.5

L Lamacchia (A Bankrupt), Re [1933] NZLR 61 …. II.4 Lawrence v Northern Crest Investments Ltd (in liq) [2011] FCA 672 …. V.1 Lawrence v Northern Crest Investments Ltd (in liq) [2011] FCA 925 …. V.1 Lee v Korea Line Corporation HC Auckland CIV-2011-404-001315, 14 March 2011 …. V.4, V.5 Lehman Brothers Holdings Inc v City of Swan [2010] HCA 11, (2010) 240 CLR 509, (2010) 265 ALR 1 …. III.5 Len Vidgen Ski & Leisure Ltd v Timaru Marine Supplies (1982) Ltd (in rec) [1986] 1 NZLR 349 …. III.8 Levin v Ikiua [2010] 1 NZLR 400 …. II.4 Levin v Ratskar [2011] NZCA 210 …. III.6 Liberty Financial Ltd v Pink-Martin HC Auckland CIV-2009-404-008432, 31 May 2010 …. II.4 Lightning Electrical Contractors Ltd, Re [1996] BCC 950 …. III.7 Liquori v Golden Fund Ltd [2012] NZHC 2253 …. II.5

M

Macmillan Builders Ltd v Morningside Industries Ltd [1986] 2 NZLR 12 …. III.6 Madden, Re (1996) 20 ACSR 10 …. III.5 Madden Construction Ltd, Re (1996) 14 ACLC 913 …. III.4 Magsons Hardware (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 …. II.5 Mason v Lewis [2006] 3 NZLR 225 …. III.4 Maxim Group Ltd v Jones Publishing Ltd HC Auckland CIV-2008-404-008179, 17 December 2008 …. III.4 McHardy v Wilkins & Davies Mariners Ltd CA54/93, 7 April 1993 …. II.4 McLoy v Titan Foundation Ltd HC Auckland CIV-2008-404-2243, 23 April 2008 …. III.6 Meltzer v Axiom International (2001) 9 NZCLC 262,671 …. III.6 Meltzer v Commissioner of Inland Revenue HC Auckland CIV-2010-404-3177, CIV-2010-404-7750, 3, 4, 8, 9 November, 6 December 2010 …. II.5 Mercy & Sons Pty Ltd v Wanari (2000) 35 ACSR 70 …. III.5 Modern Terrazzo Ltd, Re [1998] 1 NZLR 160 …. III.6 Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (1996) 63 FCR 319, [1997] FCA 395, (1997) 24 ACSR 47 …. III.5 Morphitis v Bernasconi [2003] Ch 552 …. III.7 Mountfort v Tasman Pacific Airlines of NZ Ltd [2006] 1 NZLR 104 …. III.5 Moynihan v Berkett HC Tauranga CP3/94, 27 July 1998 …. III.6 Muscletech Research and Development Inc, Re [2006] OJ No 167 (Ont SCJ), [2006] OJ 462 …. V.3 Muscletech Research and Development Inc No 04 MD 1598, Re (SDNY, 11 August 2006) …. V.3, V.4

N Nautilus Developments Ltd (in liq), Re [2000] 2 NZLR 505 …. III.6 Nisbett, Re, Ex parte Vala [1934] GLR 553 …. II.4

Number One Men Ltd, Re, Meltzer v Axiom International Ltd (2001) 9 NZCLC 262,671 …. III.6 Nylex (NZ) Ltd, Re HC Auckland CIV-2009-404-1217, 11 March 2009 …. III.4

O Oasis Merchandising Ltd, Re [1998] Ch 170 …. III.6 Official Assignee v Norris [2012] NZHC 961, [2012] NZCCLR 10 …. III.6 Official Assignee v Petricevic [2011] 1 NZLR 467 …. II.4 Official Assignee v Wairarapa Farmers’ Co-operative [1925] NZLR 1 …. II.4 Olifent v Australian Wine Industries Pty Ltd (1996) 14 ACLC 510 …. III.6 Omegatrend International Pty Ltd (in liq) v New Image International Ltd HC Auckland CIV-2010-404-004098, 5 October 2010 …. V.4, V.5 One Tel Ltd, Re (2002) 43 ACSR 305 …. III.5 Oorschott v Danfoss (NZ) Ltd (2004) 9 NZCLC 263,564 …. III.6

P Pacific Northstar Property Groups LLC, Re HC Auckland CIV-2009-404006312, 29 September 2009 …. V.4, V.5 Pacific Trawling Ltd v Coleman (as admin of E&B Management Ltd) HC Auckland CIV-2011-404-1434, 29 March 2011 …. III.4 Pan Pharmaceuticals Ltd, Re [2003] FCA 598, (2003) 21 ACLC 1,144 …. III.4 Pascoe, Re [1944] Ch 219 …. II.4 Pasminco Ltd, Re (2003) 45 ACSR 1 …. III.5 Pasminco Ltd (No 2), Re (2004) 49 ACSR 470 …. III.5 Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 …. III.6 Perkins v Perkins HC Whangarei CIV-2010-488-765, 26 August 2011 …. II.4 Polymer Group Ltd v South Vineyard Ltd HC Wellington CIV-2009-485-1298, 15 November 2010 …. III.4

Q QBE Insurance (International) Ltd ACN 000 000 948 v Ley Marketing Ltd (in rec and vol admin) HC Auckland CIV-2010-404-3205, 16 July 2010 …. III.4 Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 …. III.6 Quintette Coal Ltd v Nippon Steel (1990) 51 BCLR (2d) 105 (BCCA) …. III.4

R Ran, Re 607 F 3d 1017 (5th Cir, 2010) …. V.4 Rea v Russell [2012] NZHC 11 …. III.6 Rees v Bank of New South Wales (1964) 111 CLR 211 …. III.6 Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 …. II.4 Reid v Tararua District Council HC Palmerston North CIV-2009-454-622, 15 October 2010 …. II.4 Relf v Zekor Ltd (1997) 8 NZCLC 261 …. III.4 Reynolds v Glengarry Hancocks Ltd HC Auckland CIV-2008-404-004745, 7 July 2009 …. III.6 Ricketts v Ad Valorem Factors Ltd [2004] BCC 164 …. III.7 Ricon Constructions Pty Ltd, Re (1998) 26 ACSR 655 …. III.5 Riviera Group Pty Ltd, Re [2009] NSWSC 585, (2009) 72 ACSR 352 …. III.4 Rothmans Exports Pty Ltd v Mr Mistmorn (1994) 12 ACLC 936 …. III.6 Royal Bank of Canada v Sparrow Electric Corp [1997] 1 SCR 411 …. III.8

S Sands & MacDougall Wholesale Pty Ltd (in liq) v Commissioner for Taxation for Commonwealth (1997) 15 ACLC 115 …. III.6 Sharma v ANZ Banking Group (NZ) Ltd (1992) 6 PRNZ 386 …. II.4 Sheahan (in rec and liq), Re HC Auckland CIV-2011-404-001623, 20 May 2011 …. V.4, V.5

Sheahan v Air-Con Pty Ltd (1997) 147 ALR 1 …. III.6 Shotblast Services (Auckland) Ltd v Levin [2012] NZHC 2129 …. III.6 Sims v Celcast Pty Ltd (1998) 71 SASR 142 …. III.6 Slavich v Slavich [2012] NZHC 1513 …. II.4 South Pacific Shipping Ltd, Re (2004) 9 NZCLC 263 …. III.4 SphinX Ltd, Re (SDNY Case No 06-11760) …. V.3, V.4 Stapley v Fletcher Concrete and Infrastructure Ltd [2008] NZCA 442 …. III.6 Staubitz-Schreiber, Re (Case C-1/04) [2006] All ER (D) 65 …. V.4 Strategic Options Ltd v Swordfish Lodge Management Ltd HC Auckland CIV2008-404-1017, 4 March 2008 …. III.4 Sunbolf v Alford (1838) 3 M & W 247, 150 ER 1135 (Ex) …. II.4 Surber v Lean (2000) 36 ACSR 176 …. III.5 Suspended Ceilings (Wellington) Ltd v CIR [1995] 3 NZLR 143, [1998] 8 NZCLC 261 …. III.4 Sutherland v Eurolinx Pty Ltd (2001) 37 ACSR 477 …. III.6 Sutherland v Liquor Administration Board (1997) 24 ACSR 176, 15 ACLC 875 …. III.6

T Trans Otway v Shephard [2005] NZSC 75, [2006] 2 NZLR 289 …. III.6 Turners & Growers Exports Ltd v The Ship “Cornelis Verone” [1997] 2 NZLR 110 …. V.1 Tyree Power Construction v DS Edmonds Electrical Ltd [1994] 2 NZLR 268 …. II.4

W Waikato Freight and Storage (1988) Ltd v Meltzer [2001] 2 NZLR 541 …. III.6 Walsh v Sazer Constructions Pty Ltd (2000) 3 VR 305 …. III.6 WGL Retail Holdings Ltd, Re [2011] NZCCLR 22 …. III.4

WHK (NZ) Ltd v Retail Media Ltd (in rec and liq) HC Auckland CIV-2009404-003157, 16 July 2009 …. III.6 Williams v Simpson (No 5) [2011] 2 NZLR 380 (NZHC) …. V.1, V.2, V.4 Williams v Simpons (No 7) HC Hamilton CIV-2010-419-001174, 10 November 2010 …. V.2, V.5 Wily v Commissioner of Taxation [2002] NSWSC 909 …. III.6 Wily v Commissioner of Taxation [2003] NSWSC 377, (2003) 21 ACLC 1321 …. III.6

Table of Statutes References are to paragraph numbers

New Zealand Child Support Act 1991 …. II.5 Civil Union Act 2004 …. III.3 Companies Act 1955 …. II.4 s 284 …. III.6 Companies Act 1993 …. I.1, II.2, II.4, III.2, III.4, III.5, III.6, III.8, VI.1, VI.2, VI.3 Pt 13 …. III.4 Pt 14 …. III.3, III.4, III.8, V.4 Pt 14, Subpart 2 …. III.8 Pt 15 …. III.2, III.3, III.4, V.4, VI.3 Pt 15, Subpart 2 …. III.4 Pt 15, Subpart 9 …. III.4 Pt 15, Subpart 17 …. III.5 Pt 15A …. I.1, III.2, III.4, III.5, IV.1, VI.3 Pt 15A, Subpart 2 …. III.4 Pt 15A, Subpart 9 …. III.4 Pt 15A, Subpart 21 …. III.5 Pt 16 …. III.3, III.4, III.6 Pt 16A …. III.6 Pt 18 …. III.3 s 2(1) …. III.3

s 3 …. III.5 s 3(1)(b) …. III.4 s 126 …. III.7 s 135 …. III.4, III.7 ss 227–234 …. III.4 s 227 …. III.3 s 228 …. III.4 s 234(c) …. III.8 ss 235–239 …. III.4 s 239 …. III.4 ss 239A–239Z …. III.4 s 239A …. III.4, III.5 s 239AA …. III.4 s 239AB …. III.4 s 239ABA …. III.4 s 239ABB …. III.4 ss 239ABC–239ABJ …. III.4 s 239ABC …. III.4 ss 239ABD–239ABZ …. III.4 s 239ABE …. III.4 s 239ABE(b) …. III.4 s 239ABF …. III.4 s 239ABJ …. III.4 s 239ABK …. III.4, IV.1 s 239ABL …. III.4, IV.1 s 239ABM …. III.4 s 239ABN …. III.4

s 239ABO …. III.4 s 239ABP …. III.4 s 239ABS …. III.4 s 239ABT …. III.4 s 239ABU …. III.5 s 239ABV …. III.5 s 239ABW …. III.5 s 239ABX …. III.5 s 239ABY …. III.4, III.5 s 239AC …. III.4 s 239ACA …. III.4, III.5 s 239ACB …. III.4, III.5 s 239ACC …. III.4, III.5 ss 239ACD–239ACZ …. III.4 s 239ACN …. III.5 s 239ACO …. III.5 s 239ACO(3) …. III.5 s 239ACR …. III.4, III.5 s 239ACS …. III.5 s 239ACT …. III.5 s 239ACT(2) …. III.5 s 239ACT(3) …. III.5 s 239ACV …. III.5 s 239ACW …. III.5 s 239ACZ …. III.4 s 239AD …. III.4 s 239ADA …. III.5

s 239ADB …. III.5 s 239ADD …. III.5 s 239ADE(1) …. III.5 s 239ADE(2) …. III.5 s 239ADF …. III.5 s 239ADH …. III.4 s 239ADI …. III.4 s 239ADJ …. III.4 s 239ADK …. III.4 s 239ADL …. III.4 s 239ADM …. III.4 s 239ADO …. III.4, III.5 ss 239ADP–239ADU …. III.5 s 239ADP …. III.5 s 239ADP(2) …. III.4 s 239ADQ …. III.5 s 239ADR …. III.5 s 239ADW(1)(a) …. III.4 s 239ADW(1)(b) …. III.4 s 239ADW(1)(c) …. III.4 s 239ADW(2) …. III.4 s 239ADX …. III.4 s 239AE …. III.4 s 239AEB …. III.4 s 239AEE …. III.5 s 239AEF …. III.4 s 239AEG …. III.5

ss 239AEH–239AEP …. III.5 s 239AEQ …. III.5 s 239AER …. III.5 s 239AER(3) …. III.5 s 239AET …. III.5 s 239AEU …. III.5 s 239AEV …. III.5 s 239AEW …. III.4, III.5 s 239AF(1) …. III.4 s 239AF(3)(a) …. III.4 s 239AG …. III.4 s 239AH …. III.4 s 239AI …. III.4 s 239AK …. III.4 s 239AK(1) …. III.4 s 239AK(2) …. III.4 s 239AK(3) …. III.4 s 239AK(4) …. III.4 s 239AK(5) …. III.4 s 239AL(1) …. III.5 s 239AL(2) …. III.5 s 239AN …. III.4 s 239AO …. III.4 s 239AP …. III.4 s 239AQ …. III.4 s 239AR …. III.4 s 239AS …. III.4

s 239AT …. III.4 s 239AT(3) …. III.4 s 239AU …. III.4 s 239AU(3) …. III.4 s 239AU(3)(a)(ii) …. III.4 s 239AV …. III.4 s 239AW(1) …. III.4 s 239AW(2) …. III.4 s 239AW(4) …. III.4 s 239AX …. III.4 s 239AY …. III.4 s 239AZ …. III.4 s 239B …. III.4 s 239C …. III.3, III.4 ss 239D–239Z …. III.4 s 239D …. III.4 s 239E(1) …. III.5 s 239E(2) …. III.5 s 239E(2)(c) …. III.4 s 239F …. VI.2 s 239F(2) …. III.6 s 239G …. III.4 s 239H(1)(c) …. III.4 s 239H(1)(d) …. III.4 s 239I …. III.4 s 239I(1) …. III.4 s 239I(1)(a) …. III.4

s 239I(2) …. III.4 s 239I(3) …. III.4 s 239I(4) …. III.4 s 239I(5) …. III.4 s 239J …. III.4 s 239J(1) …. III.4 s 239K …. III.4 s 239K(1) …. III.4 s 239L …. III.4 s 239L(2)(a) …. III.4 s 239L(2)(b) …. III.4 s 239N …. III.4 s 239O …. III.4 s 239O(3) …. III.4 s 239R(2)(b) …. III.4 s 239T …. III.4 s 239U …. III.4 s 239V …. III.4 s 239W …. III.4 s 239X(1) …. III.4 s 239X(2) …. III.4 s 239Y(1) …. III.4 s 239Y(2) …. III.4 s 239Y(3) …. III.4 s 239Y(4) …. III.4 s 239Y(5) …. III.4 s 239Z …. III.4

s 239Z(1) …. III.4 s 239Z(2) …. III.4 s 239Z(3) …. III.4 s 239Z(4) …. III.4 s 241AA …. III.4, III.6 s 241AA(3) …. III.6 s 241AA(4) …. III.6 s 243 …. III.6 s 243(11) …. III.6 s 245 …. III.6 s 245A …. III.4, III.6 s 245A(1) …. III.6 s 245A(2) …. III.6 s 245A(3) …. III.6 s 250 …. III.5 s 250(2) …. III.5 ss 255–263 …. II.4 s 255 …. III.6 s 255(2)(c) …. III.6 s 255(5) …. III.6 s 255(6) …. III.6 s 260A …. III.6 s 261 …. V.5 s 269(2)(a) …. II.4, III.6 s 271 …. III.5 s 272 …. III.5 s 279(2) …. III.6

s 280 …. III.4, III.6, VI.2 s 280(1)(ca) …. III.6 s 280(1)(cb) …. III.6 s 280(2) …. VI.2 s 280(3)(a) …. III.6 s 280(4) …. III.6 s 283(4) …. III.6 s 284 …. III.6 s 285(2) …. III.6 s 286 …. III.6, VI.1 s 286(5) …. III.6 s 286(7) …. III.6 s 289(2)(a) …. II.4 s 292 …. II.4, III.6 s 292(3) …. II.4, III.6 s 292(3)(f) …. III.6 s 292(4) …. III.6 s 292(4B) …. III.6 s 292(5) …. III.6 s 293 …. II.4, III.6 s 293(6) …. III.6 s 293(7) …. III.6 s 294 …. II.4, III.6 s 294(1)(b) …. III.6 s 294(3) …. III.6 s 294(4) …. III.6 s 295 …. III.6

s 295(a) …. III.6 s 295(c) …. III.6 s 296 …. III.6 s 296(3) …. II.4, III.6 s 296(3)(b) …. III.6 s 297 …. II.4, III.6 s 297(1)(c) …. III.6 s 297(3) …. III.6 s 301 …. III.4 s 301(4) …. III.4 s 314 …. III.6 s 316G …. VI.2 s 316M …. III.6, VI.2 s 342 …. III.3 s 373(4) …. III.7 s 380 …. III.7 s 380(1) …. III.7 s 380(3) …. III.7 ss 386A–386F …. III.7 s 386A …. III.7 s 386A(1) …. III.7 s 386B …. III.7 s 386B(2) …. III.7 s 386C …. III.7 s 386D …. III.7 s 386E …. III.7 s 386F …. III.7

s 386F(2) …. III.7 Sch 5 …. III.4, III.5 Sch 7 …. II.4, III.4, III.6, III.8, IV.2, IV.3 Sch 7, para 1(1)(a) …. III.8 Sch 7, para 1(1)(b) …. III.8 Sch 7, para 1(1)(c) …. III.8 Sch 7, para 1(1)(d) …. III.8 Sch 7, para 1(1)(e) …. III.6, III.8 Sch 7, para 1(2) …. III.8 Sch 7, para 1(2)(a) …. IV.2 Sch 7, para 1(2)(aa) …. III.8 Sch 7, para 1(2)(b) …. III.8, IV.2 Sch 7, para 1(2)(c) …. III.8, IV.2 Sch 7, para 1(2)(d) …. III.8 Sch 7, para 1(2)(e) …. III.8 Sch 7, para 1(2)(g) …. III.8 Sch 7, para 1(2)(h) …. III.8 Sch 7, para 1(3) …. III.8 Sch 7, para 1(4) …. III.8 Sch 7, para 1(5) …. III.8 Sch 7, para 1(5)(b) …. III.8 Sch 7, para 2(ba) …. III.8, IV.2 Sch 7, para 2(bb) …. III.8 Sch 7, para 2(c) …. III.8 Sch 7, para 2(d) …. III.8 Sch 7, para 2(e) …. III.8 Sch 7, para 2(ea) …. III.8

Sch 7, para 2(g) …. III.8 Sch 7, para 2(1)(b)(B) …. III.8 Sch 7, para 3(2) …. III.8 Sch 7, para 3(2)(c) …. III.8 Sch 7, para 3(2)(d) …. III.8 Sch 7, para 3(4)(b) …. III.8 Sch 7, para 4 …. III.8 Sch 7, para 6 …. III.8 Sch 7, para 6A …. III.8 Sch 7, para 7 …. III.8 Sch 7, para 9(b) …. III.8 Sch 7, para 9(b)(i)(C) …. III.8 Sch 7, para 12(ab) …. III.8 Companies Act 1993 Liquidation Regulations 1994 reg 5 …. II.4 reg 29 …. VI.3 reg 31 …. VI.3 Companies Amendment Act 2004 …. III.8 s 4 …. IV.2 s 4(1) …. III.8 s 4(2) …. III.8 s 4(3) …. III.8 s 4(4) …. III.8 s 4(7) …. III.8 Companies Amendment Act 2006 …. I.1, II.2, II.4, III.1, III.2, III.4, III.5, III.6, III.8, IV.2, IV.4, V.6 Pt II …. III.8

Pt III …. III.8, IV.2, IV.4, V.4 s 4(2) …. III.3 s 5 …. III.3 s 6 …. III.2, III.4, IV.1 ss 7-35 …. III.2 s 9 …. III.6 s 10 …. III.5 s 14 …. III.4 s 15 …. III.4, III.6 s 16 …. III.6 s 18 …. III.6 s 19 …. III.6 s 19(2) …. III.6 s 19(3) …. III.6 s 21 …. III.6 s 22 …. II.4, III.6 s 24 …. III.6 s 25 …. III.6 s 26 …. III.6 s 26(2) …. III.6 s 27(1) …. III.6 s 27(2) …. III.6 s 27(5) …. III.6 s 28(4) …. III.6 s 29 …. III.6 s 30 …. III.6 s 31 …. III.6

s 32 …. III.6 s 32(3) …. III.6 s 33 …. III.7 s 35 …. III.7 ss 36-39 …. III.2 s 39(2) …. III.7 s 42 …. III.2 Sch 1 …. III.6, III.8, IV.2 Sch 2 …. III.2, III.4, IV.2, IV.3 Companies (Voluntary Administration) Regulations 2007 …. I.1 cl 4(1) …. III.5 Sch 1 …. III.5 Construction Contracts Act 2002 …. III.6 Corporations (Investigations and Management) Act 1989 …. III.4 Pt III …. III.4 s 4(a) …. III.4 s 4(b)(iii) …. III.4 District Courts Act 1947 …. II.4 s 85(1)(a) …. II.4 Employment Relations Act 2000 …. III.8 s 3 …. III.4 Family Proceedings Act 1980 …. II.5 Fisheries Act 1996 …. III.8 High Court Rules …. II.4 r 1.22 …. V.5 r 549 …. II.4 Income Tax Act 2004 …. III.8

s HK11(3) …. III.8 s HK11(5) …. III.8 Insolvency Act 1967 …. I.1, II.1, II.4, II.5, III.6, III.8 Pt XV …. II.5 Pt XVI …. II.5 s 2 …. II.4 s 19 …. II.4 s 21 …. II.4 s 23(a) …. II.4 s 42(2)(a) …. II.4 s 42(5) …. II.4 s 45 …. II.4 s 52(1) …. II.4 s 53(2) …. II.4 s 54(3) …. II.4 s 55 …. II.4 s 56 …. II.4 s 56(1)(a) …. II.4 s 57 …. II.4 s 57(1) …. II.4 s 57(2)(b) …. II.4 s 58(1) …. III.6 s 58(6) …. II.4, III.6 s 67 …. II.4 s 68 …. II.4 s 75 …. II.4 s 75(3) …. II.4

s 76 …. II.4 s 78 …. II.4 s 104(1)(d)(via) …. III.8 s 104(1)(g) …. II.4 s 104(1)(h) …. II.4 s 107 …. II.4 s 108 …. II.4 s 119 …. II.4 s 135 …. V.1, V.2 s 146(1)(a) …. II.5 s 148(12) …. II.5 Insolvency Act 2006 …. I.1, II.1, II.3, II.4, II.5, II.6, III.4, III.6, III.8, V.6 Pt 2 …. III.6 Pt 5, Subpart 2 …. II.5 Pt 6, Subpart 6 …. II.4 Pt 6, Subpart 7 …. II.4 Pt 7, Subpart 5 …. II.6 s 2 …. I.1, III.8 s 3 …. II.4 s 6 …. II.2 s 7 …. II.4 s 7(2) …. II.4 s 8 …. II.3 s 8(2) …. II.3 s 10(2)(b) …. II.4 s 13 …. II.4 s 13(a) …. II.4

s 13(b) …. II.4 s 13(c) …. II.4 s 13(d) …. II.4 s 16(1) …. II.4 s 17 …. II.4 s 17(1) …. II.4 s 17(4)(a) …. II.4 s 17(7) …. II.4 ss 18–28 …. II.4 s 26 …. II.4 s 29 …. II.4 s 36 …. II.4 s 37 …. II.4 s 37(b) …. II.4 s 37(c) …. II.4 s 37(d) …. II.4 s 45 …. II.4 s 46 …. II.5 s 47(1) …. II.4 s 49 …. II.4 s 55 …. II.4 s 62 …. II.6 s 67 …. II.4 s 71 …. II.4 s 73 …. II.4 s 86 …. II.4 s 87(1) …. II.4

s 93(2) …. II.4 s 101 …. II.4 s 102 …. II.4 s 104 …. II.4 s 105(2) …. II.4 s 113 …. II.4 s 114 …. II.4 s 117(3) …. II.4 s 117(4) …. II.4 s 118(a) …. II.4 s 119(2) …. II.4 s 120 …. II.4 s 125 …. II.4 s 126 …. II.4 s 147 …. II.4 s 158 …. II.4 s 158(3)(a) …. II.4 s 158(3)(b) …. II.4 s 158(3)(c) …. II.4 s 158(5) …. II.4 s 160 …. II.4 s 163 …. II.4 s 164 …. II.4 s 192 …. III.6 s 192(1) …. II.4 s 192(1)(d) …. II.4 s 192(2) …. II.4

ss 194-197 …. II.4 ss 194-196 …. II.4 s 195 …. II.4 s 195(1)(b) …. II.4 s 197 …. II.4 ss 198-203 …. II.4 ss 198-199 …. II.4 s 198 …. II.4 s 201 …. II.4 s 202 …. II.4 s 204 …. II.4 s 205 …. II.4 s 205(1)(b) …. II.4 s 205(2) …. II.4 ss 206-210 …. II.4 s 206 …. II.4 s 206(1) …. II.4 s 206(1)(d) …. II.4 s 206(2) …. III.6 s 206(3)(f) …. III.6 s 206(4) …. II.4 s 206(5) …. III.6 s 206(6) …. II.4 s 207 …. II.4 s 208 …. II.4, III.6 s 208(1)(b) …. II.4 s 211 …. II.4

s 212(a) …. II.4 ss 213–216 …. II.4 s 213 …. II.4, III.6 ss 274–279 …. II.4 s 274 …. III.8 s 274(1)(a) …. III.8 s 274(1)(b) …. III.8 s 274(1)(c) …. III.8 s 274(2) …. III.8 s 274(2)(d) …. III.8 s 274(2)(e) …. III.8 s 274(2)(g) …. III.8 s 274(2)(h) …. III.8 s 274(3) …. III.8 s 274(4) …. III.8 s 274(5) …. III.8 s 275 …. III.8 s 276(1) …. III.8 s 276(2) …. III.8 s 277 …. III.8 s 280 …. II.4 s 304(2) …. II.5 s 308 …. II.6 s 309 …. II.4 s 310 …. II.4 ss 312–324 …. II.3 s 325 …. II.5

s 326 …. II.5 s 328 …. II.5 s 333(3) …. II.5 s 333(3)(a) …. II.5 s 333(3)(b) …. II.5 s 333(3)(c) …. II.5 s 333(4) …. II.5 s 333(4)(c) …. III.8 s 334 …. II.5 s 335 …. II.5 s 340 …. II.5 s 341 …. II.5 s 343 …. II.5 s 343(1)(a) …. II.5 s 343(1)(b) …. II.5 s 343(4) …. II.5 s 345 …. II.5 s 346(2) …. II.5 s 349 …. II.5 s 352 …. II.5 s 354 …. II.6 s 355 …. II.6 s 359 …. II.5 s 362 …. II.5 s 363(1) …. II.5 s 363(1)(a) …. II.5 s 363(1)(b) …. II.5

s 363(1)(c) …. II.5 s 363(1)(d) …. II.5 s 363(1)(e) …. II.5 s 363(2) …. II.5 s 364 …. II.5 s 364(a) …. II.5 s 364(b) …. II.5 s 364(c) …. II.5 s 364(d) …. II.5 s 366 …. II.5 s 368 …. II.6 s 369 …. II.5 s 369(1) …. II.5 s 369(2) …. II.5 s 369(2)(c) …. II.5 s 370(2) …. II.5 s 370(3) …. II.5 s 371 …. II.5 s 372(a) …. II.6 s 372(b) …. II.5 s 372(c) …. II.5, II.6 s 372(d) …. II.5, II.6 s 373 …. II.5 s 373(1)(a) …. II.5 s 373(1)(b) …. II.5 s 374 …. II.5 s 375 …. II.5

s 376 …. II.5 s 377 …. II.5, II.6 s 377(1) …. II.5 s 377(2)(a) …. II.5 s 377(6) …. II.5 s 377A(1) …. II.5 s 377A(2) …. II.5 s 377A(3) …. II.5 s 377B …. II.5 s 436A …. I.1 s 444 …. III.8 s 444(3) …. III.6 s 447(2) …. II.6 s 448(3)(a) …. II.6 s 448(4) …. II.6 s 448(4)(a)–(c) …. II.6 s 448(4)(a) …. II.6 s 448(4)(b) …. II.6 s 449 …. II.6 s 449(1) …. II.6 s 449(4) …. II.4 s 449(5) …. II.6 s 449(4A) …. II.5 s 449A …. II.6 s 449A(2) …. II.6 s 451(1) …. II.6 s 452 …. II.6

s 453 …. II.6 s 454 …. II.6 s 455 …. II.6 Insolvency Amendment Act 2004 …. III.8 s 4(1) …. III.8 s 4(3) …. III.8 Insolvency Amendment Act 2009 …. II.4, II.5, II.6 s 4 …. II.4 s 5 …. II.4 s 7 …. II.5 s 8 …. II.5 s 9 …. II.5 s 10 …. II.5 s 11 …. II.5 s 12 …. II.6 s 13 …. II.6 s 14 …. II.6 Insolvency (Cross-border) Act 2006 …. I.1, II.4, V.1, V.2, V.6, VI.2 s 3 …. V.1, V.2 s 4 …. V.4 s 5 …. V.3 s 5(2) …. V.3 s 8 …. V.1, V.2 s 8(3) …. V.2 s 9 …. V.1 s 10 …. V.6 s 11 …. V.1

Sch 1 …. V.1, V.2 Sch 1, Ch IV …. V.5 Sch 1, art 1(2) …. V.2, V.5 Sch 1, art 2(b) …. V.4 Sch 1, art 2(c) …. V.4 Sch 1, art 2(f) …. V.4 Sch 1, art 2(i) …. V.4 Sch 1, art 3 …. V.5 Sch 1, art 11 …. V.5 Sch 1, art 13 …. V.5 Sch 1, art 15 …. V.5 Sch 1, art 20 …. V.5 Sch 1, art 21 …. V.5 Sch 1, art 21(1) …. V.5 Sch 1, art 21(2) …. V.5 Sch 1, art 22 …. V.5 Sch 1, art 22(4) …. V.2 Sch 1, art 23 …. V.5 Sch 1, arts 25-27 …. V.5 Sch 1, art 25 …. V.4 Sch 1, art 27 …. V.5 Sch 1, art 28 …. V.5 Sch 1, art 29 …. V.6 Sch 2 …. III.3 Insolvency (Personal Insolvency) Regulations 2007 …. I.1, II.1, II.4, II.5 Pt 4 …. II.5 Pt 5 …. II.5

reg 6 …. II.4 reg 7 …. II.4 reg 44 …. II.5 reg 64 …. II.5 reg 65 …. II.5 reg 66 …. II.5 reg 69 …. II.6 Interpretation Act 1999 s 7 …. III.6 Judicature Act 1908 …. III.6 s 94B …. III.6 Kiwisaver Act 2006 s 67 …. III.8 ss 231–232 …. III.8 Sch 3 …. III.8 Layby Sales Act 1971 …. III.8 Modern Apprenticeship Training Act 2000 …. III.8 Personal Property Securities Act 1999 …. I.1, II.4, III.4, III.8 s 16 …. III.8 s 17 …. II.4, III.8 s 17(1) …. III.8 s 17(3) …. III.8 s 66 …. III.8 s 66(a) …. III.8 ss 73-75A …. III.8 s 74 …. III.8 s 75 …. III.8

s 191 …. III.8 Sch 1 …. III.8 Personal Property Securities Amendment Act 2001 s 13 …. III.8 Sch …. III.8 Property Law Act 1952 s 60 …. II.4 Property Law Act 2007 …. II.4 ss 344-350 …. III.6 Radiocommunications Act 1989 …. III.8 Receiverships Act 1993 …. I.1, III.2, III.4, III.8, IV.1, IV.2, IV.3, VI.1, VI.2, VI.3 s 2(1) …. V.4 s 5 …. VI.2 s 18(2) …. III.4 s 18(3) …. III.4 s 30 …. III.8, IV.3 s 30(1)(b) …. IV.3 s 30(1)(c) …. IV.3 s 30(2) …. IV.3 s 30(2)(b) …. IV.2 s 30(2A) …. IV.3 s 30(3) …. IV.2 s 30(3)(d) …. IV.2 s 30(3)(e) …. IV.2 s 32 …. III.4, III.6 s 32(1) …. III.6

s 32(1)(b) …. IV.2 s 32(3) …. IV.2 s 32(9) …. IV.2 s 32(10) …. IV.2 Reserve Bank of New Zealand Act 1989 …. III.4, V.2, V.4 s 117 …. III.4 Student Loan Scheme Act 1992 s 25 …. III.8 Tax Administration Act 1994 s 167(2) …. III.8 Taxation (International Taxation, Life Insurance and Remedial Matters) Act 2009 s 862 …. III.8 Telecommunications Act …. III.8 Trans-Tasman Mutual Recognition Act 1997 …. III.6 Workers Compensation Act 1956 …. III.8

Australia Bankruptcy Act 1966 s 109 …. III.8 s 122 …. III.6 Corporate Law Reform Act 1992 …. III.4 Corporations Act 2001 Pt 5.1 …. III.4 Pt 5.3A …. III.4, III.5 s 411(4) …. III.4 s 435A …. III.4

s 436A …. III.4 s 436E(1) …. III.4 s 436E(2) …. III.4 s 439A(5) …. III.4 s 439B(2) …. III.4 s 447A …. III.4, III.5 s 482(1A) …. III.5 s 564 …. III.8 ss 571–579L …. III.5 s 580 …. V.6 s 581 …. V.6 s 588FA …. III.6 s 588FA(3) …. III.6 s 588H …. III.4 s 600A …. III.4, III.6 Corporations Amendment (Insolvency) Act 2007 …. III.4 Corporations Regulations 2001 reg 5.6.21 …. III.4 reg 5.6.21(2) …. III.4 Cross-Border Insolvency Act 2008 …. I.1, V.1, VI.2 Income Tax Assessment Act 1936 s 222AGB …. III.8 s 222AHA …. III.8 s 222AOB …. III.8 Insolvency (Tax Priorities) Legislation Amendment Act 1993 …. III.8 Tax Laws Amendment (2011 Measures No 8) Act 2011 …. III.8

Canada Bankruptcy and Insolvency Act 1985, c B-3 …. III.4 s 50 …. III.4 s 50.4 …. III.4 s 69 …. III.4 s 69.1 …. III.4 s 245 …. III.4 Companies’ Creditors Arrangements Act 1985, c C-36 …. III.4 s 3 …. III.4

International European Community Regulation on Insolvency Proceedings 2002 …. V.1 European Insolvency Regulation 2000 art 6(1) …. V.4 art 26 …. V.4 International Labour Organisation Protection of Workers Claims (Employers Insolvency) Convention 1992 …. III.8 Montevideo Treaties …. V.1 Nordic Convention …. V.1 United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency 1997 …. I.1, III.1, V.1, V.2, V.4, V.5, V.6 art 1 …. V.1, V.2 art 2 …. V.5 art 7 …. V.2 art 8 …. V.3 art 16(3) …. V.4 art 19 …. V.5 art 20 …. V.5

art 22 …. V.2 art 23(3) …. II.4 arts 25-27 …. V.5

United Kingdom Bankruptcy Act 1914 …. II.4, III.6 Companies Act 1985 s 425 …. III.4 Cross-Border Insolvency Regulations 2006 …. V.1 Enterprise Act 2002 s 248 …. III.8 s 250 …. III.4 s 251 …. III.8 s 276A …. III.8 Sch B6 …. III.8 Insolvency Act 1986 s 8 …. III.8 s 72A …. III.4 s 216 …. III.7 s 217 …. III.7 s 426 …. V.2, V.6 Insolvency Rules 1986 rr 4.228-4.230 …. III.7

United States of America Bankruptcy Abuse Prevention and Consumer Protection Act 2005 s 256 …. V.1

Bankruptcy Code Ch 11 …. V.4, V.5 Ch 15 …. V.1, V.2, V.4 §304 …. V.1 §1501 …. V.1

Table of Concordance All references in the right-hand column of the table are to the Insolvency Act 1967 unless otherwise indicated. In some instances provisions in the Insolvency Act 2006 have been derived from the Companies Act 1993. References to Companies Act 1993 are cited as CA 1993. Insolvency Act 2006 Section Part 1 Interpretation and scope s 3 s 4 s 5 s 6 Part 2 Nature of bankruptcy, and process of being made bankrupt Subpart 1 Bankruptcy and its alternatives s 7 s 8 Subpart 2 Process of being made bankrupt s 9 s 10 s 11 s 12 s 13 s 14 s 15 s 16 s 17 s 18

Insolvency Act 1967 Section s 2 s 3(1), (2), (3) s 4 s 168

New New New New New New s 23 s 25 s 26(10) New s 19(1)(d), (2) s 19(1)(a)

s 19 s 20 s 21 s 22 s 23

s 19(1)(b) s 19(1)(c) s 19(1)(c) s 19(1)(e) s 19(1)(f)

s 24 s 25 s 26 s 27 s 28 s 29 s 30 s 31 s 32 s 33 s 34 s 35 s 36 s 37 s 38 s 39 s 40 s 41 s 42 s 43 s 44 s 45 s 46 s 47 s 48

s 19(1)(g) s 19(1)(h) s 19(1)(i) s 19(1)(j) s 19(1)(k) s 19(2), 20(a) s 20(b) s 24(1) s 24(2) s 24(2) s 24(5) s 24(4) s 26(1) s 26(2) s 26(7) s 26(6) s 26(8) s 26(3) s 26(4) s 26(5) s 26(9) New New s 21 s 22

s 49 Subpart 3 Appointment of receiver s 50 s 51 s 52

New

s 53 s 54 Subpart 4 Adjudication s 55 s 56 s 57 s 58 s 59 s 60 s 61 s 62 Subpart 5 What happens on adjudication s 63 s 64 s 65 s 66 s 67 s 68 s 69 s 70 s 71 s 72 s 73 s 74 s 75

s 27(3) s 24(3)

s 27 s 27(2) s 27(3)

New s 28 s 28A New New New s 30 New New New s 31 New s 33 s 33(1) New s 33(2) s 34(1), (2) s 34(1) s 34A s 34A s 35

s 76 s 77 s 78 Subpart 6 Role of Creditors s 79

s 32 s 50(5) s 137

s 80 s 81 s 82 s 83 s 84 s 85 s 86 s 87 s 88 s 89 s 90 s 91 s 92 s 93 s 94 s 95 s 96 s 97 s 98 s 99 s 100 Part 3 Dealing with bankrupt and bankrupt’s property Subpart 1 Status of bankrupt’s property s 101

New s 36 s 40(6) s 37(1) s 37(3) s 37(4) New s 37(2) s 37(5) s 37(6) s 38 s 39 s 40(1) New New s 40(2) s 40(3) s 40(4) s 40(5) s 41(1), (2) s 131

New

s 42(1), (2)

s 102 s 103 s 104 s 105 s 106

s 42(2) s 42(1) s 42(3) s 42(5) s 45A

s 107 s 108 s 109 s 110 s 111 s 112 s 113 s 114 s 115 s 116 s 117 s 118 s 119 s 120 s 121 s 122 s 123 s 124 s 125 s 126 s 127 s 128 s 129 s 130 s 131

s 45B s 50(1), (2), (6) s 50(3) s 50(4) s 50(7) s 50(8) s 49(1)(a), (3), (4) s 49(1)(b) s 50(2) s 49(2) CA 1993, s 269(1), (2), (4) CA 1993, s 269(3) CA 1993, s 269(5), (6) CA 1993, s 270 s 79 s 80(1), (2) s 80(3) s 74(1), (2), (3) s 78(1) s 78(3) s 78(4), (5), (6) s 78(7) s 91(1) s 91(2), (3) s 91(4)

s 132

s 91(5)

s 133 s 134 s 135 s 136

s 91(6) s 59(1)(a),(b),(2) s 59(1)(c) s 82(1)

s 137 Subpart 2 Duties of bankrupt s 138 s 139 s 140 s 141 s 142 s 143 s 144 s 145 s 146 Subpart 3 Control over bankrupt during bankruptcy s 147 s 148 s 149 s 150 s 151 s 152 s 153 s 154 s 155 s 156 s 157 Subpart 4 Provision for bankrupt during

s 82(1) s 60 s 60(b) s 60(e), (f) s 60(d) s 61(1) s 60(a) s 60(c) s 60(g) s 61

s 45 s 46 s 62 s 65(2) s 65(1) s 66 s 131 s 44(a) s 44(b) s 49(5) New

bankruptcy s 158 s 159 s 160 s 161

s 52(1) s 52(2) s 52(1) s 52(1)

s 162 s 163 s 164 Subpart 5 Powers of Assignee and Court to examine bankrupt and others s 165 s 166 s 167 s 168 s 169 s 170 s 171 s 172 s 173 s 174 s 175 s 176 s 177 s 178 s 179 s 180 s 181 s 182 s 183 s 184

s 52(3) s 53(1) s 53(2), (3)

s 68(1), (2) s 68(3)–(5) s 68(6) New s 68(7) s 68(8) s 68A s 73 s 69(1) s 69(1), (2) s 69(1) s 69(3) s 69(4), (5) s 69(6) s 69(7) ss 68(4), (5), 69(8) ss 68(6), 69(8) s 74(4) s 74(4) s 70(1)

s 185

s 70(2)

s 186 Subpart 6 Status of bankrupt’s contracts

s 70(3)

s 187 s 188 s 189

s 76(1) s 77 s 48

s 190 s 191 Subpart 7 Irregular transactions before adjudication s 192 s 193 s 194 s 195 s 196 s 197 s 198 s 199 s 200 s 201 s 202 s 203 s 204 s 205 s 206 s 207 s 208 s 209 s 210

s 130 s 12

New New New s 56(1), (2) New New s 57(1) s 57(2)(a) New s 57(2)(b) s 57(3) s 57(4)(a) s 54(2) s 54(1) s 58(1) s 58(2)–(4) s 58(6) New s 58(7)

s 211 s 212 s 213 s 214 s 215

CA 1993, s 297(1) CA 1993, s 297(1) s 55(1) s 55(2)(a)(b), 55(3)(a)(b) s 55(2)(c)

s 216 Subpart 8 Role and powers of Assignee s 217 s 218 s 219 s 220 s 221 s 222 s 223 s 224 s 225 s 226 s 227 s 228 s 229 s 230 Subpart 9 Creditors’ claims s 231 s 232 s 233 s 234 s 235 s 236 s 237 s 238

s 55(4) s 71 s 72(4) s 72(5) s 81 New s 82(2) New s 84 s 85 s 86 s 132(1), (2) s 132(2)–(5) s 132A s 136 New s 87 s 88(1), (2), (3), (5) s 89(1) s 89(3) s 89(2) s 89(6) s 89(5)

s 239 s 240 s 241 s 242 s 243

s 89(4) s 89(7) s 89(8), (9) s 89(10) CA 1993, s 305(1), (2)

s 244 s 245 s 246 s 247 s 248 s 249 s 250 s 251 s 252 s 253 s 254 s 255 s 256 s 257 s 258 s 259 s 260 s 261 s 262 s 263 s 264 s 265 s 266 s 267 s 268

CA 1993, s 305(8), (9) CA 1993, s 254(a) CA 1993, s 305(3) CA 1993, s 305(4), (5) CA 1993, s 305(11) CA 1993, s 305(6), (7) CA 1993, s 305(10) s 98; CA 1993, s 307(1) s 99(1); CA 1993, s 307(2) s 95; CA 1993, s 309 s 93; CA 1993, s 310(1) s 93A s 93B s 93C s 93D s 93E s 93F s 93G s 93H s 93I(1)(a)(b) CA 1993, s 311(1) CA 1993, s 311(2) s 94; CA 1993, s 311(3) s CA 1993, s 311(4) s 92

s 269 s 270 s 271 s 272 Subpart 10 Distribution of assets

s 96 s 100 ss 101(1), 102 s 103

s 273 s 274

CA 1993, ss 312, 313 s 104(1); CA 1993, Sch 7 cls 1-5 CA 1993, Sch 7 cls 9, 10 s 104(1A), (1B), (3); CA 1993, Sch 7 cls 6, 6A, 12 CA 1993, Sch 7 cl 7 CA 1993, Sch 7 cl 11 s 106 CA 1993, s 313(1)-(3) CA 1993, s 313(4) s 134(1) s 134(1) s 134(1), (2), (7) s 134(3) s 134(4)-(6) s 134(5) s 134(6) s 134(7), (8)

s 275 s 276 s 277 s 278 s 279 s 280 s 281 s 282 s 283 s 284 s 285 s 286 s 287 s 288 s 289 Part 4 End of bankruptcy Subpart 1 Discharge from bankruptcy s 290 s 291 s 292 s 293

s 107(1), (2), (6) s 107(7) s 107(3) s 107(4), (5)

s 294 s 295 s 296

s 108 s 109(1), (3) s 109(2)

s 297

s 109(4)

s 298 s 299 s 300

s 110(1), (3) s 111 s 112(1)

s 301 s 302 s 303 s 304 s 305 s 306 s 307 s 308 Subpart 2 Annulment s 309 s 310 s 311 Part 5 Compositions, proposals, summary instalment orders, and no asset procedure Subpart 1 Composition during bankruptcy s 312 s 313 s 314 s 315 s 316 s 317 s 318 s 319

s 112(1), (2) s 112(3) s 113 s 114 s 115 s 116 s 117 s 118(1) s 119 New s 120

ss 121(1), 125(3) s 121(2)–(4) s 125(2) s 122(3)–(5), (7) s 122(1), (2), (6) ss 123(1), (2), 125(5) s 123(2) s 125(4)

s 320 s 321 s 322

s 125(1) s 123(3), (4) s 124(1), (2)

s 323 s 324

s 124(3), (4) s 124(5)

Subpart 2 Proposals s 325 s 326 s 327 s 328 s 329 s 330 s 331 s 332 s 333 s 334 s 335 s 336 s 337 s 338 s 339 Subpart 3 Summary instalment orders s 340 s 341 s 342 s 343 s 344 s 345

s 139 s 140(1)–(3) s 140(4), (5) s 140(6)–(8) s 141(1) s 141(2), (3) s 142 New s 143(1)–(4), (6); CA 1993, s 234(c) s 143(5), (7) s 144(1) s 143(8) s 144(2) s 144(3) s 145 s 146(4) s 146(1) s 146(2) s 146(4), (13) s 146(8), (9) s 146(5)–(7)

s 346 s 347 s 348 s 349 s 350

New New New s 146(12) s 146(14)

s 351 s 352 s 353 s 354 s 355 s 356 s 357 s 358 s 359 s 360 Subpart 4 No asset procedure s 361 s 362 s 363 s 364 s 365 s 366 s 367 s 368 s 369 s 370 s 371 s 372 s 373 s 374

s 146(11) s 148 s 147(a) New New s 147(b)–(d) s 146(10) s 149 s 150 s 151 New New New New New New New New New New s 151 New New New

s 375 s 376 s 377 s 377A s 377B Part 6 Insolvent deceased estates s 378 s 379 s 380 s 381 s 382 s 383 s 384 s 385 s 386 s 387 s 388 s 389 s 390 s 391 s 392 s 393 s 394 s 395 s 396 s 397 s 398 Part 7 Offences and miscellaneous provisions Subpart 1 The assignee s 399

New New New New New s 153 New s 154 s 155 s 156 s 157(2) s 157(1) s 158 s 160 s 159(1) s 159(1) s 159(2) s 159(4) s 162(1) s 162(1)(a) s 162(1)(b), (2) s 162(1)(c), (3) s 162(1)(d) s 162(1)(e), (f) s 162(1)(g) s 163

s 15

s 400 s 401 s 402 s 403 s 404

s 16 s 17 New s 18(1) s 18(3)

s 405 s 406 s 407 s 408 s 409 s 410 Subpart 2 The Court s 411 s 412 s 413 s 414 s 415 s 416 s 417 s 418 Subpart 3 Offences by bankrupt s 419 s 420 s 421 s 422 s 423 s 424 s 425 s 426 s 427

s 138 s 166 s 166A s 133 s 133(5), (6) s 133(7) s 5(1) s 5(2) s 6 s 8 s 9(1) s 9(2)-(4) s 10 s 11 ss 126(1)(a)(c), 126(2) s 126(1)(b), (g) s 126(1)(e) s 126(1)(f)(i)–(iv) s 126(1)(h) s 126(1)(i) s 126(1)(i) s 126(1)(k) New

s 428 s 429 s 430 s 431 s 432

New s 127(1) s 127(2) New s 127(3), (4)

s 433 s 434 s 435 s 436 s 437 s 438 s 439 Subpart 4 Miscellaneous provisions s 440 s 441 s 442 s 443 s 444 s 445 s 445A Subpart 5 Public registers s 446 s 447 s 448 s 449 s 449A s 450 s 451 s 452 s 453

s 128(1), (2) s 128(1)(g) s 128(1) s 128A New s 129 s 129(2) s 164 s 14 s 13 New New New New New New New New New New New New New

s 454 s 455 s 456 s 457

New New New New

Table of Contents Preface Preface to First Edition Table of Cases Table of Statutes Table of Concordance PART 1 Guide and Commentary I I.1

INTRODUCTION Introduction

II II.1 II.2 II.3

INSOLVENCY ACT 2006 Introduction Dual regime retained Overview of procedures available under the Insolvency Act 2006 Bankruptcy (a) Debtor’s application for adjudication (b) Creditor’s application (c) Modernisation of creditors’ meetings (d) Property of the bankrupt (i) Doctrine of relation back (ii) Property of the estate: generally (iii) After-acquired property (iv) Property not passing to the Assignee (e) Irregular transactions (i) Preferences/insolvent transactions (ii) Voidable charges

II.4

II.5

II.6 III III.1 III.2 III.3 III.4

(iii) Transfers at undervalue and gifts (iv) Other irregular transactions (v) Procedure for cancelling irregular transactions (vi) Defences (f) Distribution of assets (g) Discharge (h) Annulment Alternatives to bankruptcy (a) Introduction (b) Proposals (i) Reasonableness (ii) Expedient (c) Summary instalment orders (d) No-asset procedure (i) Entry criteria (ii) Disqualification of debtor from entry into noasset procedure (iii) Effect of entry to no-asset procedure on creditors (iv) Effect of no-asset proceeding on debtor (v) Termination (vi) Discharge Public register COMPANIES AMENDMENT ACT 2006 History and commencement Effect of the Companies Amendment Act 2006 Interpretation provisions Voluntary administration (a) Background to reform proposal (b) Relationship with other procedures (i) Liquidation and receivership

(ii)

III.5

III.6

Statutory management

(iii) Part 14 compromises (iv) Part 15 schemes of arrangement (v) Summary (c) Structure of legislation (d) Overview and objects of voluntary administration (e) Commencement (f) The effect of administration and the moratorium (g) First meeting of creditors (i) Overview (ii) Replacement of administrator (iii) Voting at creditors’ meetings (h) Status, duties, and liabilities of administrator (i) “Watershed” meeting (i) Overview (ii) Outcomes of watershed meeting The deed of company arrangement (a) Overview (b) Termination of voluntary administration (c) Variation and termination of DOCA (d) The role of the court (e) Relationship with liquidation (f) Key differences from Australian voluntary administration legislation (i) Joint meetings (ii) Pooling Liquidation (a) Restricting commencement of voluntary liquidation (b) Reporting to creditors (c) Assignment of liquidator’s right to sue (d) Liquidator’s disclaimer of litigation rights

(e) (f)

III.7

III.8

Related entity voting

Qualifications and supervision of liquidators and administrators (g) Prohibition orders (h) Voidable transactions (i) History (ii) Harmonisation with personal insolvency (iii) Time periods (iv) Transactions having preferential effect (v) Procedure for setting aside (vi) Defence to liquidator recovery actions (vii) Relief (viii) Transactions at an undervalue Director liability (a) Carrying on business fraudulently — a new offence (b) Phoenix companies (i) Overview (ii) Definition of “phoenix company” (iii) Involvement in a phoenix company Preferential claims (a) Introduction (i) Policy grounds for priority claims (ii) Crown claims (b) Fees, expenses, and remuneration (c) Employees (i) Changes made in the Companies Amendment Act 2004 (ii) Changes made in the Companies Amendment Act 2006 (d) Residual category (e) Layby sales and compromise meeting or proposals

(f)

under Part 14 Crown claims

(g) (h) (i)

Subrogation Subordination of secured debt to preferential claims Transitional provisions

IV IV.1 IV.2 IV.3 IV.4 IV.5

RECEIVERSHIPS ACT 1993 Introduction Preferential debt of employees Subordination of secured debt to preferential claims Voidable transactions by receivers Qualifications of receivers

V V.1 V.2 V.3 V.4 V.5 V.6

INSOLVENCY (CROSS-BORDER) ACT 2006 History Purpose and scope Interpretation Overview and definitions Procedures and relief Specified insolvency proceedings

VI VI.1 VI.2 VI.3

INSOLVENCY PRACTITIONERS BILL Introduction Proposed Register of insolvency practitioners Other proposed changes in the Bill

PART 2 Legislation Insolvency Act 2006 Companies Act 1993 Receiverships Act 1993 Insolvency (Cross-border) Act 2006

Appendix Insolvency Law Reform Consultation and Discussion Documents Index

[page 1]

PART 1 Guide and Commentary I II III IV V VI

Introduction Insolvency Act 2006 Companies Amendment Act 2006 Receiverships Act 1993 Insolvency (Cross-border) Act 2006 Insolvency Practitioners Bill

[page 3]

I INTRODUCTION I.1

Introduction

The Insolvency Act 2006, the Insolvency (Cross-border) Act 2006 and the Companies Amendment Act 2006 make significant changes to personal and corporate insolvency law. The Insolvency Act 2006 repealed the Insolvency Act 1967,1 and marked the completion of the first major review of personal insolvency law in nearly 40 years. The Insolvency (Cross-border) Act 2006 adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-border Insolvency. The Companies Amendment Act 2006 included major revisions and additions to the corporate insolvency aspects of the Companies Act 1993. Parliament had earlier reviewed some aspects of corporate insolvency law when it enacted the Companies Act 1993. However, “the major insolvency issues at that time, and that have arisen since, were deferred in anticipation of a comprehensive and coordinated review of both personal and corporate insolvency law”.2 The Ministry of Economic Development began its review of personal and corporate insolvency law in May 1999. The Ministry relied upon earlier Law Commission Reports, as well as its own consultation documents.3 From 2001 onwards, the ministry issued a series of consultation papers and identified several issues for reform. The government announced key policy decisions on the specific reform issues between November 2001 and February 2003,4 and released draft legislation in April 2004.5 The Insolvency Law Reform Bill was introduced into Parliament on 21 December 2005. The Commerce Committee approved (with some amendments) the omnibus Insolvency Law Reform Bill on 10 August 2006. By Supplementary Order Paper the Insolvency Law Reform Bill6 was divided into [page 4]

three separate Bills:7 the Companies Amendment Act 2006, which came into force on 1 November 2007;8 the Insolvency Act 2006, which came into force on 3 December 2007;9 and the Insolvency (Cross-border) Act 2006, which incorporated the UNCITRAL Model Law on Cross-Border Insolvency into New Zealand law. The Insolvency (Cross-border) Act 2006 came into force on 24 July 2008.10 The latter Act deliberately coincided with the commencement of the Cross-Border Insolvency Act 2008 (Cth), which had a similar effect in the Australian context.11 The new statutes are designed to achieve five objectives as outlined in the Explanatory Note to the original Insolvency Law Reform Bill. The legislation proposed to: (i)

provide a predictable and simple regime for financial failure that can be administered quickly and efficiently, imposes the minimum necessary compliance and regulatory costs on its users and does not stifle innovation, responsible risk taking, and entrepreneurialism by excessively penalising business failure;

(ii) distribute the proceeds to creditors in accordance with their relative pre-insolvency entitlements, unless it can be shown that the public interest in providing greater protection to one or more creditors outweighs the economic and social costs of any such priority; (iii) maximise the return to creditors by providing flexible and effective methods of insolvency administration and enforcement which encourage early intervention when financial distress becomes apparent; (iv) enable individuals in bankruptcy to participate again fully in the economic life of the community; and (v) promote international co-operation in relation to cross-border insolvency.12

In accordance with these goals, some of the amendments, to both the personal and corporate insolvency regimes, represented fundamental policy changes in New Zealand insolvency law. The Ministry of Economic Development had earlier identified bankruptcy procedure and corporate rescue as two of the most important review issues. The Ministry concluded that the “extent to which insolvency laws seek to rehabilitate insolvent persons or rescue businesses significantly shapes most other features of the law”.13 The new legislation addresses rehabilitation of individuals and companies. [page 5] For individuals in financial difficulty, an entirely new alternative to bankruptcy, the no-asset procedure, has been introduced. Its features, including a 12-month “discharge” period, makes this a popular procedure for insolvent

debtors.14 While the other main aspects of the 1967 regime remain in place, there are many other changes. Responsibility for many aspects of the administration of bankruptcy has been transferred from the High Court to the Official Assignee, and many procedural aspects of bankruptcy have been streamlined. Language and provisions have been modernised to make them more user-friendly. In the area of corporate insolvency, a new rescue regime, voluntary administration, was adopted from Australian legislation, as Part 15A of the Companies Act 1993. The voluntary administration regime has proved very popular in Australia, quickly becoming the main formal avenue for dealing with corporate distress. Similar procedures have been adopted in other jurisdictions, for example, the United Kingdom. It requires New Zealand lawyers, accountants and creditors to understand new concepts, but also to take a new approach — although fortunately with the assistance of Australian experience. In corporate insolvency, there was also the important amendment of voidable transactions law. Some Australian provisions were adopted, and there has been a clarification of the position of receivers who enter into or execute transactions which might otherwise be challenged as having preferential effect. There are new concepts and duties in the area of directors’ liability, with the introduction of provisions regarding “phoenix companies”, and the accountability and qualification of liquidators and other insolvency practitioners has been strengthened. The categories of preferential creditor have been rationalised and some harmonisation with the Receiverships Act 1993 and Personal Property Securities Act 1999 has occurred. The opportunity has also been taken to clarify the impact of the preferential creditor regime on employment contracts in receiverships. Despite strong submissions, the preferential creditor status of the Inland Revenue for certain tax debts has not been removed. This differs from the position in many other jurisdictions such as the United Kingdom and Australia, and many commentators, including the National Party who opposed the Bill for this reason, argue that this will significantly reduce the value of the new voluntary administration regime.15 With regard to both personal and corporate insolvency, the Insolvency (Crossborder) Act 2006 provides for the adoption of the UNCITRAL Model Law on Cross-Border Insolvency. This enables New Zealand insolvencies, or foreign insolvencies impacting on New Zealand, to take place within

[page 6] an international framework of cooperation with one main insolvency proceeding. Major trading partners are expected to continue to accede to this by incorporation into their domestic law. The United States and the United Kingdom have already done so, and many other States are proposing to follow in the near future. This Model Law provides a framework which is flexible enough for New Zealand courts to protect important principles of local law such as revenue law, and also allows for greater cooperation with specified countries, such as Australia, in the future. Where possible, the Insolvency Act 2006 and Companies Amendment Act 2006 also harmonise the language, provisions, and concepts of personal and corporate insolvency, for example, in the area of voidable transactions. While Regulations followed,16 the framework set down in these Acts was not affected by the detail in the Regulations. In addition, the government issued a consultation paper in October 2006 on Insolvency Practitioner Regulation, and an Insolvency Practitioners Bill 2010 was introduced into Parliament, and subsequently revised. At the time of writing this edition, it is awaiting a Second Reading. A summary of the Bill can be found in Part VI at the end of this Commentary. However, if enacted, the Bill will have minimal impact on the substantive provisions in the 2006 Acts outside of the qualifications for insolvency practitioners. The Commentary which follows seeks to provide an overview of the 2006 legislation. It is not possible, in the space provided, to discuss each of the amendments in detail. To assist in the understanding of the amendments, where relevant, reference will be made to the consultation documents that gave rise to the particular amendments. Part II of this book deals with the significant changes found in the Insolvency Act 2006. Part III addresses the Companies Amendment Act 2006. Part IV examines the consequent amendments to the Receiverships Act 1993. Part V contains a discussion of the Insolvency (Cross-border) Act 2006. The Guide and Commentary concludes with an overview of the pending Insolvency Practitioners Bill in Part VI.

[page 7]

II INSOLVENCY ACT 2006 II.1 Introduction The Explanatory Note to the Insolvency Law Reform Bill claims that many of the new provisions relating to personal insolvency “do no more than restate, reorganise, reorder, simplify, and modify those provisions without any intention of altering the substantive law”.17 Many provisions in the Insolvency Act 1967 (the 1967 Act) have been carried forward into the new Insolvency Act 2006 (the 2006 Act). While the 457-section Insolvency Act 2006 might seem daunting to those used to the older 171-section statute, the length of the new statute can partly be attributed to a new drafting style. Parliament took the opportunity to make the 2006 Act more accessible and readable by breaking down lengthy sections of the 1967 Act into smaller sections and subsections. Therefore, readers used to working with the Insolvency Act 1967 will find familiar material in the Insolvency Act 2006.18 There are many important matters which remain the same. For example, the monopoly on the administration of bankrupt estates long held by the Official Assignee has not changed. Despite the Law Commission’s recommendation19 that this monopoly should come to an end, the government concluded that the “interests of the debtor are better observed by the state than by the private sector, primarily because the Official Assignee is not profit driven”.20 However, the Insolvency Act 2006 did much more than restate and reorder the 1967 Act. Numerous changes reflected a new policy direction. The government signalled that the 2006 Act represents both a modernisation and an improvement in the bankruptcy process. The 2006 Act provides a modern framework that takes into account the more recent problems of consumer indebtedness. Since the last review of insolvency legislation in the 1960s, the number of consumer bankrupts has surpassed the number of business bankrupts.21 [page 8]

The Ministry of Economic Development recognised that the changing profile of the “typical bankrupt” meant that the Insolvency Act 1967 was no longer appropriate for the large number of consumer debtors.22 The government acknowledged that the Insolvency Act 1967 was “outdated, inflexible, and administratively inefficient”.23 The 1967 Act did “not reflect modern international practices in relation to personal bankruptcy”.24 Perhaps the most significant change was the introduction of a no-asset procedure as an alternative to personal bankruptcy. The 2006 Act also shifted a number of responsibilities from the High Court to the Official Assignee. The office of the Official Assignee now plays a much larger role in individual bankruptcies and alternatives to bankruptcy.25 In part, these changes to the role of the Official Assignee reflect more modern practices in relation to personal bankruptcy and alternatives to bankruptcy. These changes are discussed in more detail below.

II.2 Dual regime retained While other jurisdictions have opted to administer personal and corporate insolvency law within one statute, New Zealand long retained a dual statutory regime. In the wake of the insolvency law review, the Law Commission was asked by the Ministry of Economic Development to consider whether it was appropriate to enact a single statute to deal with all insolvency regimes. In its 2001 Report, Insolvency Law Reform: Promoting Trust and Confidence, the Law Commission identified several advantages and disadvantages of a single insolvency statute. The Law Commission concluded that the advantages outweighed the disadvantages. The “collection of all insolvency law under one umbrella statute has appeal: such a statute is likely to promote both accessibility to, and comprehension of, the law”.26 Notwithstanding the Law Commission’s recommendation, the government opted to implement insolvency reform through a dual statutory regime for personal and corporate insolvency law. The government reasoned that a “single statute would be large and complex, with a superficial semblance of [page 9]

order”.27 Section 6 of the Insolvency Act 2006 excludes corporations from bankruptcy and the alternatives to bankruptcy. Insolvent companies continue to be governed by the Companies Act 1993, as amended by the Companies Amendment Act 2006.

II.3 Overview of procedures available under the Insolvency Act 2006 The Insolvency Act 2006 retains the traditional framework of both voluntary and involuntary procedures to make a debtor bankrupt. Insolvent debtors may avoid bankruptcy by using one of three alternatives to bankruptcy: (a) Making a proposal to creditors; (b) Paying creditors in instalments under a summary instalment order; or (c) Entering into the no-asset procedure.28 Significant changes have been made to summary instalment orders and the no asset procedure is new. Bankruptcy and alternatives to bankruptcy are discussed below.

II.4 Bankruptcy The basic structure of bankruptcy has been retained in the 2006 Act. Justice Heath identified the purpose of the Insolvency Act 2006 as it relates to bankruptcy proceedings:29 The 2006 Act establishes a collective insolvency regime, designed to put the financial affairs of an insolvent debtor into the hands of an independent statutory officer (the Official Assignee) to realise his or her assets for distribution to all of the debtor’s creditors, in accordance with statutory priorities.

Bankruptcy may be initiated either by a debtor or creditor, and a debtor is automatically discharged after a three-year period. Section 7 provides a guide to some of the familiar consequences of bankruptcy: [page 10]

7 Nature of bankruptcy (1) Bankruptcy affects the legal status of a person and has important consequences. These include — (a) the bankrupt’s property vests in the Official Assignee: (b) the bankrupt is limited in the business activities he or she can undertake: (c) the Official Assignee may be entitled to recover assets that the bankrupt has transferred before bankruptcy. (2) This section is intended only as a guide to the consequences of bankruptcy.30

(a)

Debtor’s application for adjudication

One of the most significant changes to bankruptcy procedure involves a debtor’s application for adjudication in bankruptcy. Under the Insolvency Act 1967 a debtor had to file a petition with the High Court to be adjudged bankrupt.31 In contrast, the new statute requires that the debtor make an application directly to the Official Assignee.32 However, before making an application for adjudication, the debtor must first file a statement of affairs in the prescribed form.33 Once a statement of affairs has been completed and lodged with the Official Assignee,34 a debtor may then file an application to have himself or herself adjudicated bankrupt if the debtor has combined debts of $1,000 or more.35 A debtor who files an application with the Assignee is automatically adjudicated bankrupt when the application is filed.36 The statement of affairs is an important innovation. Under the 1967 Act, there was no requirement on the debtor to complete this document prior to filing for bankruptcy. The new statement of affairs, which is completed prior to bankruptcy and not after, enables the Official Assignee to provide information to the debtor on the alternatives to bankruptcy.37 Under the 1967 Act, many [page 11] debtors may have filed a petition in the High Court without having received any information or advice on the alternatives to bankruptcy.38 The cost of filing for bankruptcy has long proved a problem for many jurisdictions. Insolvent debtors are unlikely to be able to afford any substantial filing fees. It is worth noting that the original version of the Insolvency Law Reform Bill required the debtor to pay a prescribed fee at the time of filing an

application for adjudication. Under the original version of the Bill, the Official Assignee could “waive the prescribed fee only on the ground of financial hardship to the debtor”.39 The Commerce Committee struck out the requirement for a filing fee. However, reg 7 of the 2007 Regulations clearly requires the payment of a $200 fee for making an application to the Official Assignee for automatic adjudication.40

(b)

Creditor’s application

The threshold level for filing a creditor’s application has been raised from $200 to $1,000.41 The $200 amount under the Insolvency Act 1967 was too easily reached. The $1,000 level brings the Insolvency Act 2006 into line with the Companies Act threshold.42 In addition to meeting the monetary threshold, the new statute still requires the creditor to prove that the debtor43 committed an act of bankruptcy within the three-month period before the filing of the application.44 The acts of bankruptcy have always been “collected in a rather disorganised mass by s 19 of the Insolvency Act 1967”.45 Richard Sutton suggests that acts of bankruptcy might be categorised into three main groups. The traditional first group includes attempts by the debtor to deliberately defeat creditors such as fraudulent conveyances and preferences, and absconding or concealing property. The second category includes situations where the debtor is openly insolvent such as giving notice to creditors of an intention to suspend payments. [page 12] The third category involves reliance on a procedure, such as the bankruptcy notice, which is designed to give the creditor “ready access to bankruptcy”.46 The three categories have been retained in the new Act. However, the sections have been reorganised, with the bankruptcy notice procedure given more prominence in heading the list of acts of bankruptcy. As before, the bankruptcy notice procedure is available to a creditor who has obtained final judgment or final order against the debtor for any amount.47 Such a judgment creditor is able to serve a bankruptcy notice on the debtor.48 The notice must require the debtor to:

(i)

pay the sum owing plus costs; or

(ii) give security for the amount owing that satisfies the Court or creditor; or (iii) compromise the amount owing on terms that satisfy the Court or the creditor.49

The debtor has ten working days after service in which to comply with the bankruptcy notice.50 The purpose of the bankruptcy notice is to “notify a debtor that a creditor may apply to the Court to adjudicate the debtor bankrupt”.51 A debtor who fails to comply with the bankruptcy notice or fails to satisfy the court that he or she “has a cross claim against the creditor” commits an act of bankruptcy.52 The debtor must show that “he has a genuine triable counterclaim, set-off or cross-demand” and “[t]hat it is such that he could not have set it up in the action in which the relevant judgment was obtained.”53 The remaining acts of bankruptcy from the Insolvency Act 1967 have been carried forward into the new legislation with some minor clarifications and modifications.54 On a creditor’s application, the court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established all of the required elements in [page 13] s 13.55 Further, under s 37 the court may, at its discretion, refuse to adjudicate the debtor bankrupt if: (a) the applicant creditor has not established the requirements set out in section 13; or (b) the debtor is able to pay his or her debts; or (c) it is just and equitable that the Court does not make an order of adjudication; or (d) for any other reason an order of adjudication should not be made.56

Section 37(b) means that the regime is “designed to deal only with insolvent debtors”. Where a debtor is able to pay debts a court may refuse to make the order of adjudication.57 In Slavich v Slavich58 the Court relied on Eide v Colonial Mutual Life Assurance Society Ltd which set out the scope of the Court’s discretion under s 37:59 1)

“A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made.” McHardy v Wilkins & Davies Mariners Ltd (Court of Appeal,

Wellington, CA 54/93, 7 April 1993) at p 3. 2)

“… in the exercise of the discretion under s 26 it is proper for the Court to consider not only the interests of those directly concerned — the petitioner, other creditors, the debtor — but also the wider public interest.” McHardy v Wilkins & Davies Mariners Ltd (supra) at p 3.

3)

In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public.” Re Nisbett, ex parte Vala [1934] GLR 553 at p 556.

4)

“… on a bankruptcy petition the Court must have regard to public interest in a way which transcends the interest of the immediate parties to the proceeding. … The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of the separate question of debt collection by his immediate creditors.” Re Fidow [1989] 2 NZLR 431 at p 444.

5)

Absence of assets is a factor but: “… even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be such that the debtor ought in the public interest to be visited with the disqualifications that go with bankruptcy.” McHardy v Wilkins & Davies Mariners Ltd (supra) at p 3.

[page 14] 6)

Another matter: “… is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means.” Re Fidow (supra) at p 444.

7)

There is a need: “… for the Court to balance the various considerations relevant to the case, and to determine whether in the end the debtor has succeeded in showing that an order ought not to be made”. McHardy v Wilkins & Davies Mariners Ltd (supra) at p 4.

In Perkins v Perkins Bell As J listed the following factors to be considered in the exercise of the court’s discretion under s 37:60 [a] The creditor’s entitlement to an order; [b] The wishes of the petitioner, the creditor or the debtor; [c] The public interest; [d] Whether such discretion is just and equitable; and [e] The ability of the debtor to pay his or her debts.61

In assessing s 37(c) and (d) the court should consider a number of relevant factors. First, it is important to ask whether the bankruptcy will serve a “practical purpose and assist in the promotion of commercial morality rather than simply being a barren exercise”. Secondly, if circumstances require investigation by the Official Assignee, then an order of adjudication is warranted. The actions of the judgment creditor are also relevant but if the court discovers that the proceedings have been initiated for “an oppressive, improper or collateral purpose” the court may refuse to make the bankruptcy order. Finally, “issues of public interest and in particular the promotion of commercial morality will always be relevant. A hallmark of commercial morality is always an expectation that a person who assumes an obligation will have the willingness and ability to meet that obligation.”62 [page 15]

(c)

Modernisation of creditors’ meetings

After adjudication of bankruptcy, the Official Assignee must call a first meeting of creditors.63 Gaining the interest of creditors to attend and participate in a meeting of creditors is a problem in most jurisdictions. The 2006 Act modernised the provisions relating to creditors’ meetings by permitting attendance either by being physically present or by means of an audio or audiovisual link so that all those participating in the meeting “can hear and be heard by each other”.64 However, there is no actual right under the 2006 Act to attend by electronic means. Attendance by this alternative method is only permitted where the Assignee makes an audio or audio-visual link available.65 The bankrupt may also attend creditors’ meetings by being physically present or by an audio or audio-visual link.66 The Insolvency Act 2006 permits creditor voting by a postal vote or by electronic vote, if the voting paper for the resolution allows it. A voting paper for each resolution must accompany the notice of the meeting together with instructions for the return of the voting paper or electronic vote. In any event, a “postal or electronic vote must reach the Assignee at least two working days before the meeting begins if it is to be counted at the meeting”.67

(d)

Property of the bankrupt

(i)

Doctrine of relation back

The Insolvency Act 2006 abolishes the doctrine of relation back. Historically, the doctrine of relation back, in its broadest terms, meant that once a debtor committed an act of bankruptcy, he or she came within the jurisdiction of the Bankruptcy Court even though formal adjudication did not take place until some time later. This had several consequences. The Assignee’s title related back in time to the earlier act of bankruptcy and deprived the debtor of the ability to deal with property. Third parties that dealt with the debtor during the period of relation back (the period between the commencement of bankruptcy and formal adjudication) were at risk of having the transaction being later set aside on the basis that the debtor had no title to the property.68 Section 42(2)(a) of the Insolvency Act 1967 provided that the property vesting in the Assignee comprises “[a]ll property whatsoever and wheresoever situated belonging to or vested in the bankrupt at the commencement of the [page 16] bankruptcy or acquired by or devolving upon him before his discharge” (emphasis added). Under the Insolvency Act 1967 the commencement of bankruptcy did not coincide with adjudication. Where the debtor was adjudged bankrupt on a creditor’s petition bankruptcy related back to and commenced at the time of the act of bankruptcy that the creditor relied upon to found the creditor’s petition. However, if the debtor committed more than one act of bankruptcy, bankruptcy related back to and commenced at the earliest act of bankruptcy within the three-month period prior to the creditor’s petition.69 In part, the doctrine of relation back addressed the potential for further fraudulent or wrongful conduct once a debtor had committed an act of bankruptcy. Relating the commencement of bankruptcy back to the earliest act of bankruptcy within a three-month period enabled the Official Assignee to challenge pre-bankruptcy transactions. However, there is a great deal of overlap between the doctrine of relation back and the law relating to pre-bankruptcy transactions. Writing in 1978, Richard Sutton questioned whether the relation back doctrine needed to be retained given that “there are now extensive provisions dealing with irresponsible transactions entered into by the bankrupt prior to bankruptcy”.70 The argument for abolition

is even stronger given the further modernisation of the pre-bankruptcy transaction provisions in the Insolvency Act 2006.71 These will be discussed below. The doctrine of relation back is abolished by s 55 of the Insolvency Act 2006 which simply provides: “The bankruptcy commences on the date and time when the debtor is adjudicated bankrupt.”72 Further, s 101 provides that on adjudication all property belonging to the bankruptcy vests in the Assignee. There is no earlier commencement of the bankruptcy and vesting of the property is as of the date of adjudication rather than any earlier period. The abolition of the doctrine of relation back is a welcome change from an antiquated concept that pre-dates the emergence of modern bankruptcy statutes.73 [page 17]

(ii)

Property of the estate: generally

On adjudication of bankruptcy, all property (whether in or outside New Zealand)74 belonging to the bankrupt vests in the Official Assignee.75 The scope of property is broad. A new definition of property was included to align the Insolvency Act 2006 with the Companies Act: Property means property of every kind, whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise.76

The property vests in the Assignee without the Assignee having to intervene or take another step in relation to the property. This non-intervention clause is similar to the clause in relation to after-acquired property and is explained below.

(iii) After-acquired property Property acquired by the bankrupt during the course of the bankruptcy (that is, between the commencement of bankruptcy and discharge),77 is known as afteracquired property. This form of property poses some unique problems for the Assignee as the bankrupt may not notify the Assignee of the existence of the property and may treat it as his or her own. A question arises whether a bankrupt has the authority to deal with the property before the Assignee intervenes.

Case law pre-dating the Insolvency Act 1967 suggested that before the Assignee intervenes, all transactions by the bankrupt with a bona fide third party in respect of after-acquired property are valid against the Assignee.78 Put another way, after-acquired property still vests in the Assignee, but the bankrupt has the ostensible authority to deal with the property until intervention.79 In Gough v Fraser,80 the Court of Appeal held that a bankrupt was competent to sue for recovery of after-acquired property unless and until the Assignee intervened to claim the benefit of the action for the general creditors. Furthermore, dicta in the later Court of Appeal case of Re Bertrand81 seem to [page 18] cast doubt on this, albeit without reference to Gough. The ruling in Gough also appeared to be inconsistent with the English approach in Re Pascoe,82 which makes it clear that the rule about the Assignee needing to intervene went to the issue of ostensible authority in relation to third parties, and did not affect the position between a bankrupt and the Assignee. Section 102 of the 2006 Act overcomes the difficulties that arose under the former law by providing that after-acquired property vests in the Assignee “without the Assignee having to intervene or take any step in relation to the property, and any rights of the bankrupt in the property are extinguished”. In any event s 113 will protect a third party who enters into a transaction with a bankrupt in relation to after-acquired property. The transaction will be valid against the Assignee if: (a) A [the other party to the transaction] deals with the bankrupt in good faith and for value; and (b) the transaction is completed without an intervention by the Assignee.

Similarly, executions against after-acquired property will be valid against the Assignee where the third party acted in good faith, the execution relates to a debt or liability incurred by the bankrupt after adjudication, and the execution is completed before intervention by the Assignee.83

(iv)

Property not passing to the Assignee

(A)

Protected income

Under the Insolvency Act 1967, post-adjudication income required to maintain the bankrupt and the bankrupt’s family to a reasonable standard did not pass to the Official Assignee.84 A portion of the debtor’s post-adjudication income will similarly be preserved under the Insolvency Act 2006.85 Although a portion of the debtor’s income may be set aside for reasonable personal or family use, the Assignee may require the bankrupt to contribute to the payment of the bankrupt’s debts. The old requirement to pay the Official Assignee under s 45 of the Insolvency Act 1967 was carried forward into s 147 of the Insolvency Act 2006. (B)

Disclaimer of onerous property

Although the effect of s 101 is to vest all of the bankrupt’s property in the Official Assignee, there may well be categories of property that the Assignee [page 19] would be “better off without”.86 Assets may be difficult to sell and the Assignee may incur expensive storage costs pending a sale that may never materialise. The Insolvency Act 1967 provided separate provisions in relation to the disclaimer of shares, contracts, and onerous property other than shares.87 The Insolvency Act 2006 simplifies the disclaimer procedure and has largely adopted the disclaimer provisions from the Companies Act. First, the right to disclaim is not subject to the 1967 Act requirement to disclaim within a 12month period from the date of adjudication.88 There is a broad right to disclaim onerous property, combined with a requirement to send written notice of the disclaimer “to every person whose rights are, to the Assignee’s knowledge, affected” by the disclaimer. Such notice must be sent within ten working days after the disclaimer.89 The 1967 Act obligation to file notice of disclaimer with the court90 does not appear in the 2006 Act, with the new statute requiring the more useful direct notice to affected parties. The new provisions presumably will impose a requirement on the Assignee to record that disclaimer has taken place, and when it took place. This will enable the Assignee to accurately give the required tenday notice to interested parties. The ability of interested parties to force the Assignee to make a decision on

disclaimer has been carried forward into the new statute.91 A “person whose rights would be affected by the disclaimer” may send the Assignee written notice requiring the Assignee to elect whether to disclaim the onerous property. The notice must specify a date not less than 20 working days after the Assignee has received the notice. If the Assignee does not disclaim within the valid notice period the right to disclaim is lost.92 The other significant change is found in an expanded definition of “onerous property”. All categories of onerous property are brought within s 117(4). Onerous property means: (i)

an unprofitable contract; or

(ii) property of the bankrupt that is unsaleable, or not readily saleable, or that may give rise to a liability to pay money or perform an onerous act; or (iii) a litigation right that, in the opinion of the Assignee, has no reasonable prospect of success or cannot reasonably be funded from the assets of the bankrupt’s estate.93

[page 20] The new definition of “onerous property” consolidates all categories of property, including shares, into one section.94 Further, the definition of onerous property includes the new category of an onerous “litigation right”. The Explanatory Note to the Insolvency Law Reform Bill suggests that the new category covers a litigation right that is “effectively worthless”, because either the litigation right has no reasonable prospect for success, or it cannot be reasonably funded from the assets of the bankrupt’s estate.95 However, a bankrupt may be interested in pursuing it. In Auckland CC v Glucina,96 it was held that a bankrupt had no standing to apply for disclaimed property, including a chose in action, to be vested in him, despite a change having been made in the Insolvency Act 1967 to suggest that a bankrupt could be the recipient of a court vesting order in respect of disclaimed property. The Insolvency Act 2006 now reverses the effect of that case. Section 119(2) expressly gives a bankrupt standing to apply for an order that disclaimed property be vested in, or delivered to, the bankrupt. But it is not entirely clear whether disclaimer of a litigation right leaves anything that could be vested in a bankrupt. Certainly Richardson P in Edmonds Judd v Official Assignee97 thought that disclaimer of a chose in action extinguished the chose. Thus, while the reversal of Glucina in the 2006 Act will give a bankrupt express standing to

apply for disclaimed choses in possession to be vested in him or her, the effect of disclaimer98 would seem to prevent a bankrupt from having a cause of action, or other litigation right, vested in him or her. However, the Assignee can of course assign any chose in action or litigation right vested in the Assignee to the bankrupt. Nevertheless, the Assignee still has a duty to consider the merits before assigning or disclaiming any property, and could be open to challenge by the other party to litigation if the Assignee disclaims onerous property, or assigns a litigation right in order that a bankrupt might pursue it, without properly considering the merits, including the effect on the estate and on other affected parties.99 [page 21] The effect of disclaimer by the Assignee “brings to an end, at the date of the disclaimer, the rights and interests, and liabilities of the Assignee and the bankrupt in relation to the property disclaimed”.100 (C)

Exempt property

Outside of bankruptcy, the law has long sought to ameliorate the harsh results of the common law that permit the Sheriff to seize and sell all of the debtor’s personal goods and chattels that could be found with the exception of wearing apparel in actual use.101 The law has “refused to allow a debtor to be stripped of his personal chattels and his means of livelihood”.102 To this end the the District Courts Act 1947 preserves “necessary tools of trade to a value not exceeding $500 and his necessary household furniture and effects, including the wearing apparel of himself and his family, to a value not exceeding $2,000” as exempt property.103 The High Court Rules exempts “necessary tools of trade to a value not exceeding $5,000 and necessary household furniture and effects to a value not exceeding $10,000 (necessary household furniture and effects includes the clothes of the liable party and his or her family).”104 However, within the context of a bankruptcy, exemption policy takes on a more important role. Judgment enforcement remedies, which historically have been concerned with individual actions against the debtor, do not contemplate a discharge of the debtor’s liabilities. Bankruptcy proceedings, in addition to resolving all creditor claims, are concerned with the separate substantive policy

of the debtor’s fresh start. The bankrupt’s fresh start is linked to the notion that a debtor should be able to retain sufficient exempt assets to support the bankrupt and his or her dependants during the bankruptcy and to further the bankrupt’s rehabilitation following bankruptcy.105 The Insolvency Act 2006 makes a number of changes to the provisions dealing with exempt property. The changes to exemptions range from a more flexible time period in which to select the property, to the creation of a new category of exempt property and granting the Assignee much greater discretion in relation to the value of exempt property. [page 22] However, in at least one respect the Insolvency Act 2006 has retained a traditional approach to exemptions. The retention of assets by a bankrupt as exempt property does not affect the rights of secured creditors under a valid charge or hire purchase agreement in respect of the asset.106 Section 158 of the Insolvency Act 2006 no longer requires the bankrupt to select exempt property within a fixed time period. Section 52(1) of the Insolvency Act 1967 required the debtor to select exempt property within seven days immediately after the adjudication. Under the 1967 Act, it would appear that if the choice was not made within the seven days, or such further time as the Assignee allowed, arguably the bankrupt had waived the right to claim an exemption.107 Section 158 of the 2006 Act states a broad right to “choose and retain as the bankrupt’s own property” without affixing a time for when selection must be completed. Parliament has introduced a new and separate category of exempt property: “motor vehicles—$5000”.108 This new provision acknowledges the fact that for many bankrupts a modest motor vehicle is a basic necessity. A motor vehicle may also contribute towards the earning of further wages.109 Parliament has sought to ensure that the dollar value of the motor vehicle exemption remains current by providing that the $5,000 fixed amount may be increased by Order in Council “to take account of any rise in the all groups index number of the Consumer Price Index”.110 The motor vehicle exemption is the only category of exempt property that specifies a fixed value. Parliament has moved away from a fixed dollar value for

necessary tools of trade and household effects. The Insolvency Act 1967 provided for $500 tools of trade exemption and a $2,000 exemption for household effects.111 Under the 2006 Act, the maximum value of these two categories of exempt property “is a matter for the Assignee to decide”.112 For both tools of trade113 and household effects “the maximum value is fixed in the Assignee’s discretion”.114 This is a departure from the Insolvency Act 1967. Although the Assignee could determine under the 1967 Act whether the value of the selected tools, for example, amounted to $500, the Assignee did not have the discretion under the 1967 Act to fix a higher maximum value. [page 23] The shift to a more open-ended standard of Assignee discretion may have several advantages. While a fixed dollar amount has the advantage of providing certainty it is unable to accommodate individual circumstances in a flexible way. Providing the Assignee with a more open-ended discretionary power enables the Assignee to adapt the maximum values to the individual circumstances of the bankrupt and his or her family and dependants. It may allow, for example, an Assignee to permit a debtor to retain a household effect that is of high sentimental value to the debtor that may or may not necessarily be of high market value.115 Further, a fixed dollar amount may not reflect the cost of living of all regions in the country. Assignee discretion may lead to higher exemptions being granted in different parts of the country. While this might be advantageous in some instances, different and perhaps arbitrary practices may emerge leading to different exemptions being granted depending on where the bankrupt resides. The 2006 Act also recognises that exemptions are not just for the benefit of the bankrupt. The exemption for necessary household furniture and effects, including clothing, is for the bankrupt “and his or her relatives and dependants”.116 This is a much broader category of individuals than the household exemption under the 1967 Act, which was limited to the bankrupt, and the bankrupt’s “family”.117 The broader language has also been used in s 163, which permits an Official Assignee to provide for an allowance to the bankrupt, relative or dependent of the bankrupt for the support of the bankrupt, and his or her relatives and dependants.118 Finally, the Insolvency Act 2006 amended the dollar amount of the money that a bankrupt may retain from funds that a bankrupt has in his or her possession, or

in a bank account, at the time of adjudication. The new Act increases the maximum allowable amount from $400 to $1,000.119

(e)

Irregular transactions

Prior to bankruptcy an insolvent debtor may choose to prefer one creditor by making a payment in full to that creditor to the prejudice of all other creditors. Alternatively, the debtor may make a gift to a relation or friend. Bankruptcy law has long sought to redress voidable preferences and gifts by enabling the [page 24] Official Assignee to set aside these transactions for the benefit of creditors. As Duffy J states:120 The ability to unwind transactions that are suspected of preferring one or more of a bankrupt’s creditors at the cost of others is a fundamental feature of all insolvency legislation. Another such feature is the provision of means to prevent potential bankrupts from disposing of their property in a way that defeates the interests of their creditors, should bankruptcy eventuate.

Section 192(1) of the Insolvency Act 2006 sets out a list of six categories of “irregular transactions”: (a) an insolvent transaction: (b) an insolvent charge: (c) an insolvent gift: (d) a disposition of property to which subpart 6 of Part 6 (setting aside of dispositions that prejudice creditors) of the Property Law Act 2007 applies:121 (e) a transaction at undervalue: (f)

a contribution by the bankrupt to the property of another person.

Subpart 7 enables the Assignee to cancel the irregular transaction and “in appropriate cases … recover property or money from a party to an irregular transaction with the bankrupt”.122 This section highlights some of the significant changes in relation to irregular transactions.

(i)

Preferences/insolvent transactions

(A)

Introduction

Creating a workable voidable preference regime has never been an easy task. The problem is finding appropriate statutory language to differentiate between transactions that should be set aside and those that should be allowed to stand. Historically, bankruptcy law has focused on the debtor’s intention to prefer. The Insolvency Act 1967 adopted this approach and the focus of the inquiry was on the debtor’s conduct and whether the transaction was made with “a view to giving that creditor … a preference over the other creditors”.123 The words “with a view” imply “both an act of free will on the part of the insolvent, that is, free from pressure by others; and a dominant intent to prefer the creditor over others”.124 Under this approach [page 25] it was not enough that the creditor was in fact preferred. The sole focus of the inquiry is the debtor’s intention. Until 1 July 1994, personal and corporate insolvencies were both governed by intention-based regimes. A parallel intention provision was also in the Companies Act 1955. However, with the adoption of the Companies Act 1993 Parliament abandoned the intention to prefer test for corporate insolvencies and opted for a regime that focused on the effect of the transaction. The new test represented a shift in policy away from the debtor’s intention to the principle of equality.125 Under an equality-based regime the debtor’s intention is irrelevant. What matters more is whether the transaction has the effect of preferring one creditor over another. The Companies Act 1993 reforms, however, did not create an absolute preference regime. The 1993 Act created an exception for transactions in the ordinary course of business.126 Despite the introduction of a new model for corporate insolvencies, personal bankruptcies continued to be governed by the intention to prefer test under the unchanged Insolvency Act 1967. The 1967 Act was not revised in 1993 and so the voidable transactions provisions for personal insolvency continued to be based largely on the English Bankruptcy Act 1914. This created a dichotomy between the personal and corporate voidable preference regimes and the insolvency law review raised the question of whether the corporate and insolvency preference law should be harmonised.127

The Tier One Discussion Document recognised that proof of the debtor’s dominant intention often proved to be very difficult. The small number of cases decided under s 56 of the Insolvency Act 1967 “reflects the difficulty created by the interpretation of ‘intention’ in this section”.128 Further, the Discussion Document recognised that any test that relies upon the debtor’s intention was “at odds with the primary object of voidable preference law, which is to achieve equality between creditors”.129 Under the intention test a transaction may be allowed to stand even where it had the effect of preferring one creditor over another. The Discussion Document recognised that the shift to an effects-based regime in the corporate sphere was designed to remove any evidential difficulties associated with proving the debtor’s state of mind, and more [page 26] importantly, to ensure that transactions are set aside on a basis consistent with the equality principle. The Discussion Document recommended that voidable transactions in the Insolvency Act, like those in the Companies Act, be set aside on the basis of the effect of the transaction regardless of the intention or motive of the debtor or recipient of the transaction.130 Reform in this area was complicated by the fact that the Companies Act 1993 shift to an effects-based regime was not without its own problems. The creation of an ordinary course of business exception combined with presumptions favouring the liquidator generated a great deal of litigation and uncertainty.131 As discussed below in Part III on the Companies Amendment Act 2006, Parliament has now removed the “ordinary course of business” exception and enacted a new defence for creditors derived from Australian legislation. (B)

Insolvent transactions in the Insolvency Act 2006

Provisions dealing with voidable preferences have been entirely recast in the Insolvency Act 2006. First, they are now known as “insolvent transactions”.132 Further, Parliament has sought to harmonise the corporate and personal preference provisions. The Explanatory Note to the Insolvency Law Reform Bill states, “there is not intended to be a substantive difference between personal and corporate insolvency in the grounds for cancelling an insolvent transaction or setting aside a voidable transaction”.133 The Insolvency Act 2006 has abandoned

the old intention to prefer test in favour of an effects-based regime based on the Companies Act 1993. What becomes relevant is the question of whether the transaction “enables a creditor to receive more towards satisfaction of debt by the bankrupt than that person would receive, or would be likely receive, in the bankruptcy”.134 A transaction by the bankrupt may be cancelled by the Assignee if it is an insolvent transaction and made within two years immediately before adjudication.135 An insolvent transaction is defined both in relation to the preferential effect and the debtor’s inability to pay debts as they become due. Although the statute sets a primary review period of two years, a rebuttable [page 27] presumption of an inability to pay debts will arise if the transaction was within a six-month period before adjudication.136 Both the corporate and personal insolvency regimes are further aligned through the adoption of parallel provisions which enable a series of transactions to be treated as a single transaction or a continuing business relationship.137 Both regimes also now include a creditor defence derived from Australian law rather than an ordinary course of business exception.138 Further details on the continuing business relationship and the creditor defence are included in Part III below, on the Companies Amendment Act 2006.

(ii)

Voidable charges

“Voidable securities” in s 57 of the Insolvency Act 1967 became “voidable charges” under the 2006 Act.139 This standardised terminology with the Companies Act 1993. The substantive provision removed the word “security” from “security or charge”, which seems an odd thing to do considering that New Zealand now has the Personal Property Securities Act 1999.140 But the government clearly decided that it was more sensible to standardise the terminology as between corporate and personal insolvency by using the word “charge”. The time period has been changed from one year to two years,141 in line with the corporate change to s 293 of the Companies Act 1993 as amended by the Companies Amendment Act 2006. Other aspects of the main provision (see now

ss 198–199) have been harmonised with s 293 of the Companies Act. However, there are still important provisions of the old “voidable securities” provision that remain. First, there is an exemption for charges which, when given within two years prior to adjudication, secure the payment of unpaid purchase money for property, where the charge was given not more than 15 working days after the sale of the property to the bankrupt.142 [page 28] Secondly, s 202 of the Insolvency Act 2006 preserves the deemed appropriation provision. This effectively states that in calculating whether a charge secures money advanced or paid, payments by the bankrupt after the giving of the charge should be first credited to repayment of moneys secured by that charge.

(iii) Transfers at undervalue and gifts The transactions at undervalue provisions of s 297 of the Companies Act 1993 were incorporated into s 211 of the Insolvency Act 2006 and are harmonised. The transactions at undervalue provision, like its corporate counterpart, has a two-year time period.143 It should be noted that, as in the corporate case, an Official Assignee cannot use the cancellation procedure by notice, but must initiate proceedings to challenge a transaction at undervalue.144 Previously, there was no transactions at undervalue provision for bankruptcy. However, there were provisions relating to voidable gifts, and improvement by the bankrupt of the property of another. These separate provisions have been retained in amended form in ss 204 and 213 of the 2006 Act. Therefore, the transactions at an undervalue provision is additional, albeit overlapping with them. The voidable gifts provision has been substantially modified, however, since under the 1967 Act, it extended to the situation, effectively a transaction at undervalue, where the debtor “intended to make a gift of the difference”145 between the consideration given and received. Not only has reference to the debtor’s intention been removed, but the “insolvent gifts” provision (s 204) as amended by the Insolvency Amendment Act 2009146 now extends to “a gift by a bankrupt to another person … within 2 years immediately before adjudication”.

Such transaction may be cancelled on the Assignee’s initiative without the Assignee having to prove insolvency. The section operates as an automatic avoidance provision. Section 205, also amended by the Insolvency Amendment Act 2009,147 deals with a gift made in the period beginning two years immediately before adjudication and ending five years immediately before adjudication. If the gift was made in that time period and the bankrupt was unable to pay his or her debts the transaction may be cancelled by the Official Assignee. Section 205(2) sets out a presumption on the inability to pay debts: [page 29] A bankrupt is presumed to have been unable to pay his or her debts for the purpose of subsection (1)(b) unless the party claiming under the gift proves that the bankrupt was immediately after the making of the gift, or at any time after that up to his or her adjudication, able to pay his or her debts without the aid of the property that the gift is composed of.

(iv)

Other irregular transactions

The Insolvency Act 2006 also continues to govern contributions by the bankrupt to another person’s property.148 Finally, the 2006 Act includes a disposition of property to which subpart 6 of Part 6 (setting aside of dispositions that prejudice creditors) of the Property Law Act 2007 applies.149 Section 206 enables the Assignee to rely on the cancellation procedure (discussed below) to set aside such a transaction.150

(v)

Procedure for cancelling irregular transactions

An attempt has been made to harmonise the procedure for cancelling irregular transactions by the Official Assignee151 with the procedure in the Companies Act 1993 (as amended by the Companies Act 2006) for setting aside transactions having preferential effect and voidable charges. Section 206(1) of the Insolvency Act 2006 enables the Assignee to rely on a notice cancellation procedure for the following irregular transactions: (a) an insolvent transaction; (b) an insolvent charge; (c) an insolvent gift; (d) disposition of property to which subpart 6 of Part 6 (setting aside of dispositions that

prejudice creditors) of the Property Law Act 2007 applies.

Any of the above irregular transactions may be cancelled upon the Assignee filing notice with the court and serving notice on the other party to the transaction. Unless the Assignee receives a written notice of objection from the other party within 20 working days after the Assignee’s notice has been served, the transaction will be automatically cancelled.152 If there is no automatic cancellation an Assignee may apply to the court for an order of cancellation.153 The 1967 Act contained a notice procedure, which applied to voidable gifts, voidable securities (charges) and voidable preferences (insolvent [page 30] transactions). This was not identical with the corporate equivalent found in s 294 of the Companies Act 1993. The notice procedure in the 2006 Act is discussed in detail in Part III below, on the Companies Amendment Act 2006.

(vi)

Defences

The relief provision in s 58(6) of the Insolvency Act 1967 contained the same defence as the unamended s 296(3) of the Companies Act 1993, requiring alteration of position in circumstances where the court viewed it as inequitable to order recovery in favour of the Official Assignee. The Insolvency Act 2006154 and the Companies Act 1993, as amended by the Companies Amendment Act 2006, both provide for a harmonised creditor defence derived from the Australian legislation. If the defence is successful a court may not make an order requiring the re-transfer of the property to the Assignee or an order requiring the other party to pay a sum of money to the Assignee.155 The Insolvency Amendment Act 2009156 amends s 208(1)(b) to align it with the new provisions found in ss 204 and 205. However the essence of the defence remains the same and will be discussed in Part III below, on the Companies Amendment Act 2006.

(f)

Distribution of assets

The Law Commission in its report on priority debts recommended that “so far as

is practicable, the preferential debts for bankruptcy, receivership, and liquidation should be identical”.157 This recommendation was largely followed. The Companies Amendment Act 2006 repealed Schedule 7 to the Companies Act and substituted a new Schedule 7 which largely “mirrors the priority debt provisions”158 found in ss 274–279 of the Insolvency Act 2006. However, there were also important changes in Schedule 7 which affect bankruptcy. The reader will find a discussion of the priority distribution scheme under Schedule 7 and the Insolvency Act 2006 in Part III below. In addition, it is important to note that apart from the move to harmonise the priority schemes of the Insolvency Act 2006 with the Companies Act, there are other changes to the 2006 Act which sets it apart from the 1967 Act. For example, the category of a deferred claim for the wages and salary of spouses of the bankrupt, found in the 1967 Act,159 was not carried forward [page 31] into the 2006 Act. In addition, the 1967 Act eighth-ranking priority claim for interest from date of adjudication on all debts admitted in the bankruptcy160 is not a preferred claim in the 2006 Act. The maximum priority amount for preferntial claims for employees has been raised to $20,340.161 Finally, in a further effort to harmonise the Insolvency Act 2006 with the Companies Act 1993, the 2006 Act allows for the subordination of debt. If before adjudication a creditor agrees to accept a lower priority in respect of a debt than would otherwise have been the case under the statutory distribution scheme, nothing in s 280 of the 2006 Act prevents the agreement from having effect according to its terms.

(g)

Discharge

The Ministry of Economic Development identified the following objective of bankruptcy administration:162 Enabling individuals in bankruptcy again to participate fully in the economic life of the community by discharging them from their remaining debts in appropriate circumstances.

Under the Insolvency Act 1967, bankrupts received an automatic discharge after the expiry of three years from the date of adjudication. At that point in time a

bankrupt was entitled to a discharge unless there is opposition either from a creditor (with the consent of the court) or the Official Assignee.163 The 1967 Act permitted a bankrupt to apply for an early discharge before the end of the threeyear period.164 During the insolvency review the Ministry of Economic Development raised the question of whether the three-year discharge period was still appropriate. Its Tier One Discussion Document canvassed the options of whether a one- or a two-year period was suitable for debtors who had not been engaged in commercial misconduct.165 However, the basic structure of the bankruptcy discharge, including the threeyear period, has been retained in the Insolvency Act 2006. The three-year period [page 32] will run, not from the date of adjudication, but rather from the date of filing of the bankrupt’s statement of affairs. In the context of a debtor application for adjudication, the filing of a statement of affairs is a prerequisite to the filing for adjudication.166 Thus the three-year period should not be affected in voluntary proceedings. However, in a creditorinitiated proceeding, a debtor is not under an obligation to file a statement of affairs until after adjudication.167 A delay in filing the statement of affairs will have the effect of extending the time before the discharge becomes available. The retention of the three-year discharge period for bankruptcy must not be taken in isolation. As will be discussed below, Parliament has created a new fast track one-year no asset procedure for qualifying debtors as a way to avoid bankruptcy.

(h)

Annulment

The Insolvency Act 2006 provides the Assignee with new powers in relation to annulment. The Insolvency Act 1967 only permitted an application to be made to the court for an order annulling the adjudication.168 The new statute makes the procedure more accessible in that it grants to the Official Assignee the power to annul adjudication where the adjudication had been made on a debtor’s application. “The Assignee may annul the adjudication on the application of any

person interested or on the Assignee’s own initiative”, provided the Assignee is satisfied that the grounds for annulment have been met.169 All other applications for annulment (for example, where the adjudication had been made on a creditor’s application) must be made to the court.170

II.5 Alternatives to bankruptcy (a)

Introduction

The Insolvency Act 1967 offered debtors two formal alternatives to bankruptcy. Parts XV and XVI permitted a debtor to make a formal proposal to creditors to avoid the bankruptcy regime altogether. Part XV contemplated a proposal to creditors requiring both High Court and creditor approval. Part XVI, which was originally designed for wage earners, enabled debtors to apply to the District Court for a payment of debts by instalments. The summary [page 33] instalment orders are limited to three years in duration and debtors may not have unsecured debts of more than $12,000.171 The Ministry of Economic Development concluded that these two alternatives to bankruptcy “are not widely used in New Zealand”.172 A number of reasons explain their low use. The lack of a common forum and the variety of intermediaries offered confusing choices to debtors. Part XV is pursued in the High Court while Part XVI is a matter for the District Court. Under the 1967 Act, private practitioners acted as trustees under Part XV while court-appointed supervisors governed summary instalment orders under Part XVI. In part, the lack of information about these procedures contributed to the relatively low use of the alternatives to bankruptcy. Debtors may have simply filed for bankruptcy without being aware of their alternatives. The requirement in the Insolvency Act 2006 for a debtor to file a statement of affairs with the Official Assignee before making an application for adjudication in bankruptcy173 enables the Assignee to assess whether bankruptcy or an alternative procedure is the most appropriate. Since the Official Assignee is responsible for all debtors’

applications, the Assignee’s office will become the first point of contact for all debtors contemplating bankruptcy or an alternative to bankruptcy.

(b)

Proposals

Part XV proposals have largely been retained in the same form as under the 1967 Act with some minor changes, and are located in Part 5, Subpart 2, of the Insolvency Act 2006. An “insolvent” may make a proposal to creditors for the payment or satisfaction of the insolvent’s debts.174 The Insolvency Act 2006 defines an insolvent as a “person who is not a bankrupt, but who is unable to pay his or her debts as they become due”.175 The insolvent must still file the proposal in the High Court.176 The government decided to retain the High Court’s involvement rather than transfer responsibility for proposals to the Assignee. This contrasts with the Assignee’s new powers in relation to debtor applications for adjudication, annulments, summary instalment orders and the no-asset procedure. The government decided that these latter [page 34] four procedures were more of an administrative process that did not require court involvement.177 The Court in Meltzer v Commissioner of Inland Revenue described the proposal procedure as a three-stage process:178 First, it must be filed in Court and the person appointed provisional trustee must, as soon as practicable after the proposal is filed, call a meeting of creditors. Secondly, the meeting of creditors must be held. A resolution accepting the proposal, with or without amendments or modifications, must be decided by a majority in number and three-quarters in value of the creditors. Thirdly, if the proposal has been accepted by the creditors, the provisional trustee must, as soon as practicable, apply to the Court for approval of the proposal.

Under s 333(3), the court may refuse to approve a proposal if it considers that: (a) the provisions of [Part 5, subpart 2] have not been complied with; or (b) the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors; or (c) for any reason it is not expedient that the proposal be approved.

(i)

Reasonableness

In Liguori v Golden Fund Ltd Abbott AJ considered the reasonableness test under s 333(3)(b):179 Whether the terms of a proposal are not reasonable or are not calculated to benefit the general body of creditors is to be assessed from the perspective of the creditors, and requires consideration of two questions: first, whether dissenting creditors are suffering unfair prejudice as a result of the vote of the majority; and, secondly, whether the compromise is one that creditors should enter into. The second of these questions requires the Court to make an objective assessment as to whether the proposal would be acceptable to a commercially experienced prudent creditor. This test has also been expressed as whether creditors generally would fare better under bankruptcy.

The Court of Appeal in Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto concluded that the reasonableness test under s 333(3)(b) is “best assessed objectively from the perspective of the ‘commercially experienced prudent creditor’ rather than the public, whose interests are protected [page 35] under s 333(3)(c)”.180 The “benefit to the general body of creditors under s 333(3)(b) raises the fairness of the proposal between classes of creditors, requiring a comparative analysis of the creditors’ relative positions under the proposal or bankruptcy respectively.”181 The Court of Appeal in Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto182 endorsed the following statement from Farmer v Rowley183 on the proper test to be applied under s 333(3)(b). The court: … must be influenced by the commercial judgment of creditors who in approving the proposal have demonstrated their willingness and wish to receive a partial payment without recourse to bankruptcy. It is important to emphasise, too, that it is the creditors who stand to lose the benefit if a proposal is rejected and bankruptcy ensues. Unless there are special public interests or other commercial considerations present the assessment of the substantial body of the creditors ought to be accepted.

(ii)

Expedient

The court may refuse to approve a proposal if it is not expedient under s 333(3) (c). In order to determine whether it is expedient to approve a proposal the Court of Appeal in Magsons held that “the wider public interest” was relevant to the

analysis of s 333(3)(c).184 The word “expedient” can have the wider meaning of “suitable” or “appropriate.” However, it would be improper to limit the meaning of the word. It is possible that the conduct of the debtor may be so irresponsible that a Court may conclude that it is in the public interest that the person be adjudicated bankrupt.185 Under s 333(4) the court must not approve a proposal if it does not provide for the payment, before any other debts are paid, of: (a) those debts that would have priority under [the Insolvency Act 2006] if the insolvent were adjudicated bankrupt; and (b) the trustee’s fees and expenses that are properly incurred by the trustee in respect of the proposal; and (c) costs incurred by a person other than the insolvent in organising and conducting a meeting of creditors for the purpose of voting on the proposal.

[page 36] A proposal that is approved by the court is binding on all of the creditors whose debts are provable and are affected by the terms of the proposal. Creditors whose debt is provable must not take any enforcement steps while the proposal remains in effect.186 Procedure for Proposals is governed by Part 4 of the Insolvency (Personal Insolvency) Regulations 2007.

(c)

Summary instalment orders

Summary instalment orders are now defined by the Insolvency Act 2006 as: “an order by the Assignee that the debtor pay his or her debts:187 (a) in instalments or otherwise; and (b) in full or to the extent that the Assignee considers practicable in the circumstances of the case.

Three major changes were made to summary instalment orders. First, the maximum threshold of debt for a summary instalment order was raised from $12,000 to $40,000.188 Secondly, the responsibility for the granting of the summary instalment orders was shifted from the District Court to the Assignee.189 Thirdly, the duration of a summary instalment order was increased

from a maximum of three to five years. The payment of instalments may be spread over a period of three years or up to five years “if justified by special circumstances”.190 A debtor, or a creditor with the debtor’s consent, may apply for a summary instalment order.191 An Assignee may make a summary instalment order if he or she is satisfied that:192 (a) the debtor’s total unsecured debts (excluding any student loan balance) that would be provable in the debtor’s bankruptcy are not more than $40,000; and (b) the debtor is unable immediately to pay those debts.

A summary instalment order must appoint a supervisor who is a “suitable and willing person to supervise compliance by the debtor with the terms of the order”.193 The supervisor may charge the debtor remuneration for carrying [page 37] out his or her duties under the order.194 The Insolvency (Personal Insolvency) Regulations 2007 have fixed remuneration at “7.5% of the value of the assets of the debtor that are recovered by the supervisor”.195 Once the summary instalment order is granted creditors may not begin or continue proceedings against the debtor or the debtor’s property.196 If a debtor defaults on the summary instalment order any proceeding which had been halted by the effect of the summary instalment order may begin or continue.197 Procedure for Summary Instalment Orders is governed by Part 5 of the Insolvency (Personal Insolvency) Regulations 2007.

(d)

No-asset procedure

A cornerstone of the insolvency reforms is the introduction of a new streamlined one-year no-asset procedure as an additional alternative to bankruptcy. The Ministry of Economic Development acknowledged that the existing bankruptcy regime in the Insolvency Act 1967 is not appropriate in all cases. The Tier One Discussion Document concluded that the 1967 Act did not distinguish between debtors with little or no assets, and debtors with assets. A study of a small sample of bankrupts during the period 1 July 1997 to 30 June 1998 revealed that almost 80 per cent of bankrupt estates did not return a dividend to creditors.198

Cabinet documents reveal that the government viewed the introduction of the no-asset procedure as the “most significant change” in the area of personal insolvency.199 The objectives of the no asset procedure are: [T]o acknowledge that the targeted debtor usually cannot avoid bankruptcy and therefore the punitive and deterrent aspects of bankruptcy are inappropriate; to give the targeted debtor a fresh start; to provide appropriate safeguards against risk of abuse; and to provide a simple procedure which minimises administration costs to the State.200

The Minister of Commerce, in announcing the changes, recognised that the traditional bankruptcy procedure, with all of its consequent restrictions for a three-year period, is no longer appropriate for a large number of debtors.201 [page 38] The government concluded that it is not “necessary to apply any of the punitive aspects of bankruptcy such as restrictions on overseas travel, or owning a business” to no asset debtors.202 Although the original aim of the no-asset procedure was to provide a clear alternative to bankruptcy the effect of the Insolvency Amendment Act 2009 is to “re-align NAP more closely with bankruptcy provisions”.203 These important changes will be highlighted below. The starting point for the debtor is the completion of a statement of affairs and the completion of an application for entry into the no asset procedure.204 From the statement of affairs the Assignee may determine whether bankruptcy, or one of the alternatives to bankruptcy, is most appropriate. The statement of affairs will assist the Assignee in determining whether the debtor qualifies for the noasset procedure.205

(i)

Entry criteria

The design of appropriate entry criteria is fundamental to the operation of the no asset procedure. As Allan J explained:206 The procedure is self-evidently concerned with debtors who have no significant assets, and with relatively modest debts. …The legislative scheme is not suitable for cases of any complexity, or where there are areas of dispute. The ordinary insolvency procedures of the Act are available to cope with all but the simpler cases. … The no asset procedure was designed to deal with simple cases of insolvency where the debtor has limited debts and an uncomplicated financial and business background.

The Assignee has responsibility for administering the no-asset procedure. The Assignee may admit a debtor to the no-asset procedure if he or she is satisfied on reasonable grounds that certain conditions are met.207 Given that bankruptcy procedure remains three years and the no asset procedure is only a 12-month period, Parliament has sought to set up some rather strict entry criteria to prevent abuse. [page 39] Although the vast majority of no-asset debtors are consumer debtors, the noasset procedure does not distinguish between consumer and non-consumer debtors. The definition of a consumer bankrupt is elusive in its own right.208 The no-asset procedure seeks to take a subset of debtors out of bankruptcy procedure by screening for no asset debtors based on a number of listed criteria. First, the debtor must have no realisable assets. Realisable assets do not include exempt property under s 158.209 Secondly, the debtor must not have been previously admitted to the no asset procedure or been a bankrupt. Thirdly, the debtor must have total debts (excluding any student loan balance) that are not less than $1,000 and not more than $40,000. Finally, the Act also sets up a means test, which is set out in reg 66 of the Insolvency (Personal Insolvency) Regulations 2007: The prescribed means test for the purposes of section 363(1)(e) is whether, taking into account the income of the debtor personally and that of any relative with whom the debtor lives, the debtor has a surplus of money after paying the household’s usual and reasonable living expenses.

The test focuses on household income and asks “in effect whether the debtor has any net disposable income”.210 Under the means test a debtor must be able to satisfy the Assignee that the debtor does not have the means of repaying any amount towards those debts.211 This suggests that if the debtor has any amount of net disposable income he or she will not be eligible for the no asset procedure.212 It is a mandatory hurdle that all debtors must overcome. Setting the means test too low runs the risk of allowing too many debtors into the procedure. Conversely, setting it too high may exclude many “no-asset debtors” and defeat the purpose of the provision.213

The entry criteria precludes “repeat players”. Debtors may only use the noasset procedure once. Debtors who have previously been bankrupt are also excluded.214 Finally, the Act has set the maximum amount of the debtor’s [page 40] total debts at $40,000 (excluding any student loan balance).215 Student loans remain enforceable despite the debtor’s entry into the no asset procedure.216 However, student loans remain dischargeable in a straight bankruptcy.217 It remains to be seen whether the different treatment of student loans in bankruptcy and the no asset procedure will have any effect on student use of either procedure. The Insolvency Amendment Act 2009 made one change with respect to the entry criteria. Under s 363(1)(a), to be eligible for the no-asset procedure the debtor must not have any realisable assets. The Insolvency Amendment Act 2009 amended s 363(2) so that realisable assets now includes any gifted assets that might be recoverable by the Assignee if the debtor were bankrupt.218 This has the effect of raising the bar for entry into the no-asset procedure. To the extent that the debtor has made an insolvent gift this will become a realisable asset and may bar entry. The entry criteria combine fixed rules with some general standards that provide the Assignee with some discretion to determine whether the debtor qualifies. However, it is unclear how the entry criteria will ultimately balance the need for easy identification of qualified debtors through clear rules and the need to guard against abuse through more open-ended, discretion-based standards.219

(ii)

Disqualification of debtor from entry into no-asset procedure

Even if the debtor meets all of the entry criteria, s 364 of the Insolvency Act 2006 sets up a number of factors that may disqualify the debtor from the no-asset procedure. The Assignee must not admit a debtor to the no asset procedure if the Assignee is satisfied on reasonable grounds that: (a) the debtor has concealed assets with the intention of defrauding his or her creditors, for example, by transferring property to a trust; or (b) the debtor has engaged in conduct that would, if the bankrupt were adjudicated bankrupt, constitute an offence under this Act; or

(c) the debtor has incurred a debt or debts knowing that the debtor does not have the means to repay them; or

[page 41] (d) a creditor intends applying for the debtor’s adjudication as a bankrupt and it is likely that the outcome for the creditor if the debtor is adjudicated bankrupt will be materially better than if the debtor is admitted to the no asset procedure.

Section 364(a) and (b) identify conduct of concealing assets with intent to defraud, and conduct that, were the debtor bankrupt, would amount to an offence under the bankruptcy provisions of the Act. A debtor who is discovered to have engaged in this conduct will be disqualified from the no-asset procedure. A more problematic exclusion is s 364(c). An Assignee must not admit a debtor where the “debtor has incurred a debt or debts knowing that the debtor does not have the means to repay them”. A review of the Parliamentary debates suggests that Parliament may have intended to exclude debtors who were “careless and reckless” in incurring a debt.220 A careless or reckless debtor who runs up credit card bills on the eve of a no-asset procedure (with the knowledge of an inability to pay) may well be excluded from the no-asset procedure. However, an Assignee may have more difficulty applying this reckless disqualifying factor in other scenarios. For example, how would an Assignee react to a debtor in dire circumstances who had no choice but to buy on credit? It is unclear how an Assignee would respond where such a debtor had no immediate means to repay the debt, but had a good faith, yet overly optimistic, belief that times would improve to allow for repayment. Finally, a no-asset procedure may be precluded by the fact that a creditor intends to apply for the debtor’s adjudication in bankruptcy.221 The no-asset procedure cannot proceed if the Assignee is satisfied, on reasonable grounds, that the outcome for the creditor in a bankruptcy will be materially better than if the debtor is admitted to the no-asset procedure. This might arise where a threeyear bankruptcy period would be more appropriate; for example, where there is suspicion of irregular transactions. In any event, as discussed below, creditors are given the power to terminate a no-asset procedure once it has been commenced.

(iii) Effect of entry to no-asset procedure on creditors

After the debtor has been admitted to the no asset procedure, the debtor enjoys a moratorium on his or her debts with some limited exceptions. Under s 369 a creditor must not, after the debtor is admitted, “begin or continue any step to recover or enforce a debt”. The debt must relate to a debt that the debtor owes the creditor at the time when the debtor applies for entry into to [page 42] the no-asset procedure and the debt must be one that would be provable in the debtor’s bankruptcy. Certain debts remain enforceable notwithstanding the admission of the debtor to the no-asset procedure:222 (a) any amount payable under a maintenance order under the Family Proceedings Act 1980: (b) any amount payable under the Child Support Act 1991: (c) a student loan balance.

(iv)

Effect of no-asset proceeding on debtor

The no asset procedure also has an impact on the debtor. Although the debtor enjoys the benefit of the moratorium once entry to the procedure has been gained, the debtor faces restrictions upon obtaining credit in relation to the initial application and during the 12-month period of the procedure. The initial restrictions on a debtor who has applied for entry into a no-asset procedure are modest. A debtor “who has applied for entry to the no asset procedure must not obtain credit (including hire purchase credit) … of more than $100 without first informing the credit provider that the debtor has applied for entry to the no asset procedure”.223 Once the debtor is admitted to the no-asset procedure, the debtor must not obtain credit (including hire purchase credit) of more than $1,000 without first informing the credit provider that the debtor is subject to the no-asset procedure.224 The Commerce Committee inserted the offence of obtaining credit while subject to the no asset procedure. The Committee was “concerned that the no asset procedure lacks penalties for people who breach the procedure while still subject to it”.225 Section 371 creates the offence of obtaining credit of more than $1,000. It is a defence if the debtor establishes that the debtor informed the

credit provider that the debtor was admitted to the no-asset procedure. A person who commits an offence under s 371 is liable on summary conviction to imprisonment for a term not exceeding one year or a fine not exceeding $5,000, or both. After admission to the procedure the debtor is under a general duty to notify the Assignee “as soon as practicable of any change in the debtor’s circumstances that would allow the debtor to repay an amount” owing to a creditor under s 369(1).226 This change in circumstances might be sufficient [page 43] for the Assignee to terminate the no asset procedure under s 373. Termination is discussed below.

(v)

Termination

Except in the case of termination by discharge, termination will have the effect of rendering the debtor’s debts enforceable again.227 The Insolvency Amendment Act 2009 specifies that the “debtor is liable to pay any penalties and interest that may have accrued”.228 Several events will terminate a no-asset procedure. First, a no asset procedure will be terminated when a debtor is discharged from the procedure following the expiration of the 12-month period from the date of admission.229 Secondly, a debtor may terminate the no-asset procedure by applying for his or her own adjudication.230 Thirdly, the limited class of creditors, which have a debt that remains enforceable231 despite the commencement of a no-asset procedure, may terminate the procedure by applying for the debtor’s adjudication. An adjudication order in this circumstance will terminate the no asset procedure. In contrast to these three terminating events, two additional means of termination involve the application of the Assignee’s discretion. First, the Assignee may terminate the procedure if the debtor was wrongly admitted to the no-asset procedure. Grounds for termination would include, for example, if the debtor concealed assets or misled the Assignee.232 Alternatively, the Assignee may terminate the no-asset procedure where he or she is satisfied that the debtor’s financial circumstances have changed “enabling the debtor to repay an amount towards his or her debts”.233 A debtor is under an obligation to notify the

Assignee of any change in financial circumstances.234 The Assignee is under a duty to terminate where a debtor has been wrongly admitted to the no-asset procedure due to the debtor understating his or her debts. “The scheme of the Act would be subverted if the Assignee exercised his discretion in favour of the debtor in such circumstances”.235 The Commerce Committee was concerned about the possibility that a debtor may gain entry into the no-asset procedure by providing false and [page 44] misleading statements about the debtor’s assets. In the 2006 Act, the Assignee may terminate the no-asset procedure if such deception is discovered. This allows creditors to apply for adjudication. However, the Commerce Committee was also concerned that the debtor may well dissipate his or her assets in the period leading up to adjudication. The 2006 Act allows for a preservation order to “protect the debtor’s assets for the benefit of all creditors”.236 Where an Assignee has terminated a debtor’s participation in the no-asset procedure on the ground that the debtor has concealed assets or misled the Assignee, the Assignee may apply to the court for a preservation order of the debtor’s assets pending an application for the debtor’s adjudication. Where a creditor applies to the Assignee for the termination of the no-asset procedure, the grounds for the objection are:237 (a) the debtor did not meet the criteria for entry into the no asset procedure; or (b) there are reasonable grounds for the Assignee to conclude that the debtor was disqualified under section 364.

The grounds for disqualification, discussed above, include: concealing assets; engaging in conduct that would, if the debtor was bankrupt, constitute an offence; and incurring a debt knowing that the debtor does not have the means to repay them.238 Since a creditor’s grounds for termination incorporate by reference all of the disqualifying factors in s 364, the creditor may also apply to the Assignee for termination on the basis that the creditor intends to apply for the debtor’s adjudication. As long as the creditor can demonstrate that the outcome under bankruptcy will be materially better than the no-asset procedure, it will be a valid ground for termination.

(vi)

Discharge

The debtor is automatically discharged from the no-asset procedure 12 months after the date the debtor was admitted to it.239 However, the Insolvency Amendment Act 2009 allows the Assignee to defer the discharge if the Assignee is “satisfied that the 12-month period should be extended for the purpose of properly considering whether the debtor’s participation [page 45] in the no asset procedure should be terminated”.240 Where this procedure is used, the debtor is automatically discharged on the date stated in the deferral notice.241 The amendment gives the Assignee the discretion to extend the 12-month period. On discharge, under s 377A(1) of the Insolvency Act 2006,242 all of the debtor’s debts that became unenforceable on entry to the procedure “are cancelled, and the debtor is not liable to repay any part of the debts, including any penalties and interest that may have accrued”.243 However, as a result of amendments in 2009,244 debts incurred by fraud remain enforceable after discharge from the no-asset procedure and the debtor is liable to pay any penalties and interest that may have accrued. The 2009 amendments also245 clarified that a discharge under the no-asset procedure does not release business partners, co-trustees, guarantors and parties that might be jointly contractually bound with the debtor. The difference between the three-year automatic discharge period in bankruptcy and the 12-month period for the no-asset procedure, raises the possibility that debtors might illegitimately seek entry into the no-asset procedure in order to fast track their discharge. Indeed, it seems that the deferral notice procedure responds to this concern. The statute has set up a number of strict entry criteria as well as disqualifying factors in order to preclude abuse of the no asset procedure. However, many of the entry criteria and disqualifying factors might involve significant investigation on the part of the Assignee. The greater the disparity between the no-asset procedure and the regular bankruptcy track, the greater the resources that will have to be devoted to ensuring that the misuse of the no asset procedure does not become a problem.246

II.6 Public register The fact that a debtor is or was a bankrupt, or is using one of the alternatives to bankruptcy, is an important source of information to creditors. The Insolvency Act 2006 responded to this need by creating new Public Registers. [page 46] The statute creates Public Registers for the three insolvency procedures. First, if the court has refused to discharge a bankrupt, or has discharged the bankrupt but suspended the discharge, that information must be contained in the Public Register.247 Secondly, the Official Assignee must maintain a Public Register of persons who are subject to a current summary instalment order.248 A summary instalment order “is not current if it has been discharged or all the instalments required to be paid under the order have been paid in accordance with the order”.249 Finally, the Official Assignee must maintain a Public Register of persons admitted to the no asset procedure250 or persons discharged from that procedure.251 All information about a person who has been adjudicated bankrupt and discharged from bankruptcy must be removed from the Public Register four years after the date of the discharge. In the event of a conditional discharge the time period is four years after the discharge becomes unconditional.252 Where a person has been adjudicated bankrupt but the bankruptcy has been annulled, all information about this person must be removed seven years after the date of adjudication.253 All information about a person who has been admitted to the no-asset procedure must be removed from the Public Register four years after the date of the discharge under s 377. Alternatively, the information must be removed “as soon as practicable after a termination under section 372(a), (c), or (d)”.254 The Insolvency Amendment Act 2009 has added a new s 449A, to deal with information on the Public Register where there are multiple insolvency events. Where a person has been bankrupt on two or more occasions or has been a bankrupt and discharged from the no-asset procedure, the information about these events will remain on the register indefinetely. Information about this person “must not be removed from the public register”.255

The statute also recognises the importance that the Public Registers will play in providing statistical information and information for research purposes. [page 47] The new database will assist not only researchers, but will provide the Official Assignee’s office and the government with a vital source of information to assess the effectiveness of the three insolvency procedures.256 The Registers are designed to give broad access to any member of the public. The information listed in s 449(1) must be available to any member of the public and is not limited in any way to existing or prospective creditors.257 However, a search may only be conducted in accordance with the Act, and any Regulations that may follow.258 The Registers may be searched by:259 (a) by any individual, or by any person with the consent of that individual, for the purpose of searching for information about that individual: (b) by any person for the purpose of ascertaining whether another person is bankrupt, is a discharged bankrupt, is subject to a current summary instalment order, is currently admitted to the no asset procedure, or is discharged from that procedure under section 377: (c) by any person for any purpose related to the bankruptcy of a person, the making of a current summary instalment order in respect of a person, or the admission of a person to the no asset procedure: (d) by any person for any of the purposes set out in section 448(4)(a) or (b).

Under s 451(1), the Assignee may omit, remove or restrict access to information in the Public Register if the Assignee “considers, in his or her discretion, that the disclosure of the information via the public register would be prejudicial to [the person’s] safety or the safety of [the person’s] family.” Regulation 69 of the Insolvency (Personal Insolvency) Regulations 2007 provides additional grounds for the Assignee to refuse access to a public register. The Assignee may refuse access to a public register maintained or suspend the operation of it, for any of the following additional reasons: (a) for the maintenance of the register: (b) in response to technical difficulties in the maintenance or operation of the register: (c) to ensure the security or integrity of the register.

[page 49]

III COMPANIES AMENDMENT ACT 2006 III.1 History and commencement A history of the insolvency law review and the preliminary stages leading to the legislation has been provided in Part I.260 The review proceeded initially in two tiers. In the area of corporate insolvency, the Ministry of Economic Development Tier One papers included voidable transactions, priority debts, and phoenix companies. Tier Two papers included voluntary administration, directors’ duties, and statutory management. In addition, the Law Commission261 produced three key reports: two in 1999 on priority debts262 and cross-border insolvency263 and a broader report in 2001 — Insolvency Law Reform: Promoting Trust and Confidence.264 After the Law Commission’s Insolvency Law Reform: Promoting Trust and Confidence report was issued, the government announced policy decisions in late 2001, on voidable transactions, priority debts, and adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.265 In May 2002, the Ministry of Economic Development produced a further paper on business rehabilitation after consultation.266 This led to the announcement in early 2003267 of policy decisions to adopt the Australian Voluntary Administration regime, take action with regard to phoenix companies and implement the UNCITRAL Model Law. After a period of consultation on the draft Insolvency Law Reform Bill issued in April 2004, the actual Bill was introduced into Parliament on 21 December 2005, and reported back by the Commerce Committee on 10 August 2006. [page 50]

The Companies Amendment Act 2006 was divided from the Insolvency Law Reform Bill on 24 October 2006. It received Royal Assent on 7 November 2006 and was brought into force by Order in Council.268

III.2 Effect of the Companies Amendment Act 2006 The Companies Amendment Act 2006 (the Amendment Act) amended the Companies Act 1993 (the principal Act). Apart from the addition of the new Part 15A (Voluntary Administration),269 the Amendment Act was almost exclusively concerned with amendments to Part 15 (Liquidations),270 and consequential amendments to other Acts, or other Parts of the principal Act.271 A general overview of the Amendment Act is given in Part I, the Introduction to this Guide and Commentary. This commentary also details changes made to the Receiverships Act 1993 by the Companies Amendment Act 2006. The consolidated version of the Receiverships Act 1993 is included in the legislation section of this book.

III.3 Interpretation provisions A definition of “spouse” is added for the first time to the interpretation section of the principal Act,272 to accommodate de facto relationships (whether the same or different sex) and civil union partnerships under the Civil Union Act 2004. Secondly, in respect of the compromise procedure contained in Part 14 of the principal Act, it is confirmed that a “company”273 extends to an overseas company registered under Part 18. The Part 14 compromise procedure continues to exist alongside the new Part 15A (Voluntary Administration). As an overseas company can expressly be subject to voluntary administration,274 and s 342 of the principal Act275 provides for the liquidation of overseas [page 51] companies under Part 16, the extension of Part 14 to overseas companies

prevents an anomalous distinction that would otherwise have been created.

III.4 Voluntary administration (a)

Background to reform proposal

The lack of an effective formal rescue procedure available to a debtor or creditors has been a concern for some time.276 In 1992, Australia, as a consequence of the Harmer Report277 introduced the voluntary administration procedure.278 Along with developments in other major jurisdictions (England, Canada and the United States), the Australian voluntary administration procedure was widely discussed as a possible model among academics and practitioners in New Zealand. Early in its insolvency law review, the government initiated a paper by David Brown on Corporate Rescue, which was published in late 2000.279 The Law Commission examined the topic as part of its “Promoting Trust and Confidence” report in advising the government.280 This led to a paper on business rehabilitation being issued by the Ministry of Economic Development (MED) in 2002.281 Having considered other models, this report recommended the Australian voluntary administration regime as the appropriate one, given the Closer Economic Relations (CER) agreement between Australia and New Zealand. The CER agreement includes a programme of coordination of commercial laws, including insolvency law.282 Since the 2002 MED Report, Australian corporate insolvency law, and in particular voluntary administration, has undergone scrutiny by law reform [page 52] bodies.283 The Australian Parliamentary Joint Committee in particular discussed several areas of controversy in relation to the voluntary administration regime, which it found to be generally very popular and working well.284 The Joint Committee endorsed some of the specific recommendations that had earlier been made by the Company and Securities Advisory Committee in its report on voluntary administrations in 1998.285 While many of these reform proposals

were eventually enacted in Australia in 2007,286 the New Zealand Government decided to incorporate the Australian reform proposals into Part 15A. Therefore, the New Zealand version of voluntary administration in Part 15A was, in a sense, one slight step ahead of the Australian equivalent version. Further, it will be pointed out at the relevant points below, where New Zealand has enacted specific provisions arising from the Australian review recommendations which, the Australian Government decided not to proceed with.

(b) (i)

Relationship with other procedures Liquidation and receivership

The main reason for recommending the introduction of voluntary administration was that the existing choices available to a company in distress, or its creditors, were limited and flawed. Liquidation is the terminal procedure, and its purpose is realisation and distribution of assets, not business survival.287 Receivership can be an effective way of preserving some or all of a viable business, so that business survival may be an incidental effect of it, but it is triggered only by, and primarily for the benefit of, one secured creditor, to whom the receiver primarily owes his or her duties.288 [page 53]

(ii)

Statutory management

New Zealand does have a unique procedure, statutory management, under Part III of the Corporations (Investigations and Management) Act 1989, and its counterpart for registered banks in s 117 of the Reserve Bank of New Zealand Act 1989.289 The procedures bear some similarity to a modern rescue procedure, in that a statutory manager is appointed, with the advantage of a very wide moratorium on creditor enforcement action, and the manager has the power to run the business with a view to its survival, in the interests of creditors and members. Statutory management is not an insolvency rescue procedure, however, as the Executive branch of government initiates it. Further, creditors have no legal role in decision making nor do they have the right to access information. Statutory

management is not necessarily used in insolvency situations (often being used where there is fraud or the suggestion of fraud). The most important distinction is that it cannot be initiated by a company, or its directors. Although statutory management has been used in cases of financial failure, particularly of corporate groups, the Executive element of control over appointment and termination, and its lack of creditor involvement, has led to criticism.290 However, after the Law Commission examined the issue,291 the government has decided to retain it unamended, alongside the voluntary administration, notwithstanding the fact that most of the functions of a statutory manager can arguably be carried out effectively within a voluntary administration. Recent judicial statements are to the effect that the procedure is reserved for situations where the normal procedures are not suitable:292 [T]he Act is specifically designed to deal with those situations where a company has been operating fraudulently or recklessly (s 4(a)) or, alternatively, where the ordinary law is inadequate (s 4(b)(iii)). The Act is intended to take over where the ordinary law cannot cope and stronger measures are needed. Situations where those measures are needed will include a major collapse of a large and interlocking group of companies with complex rights amongst creditors, shareholders and beneficiaries.

It should be noted that where a company is in statutory management, it cannot go into voluntary administration, and vice versa.293 [page 54]

(iii) Part 14 compromises Part 14 of the Companies Act 1993 represents a compromise procedure, for the collective benefit of creditors.294 It enables the company to compromise with its creditors in circumstances where the proponent believes the company is, or will be, unable to pay its debts.295 The major disadvantage of Part 14 has always been that there is no automatic moratorium or “stay” from the time that the proposal is notified to creditors.296 Further, although it could be used within liquidation, there is no separate ability for an external manager to be appointed to run the business during the compromise negotiation period, let alone any duties to report director misconduct. Part 14 has been useful for inexpensive compromises, but requires unanimity to be assured in advance. There are also issues concerning the composition of classes for voting purposes. Nevertheless, Part 14 has been retained, and has not

been amended to provide a moratorium. It may be of some use to a smaller company with few creditors, that wishes to avoid the cost of a voluntary administration, but a continuing lack of a moratorium under which the company is able to negotiate a compromise with creditors may mean that its use, already believed to be low,297 will diminish in future.

(iv)

Part 15 schemes of arrangement

In addition, Part 15 of the Companies Act 1993 has been retained.298 This provides for a court-approved scheme of arrangement. It is not confined to insolvency, but can be used in that situation, or in liquidation. It is similar to s 425 of the Companies Act 1985 (UK), and to the scheme of arrangement in Australia.299 Again, however, there is no immediate moratorium, and there has been much uncertainty about the powers of the Court and the relationship with older case law under Part 13.300 The procedure has been little used. [page 55] A Part 15 proposal was recently approved by the Court in Polymer Group Ltd v South Vineyard Ltd.301

(v)

Summary

Therefore, there are now three formal rescue procedures in New Zealand, Parts 14, 15, and now 15A of the Companies Act 1993. It will be interesting to see how Parts 14 and 15 fare in the light of the wider, new voluntary administration procedure, with its automatic stay and, in theory, less Court involvement. In some jurisdictions such as Canada, it has proved useful for larger, more complex corporate groups, companies, and their creditors, to utilise a more flexible, but more Court-driven, reorganisation procedure. This has occurred despite the existence of a procedure similar to voluntary administration alongside it.302

(c)

Structure of legislation

The insertion of Part 15A303 incorporated 154 new sections into the Companies Act 1993.

The numbering of the sections requires explanation. First, the sections largely track the order of the sections in the Australian Part 5.3A of the Corporations Act 2001 (ss 435A onwards), and both the legislation, and this Guide and Commentary, refer to any appropriate Australian section. However, there are some specific New Zealand provisions, or departures from the Australian provisions, which will be mentioned below. Secondly, the numbering of the sections in Part 15A follows on from s 239 (the last section in Part 15) of the Companies Act, by use of capital letters from s 239A through to s 239Z. This is followed by s 239ABA through to s 239ABZ, and so on until the final section of Part 15A, s 239AEW. The ordering of the sections in Part 15A is illustrated by the following examples: – ss 239A, 239B, 239C, 239D through to … s 239Z; – ss 239ABA, 239ABB, 239ABC, 239ABD through to … s 239ABZ; – ss 239ACA, 239ACB, 239ACC, 239ACD through to … s 239ACZ. [page 56] This numbering system is far from user-friendly. However, it is logical to insert the voluntary administration regime after the existing rescue procedures, Parts 14 and 15, and before liquidation procedures in Part 16. The Insolvency Practitioners Bill 2010, at the current time awaiting its Second Reading,304 proposes insertion of a new Part 16A into the Companies Act 1993 (“Insolvency Practitioners”).

(d)

Overview and objects of voluntary administration

The steps and procedures within a voluntary administration, the duties and powers of the administrator, rights of creditors and the role of the court, all have to be seen within the context of the statutory objects of voluntary administration expressed in the legislation. Courts in Australia have consistently referred to these objects in determining the boundaries and purposes of particular provisions, and the extent of the court’s own role and powers. It is therefore worth setting out the statutory objects of Part 15A in full: The objects of this Part are to provide for the business, property, and affairs of an insolvency company, or a company that may in the future become insolvent, to be administered in a way

that — (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) If it is not possible for the company or its business to continue in existence, results in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company.305

The extension of voluntary administrations to cover future insolvency emphasises that this procedure can be used to deal with financial difficulties before liquidation becomes inevitable. The wording reflects a reform proposal in Australia which was never implemented,306 and is a change from earlier drafts of the New Zealand Bill, which used the phrase from s 436A of the Corporations Act 2001 (Cth) “likely to become insolvent”.307 The second limb of the statutory purposes recognises that business survival may not be possible, and that the administrator, with the enhanced powers available in administration, may still be able to achieve a better return than on immediate liquidation. The reality is that it may not be clear from the start whether a rescue can be achieved.308 Moreover, it is not necessarily [page 57] an abuse of the procedure to initiate administration solely on the second ground.309 The objects are set out in statute, but they are not an enforceable precondition for appointment, since no initial court application is required to commence administration. However, the objects might be factors if it is later alleged, on application to court, that directors or others are abusing the procedure,310 or on proceedings for termination of a deed of company arrangement (DOCA). An administrator is normally appointed by the directors of the company, hence the label “voluntary” administration. However, an administrator can be appointed out of court by certain secured creditors, any liquidator in office; the court can appoint an administrator on the application of creditors, a liquidator, or the Registrar of Companies. One of the main purposes of voluntary administration, within the context of the statutory objects set out above, is to provide a breathing space free from creditor enforcement steps and proceedings, during which the administrator can assess and investigate the company’s situation, continue to run the business if

appropriate, and put together a proposal for the company’s future, which will be usually take the form of a DOCA. Once the DOCA has been approved and becomes binding, the voluntary administration actually terminates, though the administrator will usually be the deed administrator, and the DOCA will usually provide for a moratorium binding those creditors who are bound by the DOCA. In order to provide the debtor company with such breathing space, a moratorium or “stay” commences from the time of appointment of the administrator. The moratorium prevents court proceedings against the company, other than with consent of the administrator or leave of court. It also prevents other forms of execution and the enforcement of rights by owners and lessor of property, with certain exceptions. Finally, it prevents the enforcement of charges, with certain exceptions, particularly for a special class of creditor who has power to enforce a charge over all or substantially all of the company’s property. The moratorium lasts for the duration of the voluntary administration, which itself will be confined by the time-periods laid down for the holding of meetings, particularly the “watershed” meeting. Effectively, the meeting must be held within 25 working days of the appointment of an administrator. However, the court can extend this time and allow adjournments, as a result also extending the duration of the moratorium. The administrator has a duty to investigate the company’s affairs, and all the powers to manage the business.311 There are two prescribed meetings of [page 58] creditors. The second meeting is the key “watershed” meeting at which the “future of the company” will be decided.312 The creditors may resolve either to liquidate the company, or to effect a DOCA.313 This is essentially a compromise agreement, and may itself be followed by liquidation. Alternatively, the creditors might resolve to return the company to its directors. The timetables for the holding of the first meeting and watershed meeting are quite strict, in keeping with the policy objective of a temporary breathing-space within which the options can be investigated, the business continued (if appropriate), and a viable DOCA or alternative course formulated. Having said that, in Australia time extensions have been granted by the court under its general supervisory power in s 447A.314

(e)

Commencement315

An administrator, who, like a liquidator, must be qualified (or not disqualified) in terms prescribed by s 280 of the principal Act, is usually appointed by resolution of the directors.316 Given the voluntary nature of the proceedings, the procedure is entitled, in the heading to Part 15A, “voluntary administration”.317 Such an appointment must be in writing,318 and the administrator must also consent in writing.319 Joint administrators are permissible.320 An administration commences from the time that the administrator is appointed.321 No court application is required. However, if there is a liquidator or interim liquidator in office, only these officeholders can appoint an administrator.322 In addition, to encourage those secured creditors (“fully secured creditors”) who would otherwise be in a position to appoint a receiver, to view the procedure more favourably, a chargeholder323 [page 59] with a charge (or charges) over the whole or substantially the whole of the company’s property, may appoint an administrator.324 Such a creditor, if it decides to appoint an administrator must give written notice of the appointment to the company as soon as practicable, and in any event before the end of the next working day.325 The special position of these fully secured creditors is further recognised by giving them a ten-day decision period, where the directors have served notice that they intend to appoint an administrator, in which period the secured creditor can decide whether or not it wishes to appoint a receiver.326 If it does so, the administration could continue over any remaining non-charged assets, although in reality these may be negligible. The position of fully secured creditors, which in practice allows them to “veto” an administration if their charge is enforceable, contrasts with the position now prevailing in the United Kingdom327 and Canada,328 where the reorganisation procedure takes precedence over the right of a secured creditor of this type to appoint a receiver. An administrator can only be appointed where the appointor, in the case of the directors or the liquidator, considers the company to be insolvent,329 or that it may become insolvent.330 Appointment by a fully secured creditor does not

require insolvency in the above sense, but may take place only where the charge has become, and is still, enforceable,331 which will often satisfy the above test anyway. A court must, where it is relevant, when making any order under s 301 of the Companies Act 1993 against a past or present director, take into account any action that person took for the appointment of an administrator.332 Section 301 is a summary procedure in a liquidation, for proceedings against (among others) directors, and covers breaches of [page 60] trust or duty, misfeasance or misapplication, or duty to account for the company’s property. In particular s 301 is used by liquidators to pursue breaches of directors’ duties, including reckless trading.333 The new provision only applies where the court has satisfied itself that there has been a default, which justifies it making an order for recovery of property or contribution to the assets of the company. The cases on s 301 to date indicate that it is at this stage, in assessing the extent or amount of any such recovery or contribution, that the court will consider the issues of causation, culpability and duration of trading.334 Therefore, this is the appropriate stage for the court to consider the director or former director’s conduct in initiating voluntary administration. A similar provision in Australia has been influential in encouraging directors to initiate voluntary administration earlier rather than later.335 If an application to the court has been filed for compulsory liquidation, which has not yet been disposed of, the company may only appoint an administrator within ten working days of service of that application on the company.336 This provision reflects the provision that has been introduced for voluntary liquidation,337 and prevents directors from forestalling a creditor’s court application for compulsory liquidation. Originally, the provision in the Insolvency Law Reform Bill proposed to prevent a resolution without the consent of the applicant for the compulsory order. But the Commerce Committee recommended the ten-day limit as a way of preventing delay that might be caused by a creditor refusing consent, but at the same time still preventing the directors or shareholders delaying appointment of a voluntary liquidator until just before the hearing.338 Although it is called “voluntary administration”, the procedure can

sometimes, from the company’s perspective, be compulsory, in that the court can appoint an administrator. In addition to appointment by fully secured creditors, the court may appoint an administrator, on the application of any creditor, an existing liquidator, or the Registrar. The court may appoint an administrator where it is satisfied that the company is or may become insolvent and that administration is likely to result in a better return for the company’s [page 61] creditors and shareholders than would result from immediate liquidation.339 Contrasting approaches to the exercise of the court’s discretion to order a voluntary administration were seen in two early cases decided within a few weeks of each other.340 In Jennian Services Ltd v Jennian Homes North Shore Ltd the applicant creditor of the respondent franchisee, applied to have the company put into voluntary administration. The applicant was a wholly owned subsidiary and provided design services. The manager of the parent company supported the application, as there was a third party willing to purchase provided outstanding work could be completed. If the company went into liquidation, it would damage the brand and prejudice any sale, impacting on creditors’ funds. The Associate Judge agreed that the sale would improve the company’s position and therefore result in a better return to creditors. In contrast, in Strategic Options Ltd v Swordfish Lodge Management Ltd Associate Judge Doogue applied and endorsed a broader threshold of satisfaction as to the likelihood of a better return to creditors.341 The applicant was one of several unit holders in an apartment and hotel complex owing rent and fees. The applicant did not want to terminate the lease because there was an operating hotel with staff and if the respondent was placed in liquidation, staff would be immediately made redundant. Therefore the applicant sought the appointment of an administrator to investigate the possibilities for ongoing trading or survival. There was a paucity of information about the financial state of the respondent. Counsel argued that an administration would be likely to result in a better return for creditors than a liquidation, because if the administrators were appointed they would investigate, so the picture would become clearer. He accepted the Judge’s

suggestion that “whether or not an administration under Pt 15A was likely to result in a better return must be, in the end, founded on such inferences as the Court can draw from the proved circumstances”.342 Doogue AJ, making the order for administration, said it was legitimate, to look, as well as any directly measurable financial consequences, at “likely to result in a better return” in a broad way. He said that the legislation should be applied in a “reasonably liberal and benevolent way in order to give effect to the objectives which include those set out in s 239A”.343 [page 62] However, the liquidation with which the comparison must be made under s 239L is an “immediate” liquidation, not a future liquidation. It cannot have been intended, when contrasting that objective with the business rescue objective in s 239A, that the court would consider the long-term possibilities that an administrator might be able to achieve greater returns through prolonged trading and restructuring. In this case, there was an admitted paucity of financial evidence before Doogue AJ. In addition, His Honour gave more than one reason for putting the company into administration. First, investigation would disclose the financial situation. Secondly, reducing expenses and closing down unviable parts of the operation. The first does not of itself point to a better return than on a liquidation, and the second seems to go to business survival rather than distribution to creditors. It is suggested that the degree of inference applied in this case, and the paucity of financial evidence, undermines the threshold purposes set out in s 239L. Alternatively, the court may appoint an administrator on just and equitable grounds.344 This means that administration is an option instead of, but only for the same purposes as, compulsory liquidation. However, it should be noted that if the court makes a compulsory order for administration on this ground, it could only be made for the purpose of a better realisation than on liquidation, and not for any purpose of business survival. Note that in Australia, problems have been created by the lack of a statutory definition of “creditor”.345 In New Zealand, a “creditor” is defined by the Companies Act 1993 as someone who would be entitled to claim in liquidation, and also includes a secured creditor.346 An administrator must give notice of his or her appointment to the Registrar before the end of the next working day after appointment, and, not later than

three working days after appointment, must advertise it.347 Within the same timeframe, the administrator must give notice to any fully secured creditor (unless the administrator was appointed by that person) who may be entitled to enforce the charge.348 The company must, unless exempted by the court, set out in every document that evidences or creates a legal obligation, the fact that an administrator is appointed to it, or, if under a DOCA, that it is subject to a DOCA.349 [page 63]

(f)

The effect of administration and the moratorium

Directors are not automatically removed from office, although the administrator may remove them.350 Directors may not, without the administrator’s permission, exercise any function other than things that they are still statutorily required to do, such as attend the watershed meeting, prepare a statement of the company’s position, and execute various documents during the administration, and the DOCA.351 Where a liquidator is in office, appointment of an administrator will suspend the liquidation, and the liquidator’s powers to act as agent of the company, but does not remove the liquidator from office.352 Administration does not remove any receiver from office. However, in this case, the court may limit the powers of a validly appointed receiver in respect of property subject to the charge.353 Transactions or dealings by a company in administration will be void unless entered into by, or with the prior written consent of, the administrator, or sanctioned by court order.354 The court may validate any void transaction.355 In the case of registered banks, no transaction will be void if it is a payment out of the company’s bank account in good faith and in the ordinary course of the bank’s business, and made prior to, or on the day of, the bank becoming notified by the administrator, or otherwise having reason to believe, that the company was in administration.356 Directors or officers who enter into, or who are knowingly concerned with, a void transaction commit an offence,357 and may also be made to compensate the company or any other person who has suffered loss by reason of that offence.358 Company shares may not be transferred, or the rights and liabilities of

shareholders altered, without the consent of the administrator or the court.359 The appointment of an administrator does not automatically terminate employment contracts and the duty of good faith360 continues to apply between employees and the company, or, if the administrator expressly [page 64] adopts an employment contract, between relevant employees and the administrator.361 The appointment of the administrator triggers a moratorium, for the period of the administration, during which no commencement or continuation of proceedings, enforcement process or execution of judgments, or enforcement of charges, may occur without the consent of the administrator or the court.362 The administrator is not liable in damages for refusal to consent to any enforcement steps.363 In Maxim Group Ltd v Jones Publishing Ltd,364 the plaintiffs sought to continue proceedings for interim relief in relation to alleged copyright infringement. The Court refused leave in the circumstances, including that it was early in the voluntary administration process, the watershed meeting was due to be held the following day, the relief sought would constrain the proposed DOCA proposal and also because the merits of the plaintiffs’ case were weak. Randerson J noted that the Australian cases suggest that the courts will be very reluctant to grant leave, although His Honour was reluctant to adopt an exceptional circumstances test, given that the rescue purpose of voluntary administration distinguished it from liquidation. He stated that:365 A relevant consideration in granting permission will be whether [it] would be consistent with the statutory objectives. Other matters likely to be of relevance are whether the grant of permission to bring or continue legal proceedings will divert the attention of the administrator from the task at hand or would result in burdensome legal costs being incurred which would otherwise be available for creditors generally. The interests of the creditors as a whole are to be considered.

Further factors were whether there are other opportunities to the parties seeking leave to have the issue litigated and the length of time before that opportunity may be available. The interests of the creditors overall may require that the plaintiff’s right of access to the courts should be postponed rather than prohibited for all time. Lastly, he noted that the court had broad supervisory powers in a voluntary administration and in a DOCA in subpart 17. In particular, s 239ADP(2) enabled a creditor to apply to court of any order necessary to

protect its interests during the administration. In this case, the plaintiffs sought an advantage which would put them in a more favourable position than other unsecured creditors under the proposed DOCA and in any [page 65] case it was not clear that they would fare better through the ligitation than under the DOCA. No guarantees may be enforced against directors of the company or their relatives without leave of the court.366 This protection for directors is designed to give directors an incentive to initiate a voluntary administration without fear of having their guarantees for company debt called upon. Further, the existence of the moratorium cannot prevent limitation periods or other time limits running against a creditor.367 The stay on proceedings only extends to any “proceeding in a court”.368 Proceedings in tribunals, arbitrations or other fora are not within the scope of the stay. The prohibition on enforcement of charges does not extend to notices given under a security agreement,369 notices in leases, or other agreements relating to property used or occupied by the company.370 Thus, notices of default that are preconditions to repossession under leasing agreements, for example, or statutory notices to remedy breaches of covenant in leases, may be served notwithstanding the moratorium, and are distinguished from subsequent steps amounting to repossession of property or termination of a lease. This enables the secured creditor, owner or lessor to ensure that their right to enforcement or repossession is preserved by taking any necessary contractual steps, but the actual enforcement or repossession itself is stayed.371 In Pacific Trawling Ltd v Coleman (as admin of E&B Management Ltd)372 the applicant applied for leave under s 239ABE(b) to bring an application for an order to repossess a fishing trawler sold to the company now in administration. There were disputes about the agreement amounts, although it appears that the company had paid most of the purchase price. The applicants had given notice to cancel the contract. The applicants wished to convert the trawler into a long-liner vessel for ling fishing and then re-let it, and stated that the application was urgent as the necessary conversion involved expensive imported machinery. The Court, citing the reasoning of Heath J in Maxim v Jones Publishing Ltd,373 and Australian

[page 66] authorities,374 held that in this case there was no urgency which would justify giving leave at this stage. First, if the applicants cancelled the contract it would result in a windfall, given that the majority of the purchase price had been paid for by the company bar $300,000 — this would entitle the respondent company to apply for relief from cancellation. Secondly, the equity value in the vessel of approximately $1.5 million was ample to cover any damages. Thirdly, there had been a hearing of an application for liquidation of the company that was due to be decided imminently and this would, if granted, terminate the administration and render the application otiose. Lastly, there was also an imminent decision on an extension of the convening period for the watershed meeting, and the application would be better to be refused currently, but not dismissed, pending the decision on the creditors’ meeting, since it was true that the delay could cause prejudice to the applicants. Creditors, owners and lessors who have already commenced steps to enforce security prior to commencement of administration, including steps taken by a receiver to sell, or arrange the sale of, property, may continue to enforce, as can those in respect of perishable property.375 The normal prohibition on dealing with the company’s property without permission of the administrator or the court376 does not apply to such enforcement steps. However, the court may, on application of the administrator, restrain enforcement where satisfied that the creditor is “adequately protected”.377 The concept of “adequate protection” is familiar in United States law,378 and has also been used in the Australian voluntary administration procedure.379 Although the phrase is not used in the English administration legislation, the courts have considered guidelines for the exercise of discretion to give or refuse leave to enforce security, or rights of lessors or owners.380 Examples of adequate protection would include an agreement by the administrator to provide cash, or substitute security to the value of the secured creditor’s secured debt, or agreements to discharge that debt out of sale proceeds of charged assets. Another example is where the secured creditor has a sufficient “equity cushion” that no further protection is required. [page 67]

(g) (i)

First meeting of creditors Overview

Within eight working days of appointment, the administrator must hold the first meeting of known creditors.381 The administrator must give notice in writing of this, not less than five working days before the meeting, to as many creditors as reasonably practicable, and advertise the meeting.382 The purpose of the first meeting is twofold: First, to ascertain whether creditors wish to appoint another person as administrator; and secondly, to appoint a creditors’ committee, although such a committee has limited powers.383 The original Australian time limit for this meeting was five days.384 However, a reform recommendation385 that it should increase to eight business days in Australia was incorporated into the New Zealand provision. The administrator must also table an “interests statement” concerning any business relationships that he or she, or his or her firm, has with the company or any of its officers, shareholders or creditors.386 The administrator is also obliged to table a director’s statement of the company’s position at the first creditors’ meeting. However, if the administrator extends the time for compliance, it can be tabled at the watershed meeting.387 The statement must, barring extension, be given to the administrator within five working days from the start of the administration, and must cover the company’s business, property, affairs and financial circumstances.388

(ii)

Replacement of administrator

If the creditors resolve to replace the administrator, they must appoint a qualified replacement, who must table at the creditors’ meeting, a written consent to act, and a disclosure of interests statement.389 If an administrator is replaced by another appointor, due to death, resignation or disqualification, then the [page 68] creditors have the opportunity to replace the replacement administrator, who must convene the creditors’ meeting for that purpose within five days of his or

her appointment.390

(iii) Voting at creditors’ meetings Part 15A adopted parts of the Fifth Schedule to the Companies Act 1993 (which applies in a liquidation) with respect to creditors’ meetings.391 However, a resolution will be passed if approved by a majority in number, representing 75 per cent in value, of the creditors or class of creditors, voting in person, by proxy or postal vote.392 The administrator or nominee must chair the meeting, and has a casting vote.393 The administrator may estimate the amount of any uncertain creditor’s claim, but an aggrieved creditor, or the administrator, may apply to the court to determine the amount as it sees fit.394 The voting threshold of 75 per cent in value differs from Australia, where it is 50 per cent in value and a majority in number.395 The reason for the difference is that New Zealand has adopted the same threshold as applies in Part 14 compromises, since otherwise, there would be a distinction between the two rescue procedures which may carry incentives to use one rather than the other. Australia does not have a procedure equivalent to Part 14, although it does retain Part 5.1 of the Corporations Act 2001, a court-sanctioned scheme of arrangement procedure, for which the crucial majority is 75 per cent in value.396 The New Zealand Government chose in those circumstances to have the same voluntary administration voting threshold as in the retained New Zealand Part 14 procedure, rather than amend the latter to bring it into line with the Australian voluntary administration threshold.397 The other controversial aspect in Australia has been the administrator’s casting vote. There is a body of case law as to how the administrator should exercise his or her discretion in that regard.398 However, the Australian Parliamentary Joint Committee concluded [page 69] that the casting vote should remain, except on resolutions concerning the administrator’s remuneration or removal.399 While it may have been the intention of the New Zealand legislature to simply reflect the Australian provision, the wording of the legislation is different, since Reg 5.6.21 of the the Australian Corporations Regulations sets out the operation of the casting vote, and there is no similar prescriptive provision in the New Zealand Act or in any

Regulations. In Grant v Commissioner of Inland Revenue400 the Court of Appeal upheld the decision of Hugh Williams J below. In that case, three companies in the Jones Publishing Ltd Group went into administration and a single DOCA was proposed to creditors of each, conditional upon approval by creditors at the other meetings. While the approvals were obtained for two, in relation to Jones Publishing Ltd, the CIR opposed the DOCA and its debt was larger than 25 per cent of the value of the total debt, notwithstanding that a clear majority in number approved the DOCA. In that situation, the administrator purported to exercise a “casting vote”, and the CIR later applied to declare the DOCA void. Hugh Williams J held that a casting vote only applied where the relevant votes were equally divided. This could only ever be relevant under s 239AK(3) when there was a tie on the number of votes cast in favour and against. The Court of Appeal, in dismissing the appeal, refused to read into the New Zealand Act the “carefully prescriptive” Australian Regulation, since this was not a case where Parliament’s intention was thwarted by a drafting error. Whatever its initial intention, it had moved away from that by choosing the “supermajority” of 75 per cent in value of the debt in order to align the threshold with that for Part 14 of the Companies Act 1993, a factor which was not relevant in Australia:401 The chair may use a casting vote only where, following the first round of voting, the votes for and against the resolution are equal in number (Condition 1). But before the casting vote may be used, the votes in favour of the resolution must also represent at least 75 per cent of the value of the debt (Condition 2). In other words, a casting vote can only be used to break a numerical deadlock so as to comply with Condition 1. It cannot be used to make up any shortfall in relation to value under Condition 2.

The Court stated that if it were otherwise, there would be perverse outcomes in that the opposition of the vast majority by value could be effectively ignored by the chair exercising a casting vote to favour the approval by a bare majority in number. That would frustrate Parliament’s choice of the “supermajority” in value requirement. It is the court’s role to interpret the last as enacted, not earlier versions in the legislative process. Any alteration would have to come [page 70] from Parliament reviewing, in the light of early voluntary administration cases, the decision to align s239AK with Part 14’s threshold, rather than align it with the Australian position. The Court seemed to be inviting Parliament to think again about the wisdom of the “supermajority” threshold for voluntary

administration, which clearly makes it harder to obtain approval of DOCAs. In the case of the watershed meeting, the administrator and directors must inform the meeting in advance of voting, of any voting arrangement of which they are aware that requires one or more creditors to vote in a particular way on any resolution.402 This adopts a recommendation made by the Australian Companies and Securities Advisory Committee (CASAC) review of voluntary administration,403 although it is interesting to note that it has not been adopted in the draft Australian Bill that has recently been published.404 To the extent that administrators already have an obligation to report to creditors “any … matter material to the creditors’ decisions to be considered at the meeting”,405 this specific provision probably just reinforces that the administrator must disclose any known arrangements. It imposes a separate obligation upon directors. However, the meaning of “voting arrangement” is left undefined, and it is hard to discern from the CASAC report what exactly the provision is designed to cover. A new provision, recommended in the Australian review,406 provides that the court may order that, for limited purposes, pooled property owners are treated as a separate class.407 This refers to owners or lessors of property who are pooling an investment in a single enterprise, such as a block of flats, land, or certain viticulture or forestry investment schemes. It has proved difficult to get every single investor to assent to a proposal. The provision does not require a separate class meeting of pooled property owners, but merely provides that if 75 per cent in value of the pooled property owners vote in favour of the resolution, it will be binding on all within that class. It is not clear whether this will be much used in New Zealand. In addition, the ability of a creditor or the administrator to apply to the court to disregard related parties’ votes has been introduced to voluntary [page 71] administration, as recommended in the Australian reform proposals, and is also introduced to liquidation by the 2006 Act.408 Joint meetings of related companies are discussed below.

(h)

Status, duties, and liabilities of administrator

During the administration, the administrator may carry on the business of the company, and also has the power to terminate or dispose of all or part of the business or property, to take, defend or continue legal proceedings, and to employ agents to do anything that the administrator has power to do.409 The administrator is an agent of the company,410 but is personally liable for debts incurred by him or her for funding the company, for services or goods purchased, or property hired, leased or occupied during administration.411 In the case of rent for the use of premises, and contracts of employment, Part 15A of the Companies Act 1993 is similar to the provisions that apply to receivers in the Receiverships Act 1993.412 Thus in the case of rent for the use, possession or occupation of premises in relation to an agreement entered into by the company prior to administration, the administrator has a seven-day grace period in which to decide whether to issue a “non-use” notice, after which, if no such notice is issued, he or she will413 be personally liable for the ongoing rent during the period of the administration, for so long as the use and occupation continues by the company, or unless and until a secured creditor enters into possession, or appoints a receiver in respect of the property.414 If a non-use notice is issued within the grace period, then provided the company does not later assert any right to use the property, and the administrator does not revoke the notice, then the administrator will not be personally liable. This does not prevent the company from being liable for rent and other payments during the period of the administration.415 In the case of contracts of employment entered into by the company prior to administration, the administrator will be liable if they are expressly adopted by him or her.416 There is also a 14-day grace period during which contracts of employment may be lawfully terminated by the administrator to avoid [page 72] implied adoption.417 Of course, where the administrator has actually entered into any contracts or obligations, including funding commitments, he or she is personally liable for these.418 The administrator is entitled to charge reasonable remuneration and the court may fix remuneration at a level that is reasonable in the circumstances.419 Where

a creditor or shareholder wishes to apply to the court to fix the administrator’s remuneration, the court’s leave will be required.420 The administrator is entitled to an indemnity out of the assets for remuneration and for personal liability incurred in performance of duties, other than in bad faith or negligence.421 This indemnity has preferential status and accordingly gives priority over unsecured creditors and over-secured creditors with charges over inventory and accounts receivable subordinated under Schedule 7 to the Act. Moreover, the indemnity is secured by a lien over the company’s property, with priority over such secured assets.422 Administrators do not have the same power as a liquidator to challenge voidable transactions. Although submissions both here and in Australia have suggested that they should, the counter-argument is that administration is primarily about business survival, and supposed to be a temporary state of affairs. Further, it would be a disincentive to directors to trigger voluntary administration at an early stage. Administrators do have the same rights to the company’s documents and property as liquidators,423 and have the power to lodge a report with the Registrar of Companies as to any matter of concern.424 Further, administrators have a statutory duty to report to the Registrar of Companies where they believe that there has been any misconduct by directors, officers or shareholders, or the company itself under the Companies Act 1993 or various companies, securities and criminal legislation listed in the Act. Administrators also have a duty to report to the Registrar where they believe that any person [page 73] who has taken part in the management, promotion, formation or liquidation of the company, may be liable for misfeasance in relation to company money or property, or any other breach of duty in relation to the company.425 Administrators must file accounts at six-monthly periods, and at the end of the voluntary administration.426 The statutory provisions are not exhaustive of the administrator or the deed administrator’s liabilities. In carrying out financial reporting and other functions normally performed by officers or directors, administrators are acting in a fiduciary capacity.427 Despite the fact that they are not appointed by the court, they are probably officers of the court.

(i) (i)

“Watershed” meeting Overview

It is the duty of the administrator, as soon as practicable, to investigate the company’s circumstances and form an opinion whether it would be in the creditors’ interests to execute a DOCA, end the administration (and so return the company to control of its directors), or liquidate the company. 428 This opinion will form the basis of the administrator’s report to the all-important “watershed” meeting. The administrator must report to creditors as to whether a DOCA is possible (in which case details of the proposed DOCA must be included), or whether, in his or her opinion, the company should instead be liquidated.429 This is the most significant meeting in the administration as its statutory purpose is “to decide the future of the company”.430 The administrator must convene the decisive watershed meeting within the “convening period”, which is 20 working days from appointment, or longer if extended by the court.431 The meeting must be convened by giving notice, not less than five working days before the meeting, to creditors, and advertising in accordance with s 3(1)(b).432 The meeting must then be held within five working days after the end of the convening period, or extended period.433 In re Nylex (NZ) Ltd,434 in an application to extend the convening period, Heath J stated:435 [page 74] Although counsel for the Administrators, in a memorandum in support of the without notice application, suggested that the administration would come to an end if an order were not made [to extend the convening period] before the “convening period” expired, I do not interpret the Act as contemplating such an abrupt termination. Section 239E(2)(c) refers to the administration ending at a time when the “application [to extend the convening period] is refused or otherwise disposed of without the convening period being extended”. Because s 239AT(4) contemplates an application to extend being made “before or after the convening period has expired”, the administration does not come to an end if no extension order were made before the period of 20 working days expires.

This means that effectively the watershed meeting must ordinarily be held within 25 working days from appointment of the administrator. In Australia, the time period was 21 days, and recommendations to extend it436 were taken into

account by the New Zealand Government in the 2006 Act. In Australia, there is also a 45-day limit on the adjournment period.437 Nevertheless, time extensions have been granted frequently by the courts in Australia,438 who have considered the objects of voluntary administration, while trying to hold to the principle enshrined in the tight timetable, that administration should not be a lengthy procedure.439 The reality is that in larger or more complex cases,440 the administrator needs more time to investigate, formulate viable proposals and consult with any creditors’ committee. In the first New Zealand case where this has been considered, re Nylex, Heath J noted:441 The s 239AT(3) discretion to extend time to convene a watershed meeting is expressed in unfettered terms. … [I]t must be exercised having regard to the purposes of the voluntary administration regime and the duties upon an Administrator. The Court must also be mindful that applications of this type will, necessarily, be made without notice. Accordingly, there is a duty on the Court to scrutinise any application carefully.

[page 75] It is clear from the strict time limits contained in the legislation and the need to keep a moratorium against the exercise of certain creditors’ rights in place for the least time practicable, that Courts should take care in determining whether to grant applications to extend the convening period. There will be cases … where such an application is only made for the purpose of delay and extension of the moratorium. But, in a case where complexity reigns and an Administrator cannot, in the time prescribed, conduct a proper investigation to form opinions to put to creditors at a watershed meeting, it is appropriate (and indeed necessary) to extend the convening period so that the Administrator can perform his or her functions properly and creditors, at the watershed meeting, can make informed decisions.

In the case before him, the situation was complex in terms of assessing the options for ongoing trading, and the likelihood of significant cross-border issues in relation to an Australian parent company. A balance had to be struck between the expectation that the administration would be relatively speedy and the need to ensure that undue haste did not prejudice sensible and constructive actions directed towards maximising returns to creditors. Heath J granted the extension of the period by five months, and ordered that notice of his order be given in the four regional daily newspapers. Citing the above words from Re Nylex, Associate Judge Bell in Re WGL Retail Holdings Ltd,442 considered an application to extend the convening period in the largest case since the introduction of Part 15A in New Zealand. The case

involved a number of New Zealand companies in the Australian RED Group including Borders and Whitcoulls book retailers. In addition to stores in Singapore and Australia, there were 87 retail outlets in New Zealand and 1,200 employees here. Head Office functions were split between Australia and New Zealand. In addition to the size and complexity of the Group’s operations, and the numerous leases and retention of title claimants involved in the case, the Christchurch earthquake on 22 February 2011 impacted on 13 of the Whitcoull stores and their staff, and gave rise to insurance issues. The administrators wished to carry on trading many of the businesses and stores while seeking purchasers, and their evidence was that this would take approximately 14 weeks for the advertising and sale process. The administrators had informed creditors at the first creditors’ meeting that they intended to apply for this extension, and there was no objection from that meeting or from the creditors’ committee that was formed for wo of the companies. The Court agreed that creditors would not be unduly affected by an extension, and a major secured creditor supported the application. Creditors’ ongoing dealings with the administrators were protected by their personal liability. Associate Judge Bell also cited Austin J in Re Riviera Group Pty Ltd,443 where His Honour helpfully grouped together reasons for an extension: [page 76] (a) Size and scope of business; (b) Substantial offshore activities; (c) Large number of employees with complex entitlements; (d) Complex corporate group structure and inter-company loans; (e) Complex transactions entered into by the company (for example, securities or derivatives); (f)

Lack of access to corporate financial records;

(g) Time needed to execute orderly process of disposal of assets; (h) Time needed for thorough assessment of proposal for a DOCA; (i)

Where extension will allow sale of the business as a going concern,

(j)

More generally, additional time is likely to enhance return for

unsecured creditors. Associate Judge Bell granted an extension for six months, noting that although that was at the “top of the range” even for Australia, in the Australian administration of this Group the New South Wales Court had made an order in March for extension until September 2011, and it was desirous where possible to coordinate the timetable with the Australian administration. Independently of that consideration, six months was appropriate in the circumstances here, given the scale and complexity of the administration and the time required for the sale process. In addition the Associate Judge made an order under s 239ADO allowing the administrators to call a watershed meeting sooner than six months if possible. The meeting may be adjourned for up to 30 working days, or longer if the administrator applies to Court for an extension of the 30-day period.444 The directors (absent a valid reason) are obliged to attend the watershed meeting,445 unlike in Australia.446 However, directors cannot be required to answer questions.447 Failure to attend without good reason is an offence.448 [page 77]

(ii)

Outcomes of watershed meeting

There are three possible outcomes:449 first, a resolution that the company executes a DOCA, as specified in the resolution (even if it differs in detail from the one specified in the notice of the meeting); secondly, a resolution that the administration should end; and thirdly, a resolution to appoint a liquidator, unless a liquidator is already in office. If the creditors resolve to terminate the voluntary administration without liquidation, this will terminate the moratorium and the company will return to the control of its directors. If the meeting resolves to liquidate the company,450 or if the DOCA is not executed within 21 days, the company will be wound up,451 and provision is made for the administrator to be liquidator in a deemed voluntary liquidation.452

III.5 The deed of company arrangement

(a)

Overview

A deed of company arrangement (DOCA) must contain certain prescribed details,453 which include the property of the company available to pay creditors, the nature and duration of any moratorium and the extent to which the company will be released from its debts. It must also include any preconditions for commencement, continuation and termination of the deed. The order in which proceeds of realisation will be distributed must be specified. Importantly, the DOCA must state a “cut-off” day, which is a day after the commencement of administration, on or before which creditors’ claims must have arisen in order to be admissible under the deed. However, the scope for what is included in the DOCA is wide and not otherwise fettered by the Companies Act 1993. As a DOCA usually results in distribution to creditors, the mandatory set-off rules of liquidation are applied to the DOCA. Consequently, where there have been mutual credits, debts or other dealings between the company and a creditor whose debt is within the DOCA, an account is taken, and only the balance may be admitted under the DOCA or payable to the company, as the case may be.454 [page 78] The deed must be executed within 15 working days of the watershed meeting, or such further time as the court allows on application for extension.455 The Australian courts have indicated that once creditors have resolved that a DOCA be executed, it should be done quickly; therefore, the discretion will be exercised sparingly.456 Despite the existence of the administrator, the company board must resolve to execute the DOCA.457 If the company fails to execute the deed within the deadline, the administrator must apply to put the company into liquidation, or revive a suspended liquidation.458 In the period between the resolution to effect the DOCA, and its execution, no person bound by it must do anything inconsistent with its terms without court permission, nor take any step that would be prohibited if the deed were executed.459 Once the company and the deed administrator have executed the deed,460 it is binding on the company, its officers and shareholders, and the deed administrator.461 It is binding on all creditors who have claims arising on or before the specified “cut-off day”, but does not bind secured creditors, owners or

lessors unless they voted in favour of the resolution to effect the DOCA and the deed provides that they will be bound.462 Alternatively, the court can order such creditors to be bound, provided that they are given “adequate protection” and that the success of the DOCA would be materially adversely affected if they were allowed to enforce or deal with their charge or property, as the case may be.463 The DOCA will release the company from its debts to the extent that it provides, and to the extent that a creditor is bound by it for those debts. However, it will not discharge a guarantor or indemnifier in respect of those debts.464 This was confirmed, following the High Court of Australia’s decision in Lehman Brothers Holdings Inc v City of Swan465 and in a decision of the [page 79] District Court of New Zealand, Atlas Resources Ltd v Aull.466 In the New Zealand case the two directors and shareholders of a construction company that went into administration had entered into a credit agreement with Atlas. Under the proposed DOCA they agreed to sell their house and distribute the proceeds (free of the mortgage) to creditors. In consideration of this, creditors would not be able to bring proceedings against the directors without leave of the court. The DOCA was approved at the watershed meeting but Atlas did not vote in favour of it (and no vote against the DOCA occurred). Judge Hinton found that this fell squarely within the decision in Lehman, and that the wording considered in that case was substantially the same as the New Zealand provision. The DOCA only binds the company and creditors with claims against the company at the cut-off day.467 The language of the DOCA in this case confirmed this. The DOCA cannot bind third parties without their individual consent. Creditors could always agree to do so, but they could not be bound if they did not so agree.468 Judge Hinton said that it was “counterintuitive that a DOCA could regulate steps that a creditor might take, in relation to its separate choices or other rights and remedies. … On first principles there should be statutory authority to trump the contract of guarantee”.469 He held that the DOCA can only deal with claims against the company and the release or compromise of those claims and not claims a creditor might have against or in relation to another entity even though they relate to the claim against a company. A DOCA should concern the compromise or release of the claim against the company and incidental matters which did not extend to interference with individual or other rights.470

If a DOCA is approved, the administrator (or someone else appointed in it) becomes the “deed administrator”.471 The provisions regarding appointment and qualifications of the deed administrator mirror those for the administrator discussed above.472 Although the deed administrator is entitled to charge reasonable remuneration, with the ability of the court to fix it if necessary, there is no statutory indemnity, lien or priority in this case. This makes it crucial to deal with remuneration and expenses of the deed administrator in the deed.

(b)

Termination of voluntary administration

The voluntary administration terminates on approval of a binding DOCA, when creditors resolve that the voluntary administration should end, or when [page 80] they resolve at the watershed meeting to appoint a liquidator.473 The voluntary administration could also terminate by order of the court, on application by interested persons. Termination may also occur if the convening period for the watershed meeting expires without the meeting having been held, if the meeting terminates without a resolution for a DOCA, or if the company fails to execute the DOCA within the time allowed.474

(c)

Variation and termination of DOCA

Creditors may vary the DOCA at a meeting convened for that purpose, although the variation must not be materially different from that in the notice of the meeting.475 The deed administrator must convene such a meeting if requested by creditors whose claims are not less than 10 per cent in value.476 The consent of the deed administrator may be required before a variation can take effect.477 Any creditor may apply to the court to cancel such a variation, and the court may make various orders where just and equitable.478 The DOCA may be terminated automatically in circumstances set out in the deed, or terminated by the creditors by resolution, if a material breach has not been rectified.479 At a meeting resolving to terminate in those circumstances, the creditors may also resolve to appoint a liquidator.480 Lastly, the DOCA may be

terminated by the court on application of the company, creditors, deed administrator or any other interested person. In this case, the court may terminate a deed of company arrangement if it is satisfied that: (a) an information breach has occurred; or (b) there has been a material contravention of the deed by a person bound by it; or (c) effect cannot be given to the deed without injustice or undue delay; or (d) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be done or made under the deed would be, — (i)

oppressive or unfairly prejudicial to, or unfairly discriminatory against, 1 or more of the creditors; or

(ii) contrary to the interests of the company as a whole; or (e) the deed should be terminated for some other reason.481

[page 81] There is a considerable body of case law in Australia as to when a DOCA may be held to be “oppressive, or unfairly prejudicial or discriminatory”. There is Australian authority that creditors, including preferential creditors, may be treated differently from other unsecured creditors without such differential treatment necessarily being unfair in the context of a proposal to rescue all or part of the business.482 However, that would not be the case where a DOCA is being effected as an alternative means of distribution to a liquidation. The Companies (Voluntary Administration) Regulations 2007, cl 4(1) and Schedule 1, deems the following clause to be included in a DOCA unless expressly excluded: The deed administrator must apply the assets of the company coming under his or her control under the deed in accordance with the priorities specified in Schedule 7 of the Companies Act 1993 as if the company were in liquidation and the deed administrator were the liquidator.

While it was not necessary to decide the issue (given their decision on the casting vote issue dealt with above), the Court of Appeal in Grant v Commissioner of Inland Revenue, expressed the view that it was open to the judge to conclude that the differential treatment of the Commissioner of Inland Revenue was “oppressive and unfairly discriminatory” and went on:483 We have no doubt that it is completely artificial to consider only the position at the time of the voting process. To exclude from the assessment what will happen on a liquidation is to view only half of the story … the High Court decision [in this case] has brought about a change in practice in similar situations. It is now the norm in cases of voluntary administration for the

Commissioner’s preferential debts to be recognised in the DOCA. This is consistent with the practice in Australia …

It will be seen in the next section that Australian courts have been willing to use their broader supervisory powers to order variations of DOCAs, aside from these specific provisions.

(d)

The role of the court

The role of the court in a voluntary administration is said to be “supervisory”, but that underplays the significance and frequency of the courts’ involvement, certainly judging by the Australian experience. The courts have interpreted their supervisory jurisdiction widely, and have used the power contained [page 82] in s 447A of the Australian Corporations Act 2001,484 their powers to make orders protecting creditors485 or to give directions at the request of the administrator,486 and other powers, to effect a wide range of outcomes.487 In the early days of voluntary administration in Australia, it was emphasised that although the court’s power under that section is wide, it is not unlimited. First, it is limited to “how the Part is to operate in relation to a particular company”, and thus does not directly cover any question of the operation or effect of the Part generally.488 Secondly, although the court can alter the normal effect of a voluntary administration provision on a particular company, it is a judicial power, not a legislative or Executive one. The leading case on the court’s role is the High Court of Australia’s decision in Australasian Memory Pty Ltd v Brien.489 The High Court endorsed a relatively wide view of the meaning of the Australian s 447A, so that it was possible for a court to override specific provisions dealing with variation of time limits,490 and to deal with matters in a DOCA even though the administration has terminated. Despite specific provisions dealing with variation of DOCAs, the section has been held to allow the court to make orders amending DOCAs.491 If the administrator requires more general advice as to the effect of some aspect of Part 15A of the New Zealand Companies Act 1993, or any steps that he or she may wish to take, such as the extent of his or her statutory powers, the

proper provision is s 239ADQ. However, the courts have emphasised that they will not rule on matters which are for commercial judgment of the administrator.492

(e)

Relationship with liquidation

As noted above, a liquidator has standing to appoint an administrator out of court, or to apply to the court to do so where necessary.493 If an administrator [page 83] is appointed, the liquidator remains in office. However, the liquidation is suspended and can be revived, for example, if at the watershed meeting the creditors resolve to do so, or if no DOCA is executed within the prescribed time.494 The voluntary administration ends on the appointment of a liquidator, or the revival of a suspended liquidation.495 Execution of a DOCA probably does not automatically terminate an existing liquidation,496 but the position in Australia has been unclear, and the CASAC report in Australia recommended that a deed administrator have standing to apply to terminate a liquidation, which was introduced in Australia in 2008.497 Section 250 of the Companies Act 1993 is therefore amended to provide that a deed administrator has such standing to apply to the court to terminate liquidation. The court will have regard to various factors, as recommended by CASAC, including whether the DOCA would leave the company insolvent. The court would be reluctant to allow the court-ordered liquidation of an insolvent company to be terminated. Misconduct of directors is another factor.498 On an application for compulsory liquidation (and/or for the appointment of an interim liquidator), the court may appoint a liquidator, or may adjourn the application if satisfied that the company should continue in administration.499 Where the creditors resolve to appoint a liquidator, the former administrator is the default liquidator, unless another person who is not disqualified, unable or unwilling to act is appointed.500 Where a company in administration subsequently goes into liquidation, acts of the administrator done in good faith may not be set aside.501 This also includes acts done with the consent of the administrator. Voidable transactions legislation

does not apply to enable a liquidator to challenge transactions by the company that are executed by or with the authority of the administrator, or specifically authorised by the DOCA. This provides double protection to the administrator and the company, since s 239AEE already states that such payments or transactions are “effective for the purposes of this Act”. Strangely, [page 84] this double protection does not extend to transactions at an undervalue,502 but they may be protected in any event by s 239AEE.

(f)

Key differences from Australian voluntary administration legislation

Some procedural differences between Part 5.3A of the Corporations Act 2001 (Cth) and Part 15A (New Zealand) have been noted at the relevant places in the text above. Several of the existing procedural differences stem from the opportunity taken to incorporate reform recommendations of the CASAC committee, and Parliamentary Joint Committee Corporate Insolvency report in Australia.503 Others, such as the different voting thresholds, stem from a desire to avoid creating anomalies within the principal Act. Other differences between the New Zealand and Australian voluntary administration provisions relate to terminology, or to use of other provisions of the New Zealand Companies Act 1993504 and Schedules.505 Two important areas where substantive law differs are in the area of netting agreements and pooling orders. With regard to netting agreements, ss 239AEH–239AEP of the Companies Act 1993 apply the same provisions as apply on a New Zealand liquidation in respect of the application of netting agreements with recognised clearing houses. The court’s power to make pooling orders already exists in New Zealand liquidations.506 In Australia, both the CASAC report in respect of corporate groups,507 and its later report on rehabilitating large and complex enterprises in financial difficulties, recommended that there should be the possibility of pooling in relation to group companies in administration. Indeed, attempts have

been made, with varying success, to use the courts’ wide supervisory powers under the Australian s 447A and other powers to allow pooling within DOCAs of related companies.508 In addition, it was also recommended by the [page 85] 2000 CASAC report that administrators in related companies in administration should be able to hold joint meetings, for the sake of organisational efficiency. Although these suggestions have not been incorporated into Australian law in the case of voluntary administration (but only for liquidation),509 the New Zealand Government decided that, especially since s 271 already existed for liquidations, the amendments should provide for pooling in administrations.

(i)

Joint meetings

First, in relation to meetings, it is provided that the administrators of related companies, with the consent of all the creditors of those companies, may call meetings to be held at the same time and place.510 A creditor’s consent is presumed from lack of written objection in response to a notice sent by the administrator, and informing the creditor of his or her right to object. The administrator may specify a response time, which must be reasonably practicable in the circumstances. However, a creditor may only vote on a resolution that relates to a company of which that person is a creditor, so the meetings are in effect still separate as respects voting.511

(ii)

Pooling

Subpart 21 of Part 15A sets out the provision for single administration of related companies. The concept of a “pool” is used, meaning a pool of related companies in a single administration under one order.512 If two or more related companies are in administration, the court may order that the administration must proceed together as if it were one company, to the extent that the court orders.513 The court may make such an order where it is just and equitable to do so, but must have regard to a list of factors514 which concentrate on how far the companies’ affairs were intertwined. No doubt the existing jurisprudence of the

court as to the making of pooling orders in a liquidation will be drawn upon here,515 since similar factors apply. Courts have been cautious about the making of pooling orders in liquidation, given the likely practical risk of prejudice to at least one group of creditors in some of the companies, or to all creditors in one or more companies. However, the liquidation authorities should be treated with caution in the context of administration given first, the detailed statutory [page 86] list of factors for the Court to take into account in liquidation,516 and given the rescue objectives of Part 15A,517 courts may be more willing to grant such orders than in the liquidation situation. The consequences of an order that the pool companies be treated as a single administration, are that a single DOCA may be executed, and the Court may make further orders as to voting.518 However, unless impracticable to do so due to the degree of intermingling or otherwise, creditors of a pool company may only vote on a matter related to a pool company of which that person is a creditor.519 The advantage of a pooling order of this type lies largely with the ability of the administrators to run the affairs of the group, and primarily the possibility of a single DOCA.

III.6 Liquidation There was no separate paper in the insolvency law review on Liquidation, though there were relevant papers on Directors’ Duties, Phoenix Companies, and the Role of the State. However, in April 2004, alongside the draft Insolvency Law Reform Bill, the Ministry of Economic Development published a Discussion Document on Regulation of Insolvency Practitioners, setting out various options.520 In part the selection of this topic for scrutiny arose out of the Trans-Tasman aspect, particularly in view of both the proposal in the draft Bill for adoption of the voluntary administration procedure, and the existence of the Trans-Tasman Mutual Recognition Act 1997. This Act provides that in respect of a registered occupation, such as that run by the Australian Securities and Investment Commission in relation to insolvency practitioners, automatic recognition must

be afforded to such practitioners applying for admission in New Zealand, subject to criteria laid down in the Act. Although the Ministry of Economic Development issued a subsequent discussion paper on Insolvency Practitioner Regulation521 on which consultation closed in January 2007, earlier consultation on this topic522 [page 87] revealed that, irrespective of whether or not proposals were to be forthcoming for the broader regulatory framework for the profession, changes to the Companies Act could be made in the short-term which would deal with some of the criticisms made by submitters in relation to so-called “friendly liquidators” in creditors’ voluntary liquidations, and in relation to more accountability by liquidators to creditors generally.523 Therefore, the 2006 amendments to Part 16 of the Companies Act 1993, detailed below, concern a variety of disparate liquidation matters, although several are concerned with the appointment of liquidators and qualifications of liquidators, and tightening up the requirements for reporting to creditors. Since the publication of the first edition of this book in 2007, a broaderreaching Insolvency Practitioners Bill 2010 has been introduced, this, in its latest version, is discussed in Part VI below. One proposal in the Bill which has general application is that the administrative functions of the Official Assignee in respect of the Companies Act be transferred to the Registrar of Companies.524

(a)

Restricting liquidation

commencement

of

voluntary

Provision is made for restricting the appointment of liquidators by resolution in circumstances where an application for compulsory liquidation has been filed. (A similar provision applies to appointment of an administrator where a compulsory liquidation application has been commenced.525) Where a creditor, or other applicant entitled to apply to the court for the appointment of a liquidator, has made such application but the application has not yet been disposed of, neither the board of the company, nor shareholders by resolution, may appoint a liquidator unless they do so within ten working days after service

on the company of the application to the court.526 The purpose of this provision is to prevent directors and shareholders from frustrating an application for compulsory liquidation by initiating a voluntary liquidation at the last minute before the court hearing finally disposes of the application.527 Even if a “voluntary” liquidator is validly appointed within the [page 88] ten-day window the applicant for the court liquidation may apply to court for review of the “voluntary liquidator’s” appointment.528 In Commissioner of Inland Revenue v Castor Bay Villas Ltd,529 an application to place the company in liquidation was filed on 27 June 2007, but did not come on for hearing until 15 November 2007. The shareholders resolved to appoint different liquidators on 13 November (s 241AA came into force on 1 November). The Court found that the new section did not operate retrospectively530 to deprive the shareholders of their right to appoint altogether, due to the time period of ten days having long expired. If Parliament had intended that to be the case it should have said so.531 If shareholders purport to appoint a liquidator outside the ten-day window after service on the company of a court application for liquidation, that appointment is invalid and of no effect. It therefore follows that applications under s 241AA(3) to review appointments by shareholders only apply to valid appointments, that is, those made within the ten-day period: Commissioner of Inland Revenue v Kecamaho Haulage Ltd.532

(b)

Reporting to creditors

In response to submissions about lack of accountability to creditors where liquidators, especially those appointed out of court, were able to avoid any meeting or reporting to creditors whatsoever, the government has reversed some of the changes that were made in 1993 to reporting requirements.533 Under s 243 of the Companies Act 1993, a liquidator must usually call a meeting of creditors534 to consider whether to replace a liquidator, or confirm a court-appointed liquidator, as the case may be. Where such a meeting is called, notice in writing must be given to every known creditor. In every case, the notice

must now include a report535 containing a statement of the company’s [page 89] affairs, proposals for conducting the liquidation (and, if practicable, the estimated date for completion) and a notice explaining the right of a creditor or shareholder to require the liquidator to call a meeting of creditors under s 314.536 Under s 245, the liquidator can dispense with a meeting of creditors in certain cases; for example, if he or she considers that in view of the amount of assets and liabilities, the likely result of liquidation, and any other matters, a meeting is unnecessary. In such a case, he or she must give notice in writing to that effect, and state that no such meeting will be called unless a creditor requires one under s 314. Section 245 is now amended so that this notice must now be sent to every known creditor, along with the report and notice referred to in the previous paragraph.537 The liquidator has an existing duty to prepare a list of known creditors, and this has now been amended so that addresses, where known, must be added to the list.538 Further, the liquidator must circulate that list to all creditors with the report and notice, within five working days of appointment, in the case of a voluntary liquidation, or within 25 working days, in the case of a compulsory liquidation.539 The obligation to send the report and notice did not previously apply if the liquidator was satisfied that the dividend available for unsecured creditors on distribution was not likely to exceed 20 cents in the dollar, and notice was given to the Registrar of this decision. This exemption has now been removed, so that in all cases, the liquidator must send a report to creditors, including a list of the names and addresses of all known creditors, and a notice that they can call a meeting under s 314.540 The effect of these changes is that whether or not the liquidator decides that a meeting of creditors is necessary, the report, notice of their rights to call such a meeting, and a list of known creditors and their addresses, must now be sent in all cases. There would have been many liquidations in which a liquidator might estimate realistically that 20 cents in the dollar or less would be paid out to unsecured creditors, and although the new reporting requirement will be an added cost which will reduce that dividend even more, it enhances

accountability. A liquidator may still decide that a meeting is unnecessary, but at least creditors will have been informed and have the [page 90] chance to require a meeting if they wish. They will also have the chance to contact other creditors if they wish to discuss it and possibly act collectively to request a meeting.

(c)

Assignment of liquidator’s right to sue

A new provision has been added541 to clarify that rights of action which are conferred on the liquidator (as opposed to the company), can be assigned to others, despite any uncertainty as to the position at common law, arising from the law of maintenance or champerty.542 While the liquidator has always been able to deal with the company’s property, which included choses in action belonging to the company, there was uncertainty as to whether causes of action which only the liquidator had standing to pursue, such as voidable transactions, could be validly assigned to others by the liquidator, or in bankruptcy, by the Official Assignee.543 This provision is designed to make it easier to take action to recover funds or property for the estate in circumstances where it might not otherwise have been financially possible. In conjunction with the new provision to the effect that the costs and debt of those persons who assist in the recovery of assets for the estate can now be a preferential claim,544 this enables a liquidator to transfer the risk of litigation to any creditors prepared to take it on. The liquidator, or the proposed assignee of the cause of action, must apply to court for prior approval, and the defendant or proposed defendant may oppose such application.545 Since there are no guidelines as to how the court might exercise its discretion, it is thought that such factors as the interest of the assignee and the issue of unsuccessful costs of litigation would be factors. Of course, the liquidator can only assign in this situation where he or she deems it to be for the benefit of creditors generally, and in accordance with his or her functions and duties.546

[page 91]

(d)

Liquidator’s disclaimer of litigation rights

The liquidator’s power of disclaimer has been widened547 to include a litigation right that, in the liquidator’s opinion, has no reasonable prospect of success or cannot reasonably be funded from the assets of the company. This gives another option, along with assignment of the right to sue. Earlier case law suggested that there were difficulties for the Official Assignee to disclaim litigation rights in bankruptcy cases, such as causes of action or rights of appeal.548 The un-amended provision did not really cover the situation.549 Even if some litigation rights were property of the company, they did not necessarily fit within the other criteria. Now the liquidator has at least two options: to assign the cause of action, or to disclaim. Disclaimer extends beyond causes of action to “litigation rights”, so can encompass defences and appeal rights. There may still be the common law of abandonment,550 although this should not now be necessary. In any event, there remains a question mark as to whether either abandonment or disclaimer of a litigation right extinguishes that right. If that is so then, notwithstanding the new disclaimer provision, it will not be possible for a disclaimed litigation right to vest in anyone else.551 In any event, the liquidator still has to exercise judgment as to whether assignment or disclaimer is in the interests of creditors generally. It is thought that this will be more relevant to bankruptcy cases.

(e)

Related entity voting552

This provision was passed to deal with perceived problems in closely held companies where shareholders, directors, their relatives or other associates, are also creditors, and their votes have a decisive influence on the result at creditors’ meetings. This provision is similar to that in Australia,553 and was extended to voluntary administrations by the 2006 Act in New Zealand.554 On the application of the liquidator or a creditor, the court may order either that a resolution be set aside, or a new meeting be held to consider [page 92]

and vote upon it. The court may also order that a specified creditor must not vote on a resolution, or make such other orders as it thinks necessary.555 The court may make these orders if it is satisfied that a resolution which was either passed, defeated, or decided by a casting vote, would not have had the respective outcome if the votes of related creditors were disregarded. The court must also be satisfied that the result is contrary to the interests of the creditors as a whole (or a class), and has prejudiced, or is reasonably likely to prejudice, the interest of the creditor who voted, to an extent that is unreasonable having regard to either the benefits accruing to the related creditor or creditors, and the nature of their relationship with the company, and any other related mater.556 The definition of “related creditor” is very wide,557 covering directors, shareholders and promoters, relatives or spouses of these entities, companies with a common director, and trustees of a trust of which a related entity is a beneficiary.

(f)

Qualifications and supervision of liquidators and administrators

A person (other than the Official Assignee) must not be appointed liquidator unless he or she has first certified in writing that he or she is not disqualified.558 Section 280 of the Companies Act 1993, was amended in 2006,559 and also extended to administrators.560 The amendment added further restrictions on the qualifications. Unless all creditors consent, a person who, or whose firm, has within two years before an insolvent liquidation, provided professional services to the company, or had a continuing business relationship (other than banking or financial service provision) with the company, its majority shareholder, any of its directors or any of its secured creditors, is disqualified from being a liquidator or administrator. This does not apply to solvent liquidations. While to some extent this reflects best practice of the New Zealand Institute of Chartered Accountants,561 not all liquidators and administrators are chartered accountants. However, there has been criticism in Parliament, where an unsuccessful amendment was debated.562 Criticism also came from [page 93]

insolvency practitioners, who argued that the extension to relationships with secured creditors goes too far, because given the concentration of the New Zealand insolvency profession major firms, insolvency practitioners may be excluded from work due to their relationships with secured creditors for whom they are frequently appointed to investigate companies in difficulty Applications for leave to act as administrator or liquidator notwithstanding s 280(1)(cb) have been frequently brought by insolvency practitioners in the major accounting practices since 2007. Perhaps not surprisingly, given the width of this restriction and the need for the court’s leave to lift it, the first voluntary administration case to be heard in New Zealand, Icon Digital Entertainment Ltd v Westpac NZ Ltd,563 was an application for leave to act as administrator notwithstanding a business relationship under s 280(1)(cb) with a secured creditor. The case illustrated the court’s robust approach to what would be frequent applications to court in voluntary administrations and liquidations. In the case of voluntary administrations or voluntary liquidations, the application may be brought by originating proceeding.564 In the case of voluntary administration, it was supposed to be an out-of-court and inexpensive procedure, and these applications by insolvency practitioners in large accountancy practices where, inevitably, there could be a relationship with secured creditors to the company, add to the cost, even where the perceived conflict is often more apparent than real. The proposed administrators were three partners of the leading accountancy practice (BDO). One had been involved with the independent review of Icon. They had also been appointed by Westpac as receivers, and as investigating accountants for other companies on behalf of Westpac, a major secured creditor of Icon. Abbott AJ took view that the proposed administrators’ involvement with Icon, and BDO’s involvement with Icon, did not compromise the independence and professionalism of them as proposed administrators. Appointment of one of them as investigating accountant was made at Westpac’s insistence but was under a contract with Icon, and was to act independently of both of them. The mere fact that they had undertaken professional appointments in relation to other companies for Westpac should not call into question their independence from Westpac. There was no reason to believe they would lack independence, competence and integrity to carry out their role without causing risk to

[page 94] creditors of third parties. On the contrary, their knowledge of Icon, built up as investigating accountants, will assist them to carry out administration more quickly and efficiently. Westpac would be free to appoint the proposed administrators as receivers and frustrate the voluntary administration, and creditors would then be worse off. Westpac’s confidence in the proposed administrators would be a factor in extending urgently required further funding. Westpac’s evidence was that it would otherwise appoint receivers was “of some significance”. The Judge made an interim order until the creditors’ meeting, giving any party a chance to oppose the without notice application. Of course, it is always open to creditors at the first creditors’ meeting, to remove the administrators and appoint new ones, and both this fact and the inevitability of the conflicts falling within s 280(1)(cb) in the case of major banks and accounting practices, illustrate the need for amendment of this provision. It would now seem that the government has listened to the submissions of stakeholders, since the pending Insolvency Practitioners Bill proposes to remove the reference in s 280(1)(cb) to “secured creditors” and to except relationships where the practitioner was appointed by the company or its secured creditor to advisor, monitor or investigate the company’s affairs.565

(g)

Prohibition orders

Under s 286 of the Companies Act 1993, creditors, directors, shareholders the liquidation committee, presidents of a specified professional bodies of which the liquidator is a member and the Official Assignee,566 may apply to the court for an order that a liquidator comply with a relevant duty arising under the Act, any other laws, Court Rules, or previous court orders. The 2006 Act extends this to orders against administrators.567 The court has discretion to either relieve the officeholder from the relevant duty, order him or her to comply, or remove them from office. The 2006 Act makes it easier to obtain prohibition orders against liquidators and administrators. Such orders can be made in the case of serious non-

compliance, or persistent failure to comply. At present, evidence of any two or more previous orders, or applications to court for a compliance order, within the preceding five-year period is evidence of persistent failure [page 95] to comply, unless special reasons exist to the contrary. However, the Act568 removes the five-year period, so that any two or more previous orders, or applications to the court which have triggered compliance, will suffice. In addition, the Act removes the five-year maximum length of a prohibition order, and allows the court discretion to make an order for an indefinite period if it deems fit.569 In the pending Insolvency Practitioners Bill 2010, it is proposed that, under the new registration regime for insolvency practitioners, that the Registrar can cancel a practitioner’s registration if (inter alia) he or she is unfit to act as a practitioner if there have been two or more failures to comply, or because of the seriousness of a failure to comply.570 In Official Assignee v Norris571 it was argued, in relation to s 286, that no order could be made in respect of failure to comply where the companies in question had been removed from the register. The Court found that s 279(2) confirmed that orders could still be sought under ss 284 and 286 against a liquidator after the liquidation is ended and the liquidator has vacated office.

(h) (i)

Voidable transactions History

The Companies Act 1993 effected a “radical” change572 in the corporate voidable transactions provisions, moving away from the test of the company debtor’s intention to prefer one creditor over others to an “effects-based” test, as in Australia.573 In the case of transactions having preferential effect (voidable preferences), Australia also had an “ordinary course of business” exception. But at the same time as the Australians removed their “ordinary course of business” proviso, New Zealand adopted it.574 This proviso became the source of much litigation in New Zealand. There was considerable uncertainty as to the conceptual basis of the test, in particular whether it was objective or subjective,

or some combination of the two. Even after consideration by the appellate Courts including the Privy Council,575 there was considerable room for different application to the facts of each case at High Court level.576 Even after the Court of Appeal had attempted to focus [page 96] on the plain meaning of the words and provide some guidance for lower Courts,577 questions still remained as to its meaning, and the type of factors which should be evidenced.578 In 2001, the government, following a report by David Brown for the Ministry of Economic Development in 1999, issued a discussion paper579 in which it recommended removing the “ordinary course of business” test and aligning other aspects of the New Zealand provisions much more closely to those in Australia. Beyond the removal of the ordinary course of business proviso, the ministry recommendations included the introduction of a “continuing business relationship” test (whether a series of connected transactions had ultimate preferential effect) and also the adoption of the Australian “lack of reasonable suspicion” defence. The government also decided to redress the balance as between liquidators and creditors more in favour of individual creditors.580 There had been some criticism of the administrative notice procedure by which liquidators could serve a notice on affected creditors, putting the onus on creditors to take proceedings to challenge the notice. The reform package includes a new notice procedure, which seeks to address these earlier criticisms. Lastly, the government recommended that the time periods prior to liquidation, in respect of which voidable transactions could be challenged, needed to be streamlined. These and other aspects of personal and corporate insolvency provisions needed to be harmonised with each other. The Insolvency Act 1967 had not been revised to take account of the corporate move to an “effects-based” test in 1993, and in principle, there was no reason why, with obvious differences stemming from the individual or corporate nature of the insolvency, the voidable transactions provisions should not be almost the same. [page 97]

(ii)

Harmonisation with personal insolvency

The Insolvency Act 1967 was not revised in 1993 at the same time as the Companies Act. Accordingly, the voidable transactions provisions for personal insolvency remained, based largely on the English Bankruptcy Act 1914. The government, in the 2006 legislation, took the opportunity to harmonise, where possible, the corporate and personal provisions. The substantive personal insolvency provisions have been discussed above under Part II of this Guide (Insolvency Act 2006), although details of the new running account test, and the new defence adopted from Australia, are dealt with below, since the provisions for both corporate and personal insolvency are identical. The amended notice procedure under the Companies Act and the corresponding cancellation notice procedure under the Insolvency Act 2006, are also dealt with together below, since they are almost identical as between the corporate and personal provisions.

(iii) Time periods Prior to the Companies Amendment Act 2006, the time periods were as follows. Transactions having preferential effect (commonly called “voidable preferences”)581 could be challenged if they took place within two years prior to liquidation (and in addition, in the case of compulsory liquidation, the period between the application and court order). This is called the “specified period”.582 There was a “restricted period” of six months prior to liquidation, and if a transaction fell within this period, it could be presumed that (a) the company was insolvent at the time, and (b) the transaction was not in the ordinary course of business.583 In the case of voidable charges, the specified period was one year, and the restricted period six months.584 For transactions at an undervalue, the specified period was one year.585 The Amendment Act has made two years the specified period for all three types of voidable transaction,586 as well as harmonising the time periods with those in the Insolvency Act 2006.587 [page 98]

(iv)

Transactions having preferential effect

(A)

Introduction

The first change is one of nomenclature. Section 292 is now headed “Insolvent transaction voidable”,588 and this reflects the language used in Australia. Therefore, what was formerly headed “transactions having preferential effect” and colloquially known as voidable preferences, is now to be called a “voidable transaction”. Previously this term had been used as a generic description covering all of the vulnerable transactions in ss 292, 293 and 297 respectively, as well as similar provisions in the Insolvency Act. However, one merit of the new approach is that it distinguishes insolvent transactions from “preferential debts” in Schedule 7; previously the similar terms “preference” or “preferential” were prone to confuse. Secondly, the definition of “transaction” is widened to include “undergoing” an execution process, whereas formerly the company had to have “accepted” execution.589 Thirdly, anything done or omitted to be done for the purpose of entering into the transaction or giving effect to it is included in the definition of “transaction”.590 This could lead to the argument as to whether certain consequences of a transaction could be regarded as giving effect to it, and thus falling within a relevant time period. Fourthly, transactions by a receiver are confirmed as a relevant “transaction”, except a “transaction that discharges, whether in part or in full, a liability for which the receiver is personally liable under section 32(1) of the Receiverships Act 1993 or otherwise personally liable under a contract entered into by the receiver”.591 This clarifies the position after two cases decided the same day but without reference to each other. The High Court decision592 was controversial in following a High Court of Australia case593 where the latter held (Kirby J dissenting) that transactions by a receiver appointed pursuant to a crystallised floating charge were not “by the company” for the purposes of insolvent transactions provisions, even though the receiver was, in New Zealand, the statutory agent of the company. The argument was that in equity, the money used to pay creditors in the transaction in question, was charged under the (now) fixed charge, and therefore could not be the company’s property at that stage. While the New Zealand High Court followed this approach, the Court of Appeal, in a different case heard

[page 99] on the same day,594 held that transactions giving rise to obligations for which a receiver was personally liable under s 32 of the Receiverships Act, were never meant to be within the scope of insolvent transactions.595 The effect of this amendment is to overturn the reasoning in the Lakeview case, thereby confirming the vulnerability (subject to defences) of payments by the company acting by its receiver, and to confirm the reasoning in the Court of Appeal case in relation to payments by a receiver for which the latter is personally liable. (B)

Continuing business relationship (“running account”)

Importantly, both the Companies Amendment Act 2006 and Insolvency Act 2006 introduce596 the so-called “running account” or “ultimate effect” test, which was first introduced as a principle into Australian law in the High Court of Australia’s decision in Airservices Australia v Ferrier.597 The statutory wording is taken from s 588FA(3) of the Australian Corporations Act 2001,598 which differs from the wording of the statute applied in Ferrier.599 The rationale behind this principle is as follows. The previous wording of the New Zealand provision, s 292 of the Companies Act 1993, arguably600 isolates a particular transaction and examines whether that transaction, for example, a payment, has the effect of enabling one person to receive more towards satisfaction of a debt than they would have received or been likely to have received on liquidation. However, if the purpose of these provisions is to look at the “effect” of the transaction, then one should look at the net effect, taking into account related payments that were made, or services rendered by the creditor, during the vulnerable period. In Ferrier,601 the High Court of Australia found that where there was a trading business relationship and a “running account” between the insolvent company and a particular creditor, and the latter had received payments of debt in anticipation of ongoing services or goods to be supplied, rather than simply receiving payments in respect of the antecedent debt, the value of the [page 100]

goods or services supplied thereafter should be taken into account so that only the ultimate, or net effect would be considered as either a preference of that creditor to that extent, or in fact a net loss to that creditor. This led to the formulation of the “continuing business relationship” test, the “running account” being given in the statute as just one example, although it would be the most common one. Therefore, all the transactions forming part of the relationship have to be taken into account, and if the net effect of those is that the creditor has not received more towards satisfaction of their debt than they would on liquidation, the notional single transaction cannot be challenged. It may be argued that this is a logical extension of an effects-based provision. Another reason for inclusion of this principle is that the removal of the “ordinary course of business” proviso would otherwise prejudice some creditors who are in continuous business relationships of this nature, although there is also the defence in s 296(3) available, which includes the elements of giving value or alteration of position. As stated by Associate Judge Christiansen in Blanchett v McEntee Hire Holdings Ltd:602 Perhaps this provision more than any other indicates the reinforcement of what has been described as the “pro-creditor” approach of the New Zealand Companies Legislation since 1993.

As the Associate Judge pointed out,603 since the New Zealand provision is a direct incorporation of the Australian s 588FA (Corporations Act), the New Zealand courts can be expected, at least initially, to look to Australian authority for guidance on interpretation of the “continuing business relationship” test. The Australian courts have continued to refer to the High Court’s decision in Ferrier, and have seen the statutory formulation in s 588FA as enshrining the principle in that case. In Blanchett, therefore, Associate Judge Christiansen, citing Ferrier, stated604 that under s 292(4B) of the Companies Act 1993, “[a]n assessment needs to be made whether the company receives an ongoing supply of goods and services for better reason than simply to extract a creditor’s forbearance from taking action to liquidate the company”. One question in Australian law has been whether the “continuing” nature of the relationship is terminated once the creditor is aware or suspects insolvency. While the latter would deprive them of the defence in s 296(3), logically it should also suggest that the Ferrier test, based as it is on a mutual

[page 101] assumption of continuing supply and payment, would be affected by this changed circumstance. The parties may often agree to different payment or credit terms or practices in that situation. However, as Associate Judge Christiansen pointed out in Blanchett, the Australian cases are inconsistent on this point. Santow J has said that knowledge or suspicion of insolvency will not automatically terminate the running account or business relationship.605 But in Olifent v Australian Wine Industries Pty Ltd606 a firmer view was expressed that it would always terminate the business relationship, and hence the period during which the “single transaction” should be ascertained. Associate Judge Christiansen, although finding that there had been a significant change in the character of the relationship in that case when the creditor issued a Stop Credit Notice, also offered the opinion that “provision of goods or services usually will assist and benefit the company and therefore it is arguable that the creditor should not have to repay what it has received”.607 This view is consistent with the effects-based aspect of the continuing business relationship test, but also reveals the tension derived from continuing reference to the Ferrier principle, that looks to the mutual purpose of ongoing trading. In Australia, there has been some criticism,608 although no proposal to alter the law, resulting from the ability of liquidators to “cherry pick” a period of time (“peak indebtedness”) within the specified period during which transactions can be challenged, at which the net effect of a series of transactions leads to the largest value of insolvent transaction, that is, the largest net benefit to the creditor. The peak indebtedness principle is rooted in Australian case law at High Court level,609 but that pre-dates both the Ferrier case610 and the statutory wording in s 588FA(3).611 Its application to New Zealand may be even more doubtful given that the pre-Act jurisprudence has not existed here. Nevertheless, in Blanchett v McEntee, the Associate Judge held that if the finding that the relationship was terminated on the issue of the Stop Credit Notice was wrong, and instead the relationship terminated on the company filing for liquidation, the liquidators could still “cherry pick” the date upon which the relationship was deemed to have begun, and they chose the date of the Stop Credit Notice in order to maximise the extent of the alleged preference.612 [page 102]

In my judgment a liquidator has an option to choose the starting point of a transaction period for the purpose of an assessment of the extent of a creditor’s preference: that liquidators ought to be able to cherry-pick a date that best suits the general body of creditors because s 292(4B) does not limit a liquidator’s ability to do so and if the liquidator’s ability was to have been limited then the Act should have done that. Also, the creditor has access to the … defence [in s 296(3)]. It makes sense that if that defence fails a liquidator should retain the ability to act in a manner that benefits all creditors ….

But for the change in the commercial relationship it would, by way of option, have been proper for the liquidators to choose a starting date for the (single transaction) period to assess the extent of the reduction, if any, of the company’s indebtedness to the creditors.613 In order for there to be a running account (which is the only example given of a “continuing business relationship” in the legislation itself, and encapsulates the Ferrier principle) there has to be a trading relationship. In Ferrier, the example of a grocer’s account, which may now be somewhat anachronistic, was given. In Australia, the Australian Taxation Office has failed in attempts to rely on the “running account” principle, since payments to it could hardly, in a direct sense at least, be said to be made with a view to continuing services or goods being supplied to the payer.614 In New Zealand it has been held, consistently with Australian case law,615 that payments in the construction industry were not made in the course of a continuing business relationship. Associate Judge Bell stated that “overall, building contracts are not running account cases” and in the particular case, four payments for services, in the context of no previous relationship between the creditor and the company, generally matched the amounts stated in payment schedules issued under the Construction Contracts Act 2002. “Payments were accordingly for past services on the basis that any further work carried out under the contract would be the subject of fresh invoices and fresh payment schedules.”616 [page 103] (C)

Transitional provision

On 1 November 2007 the 1993 Act version of s 292 was repealed and replaced by that in the 2006 Amendment Act.617 The new version of s 292 now applies. However, there is a saving provision in s 27(5) which has the limited effect that nothing in the new version of s 292 will make a transaction voidable if it was completed before 1 November 2007, if that transaction would not have been

otherwise voidable. For example, the “ordinary course of business” proviso of the repealed s 292 would still be available in relation to transactions occurring prior to 1 November 2007.618 In Rea v Russell the High Court rejected an argument that, despite the saving provision in s 27(5), the pre-2007 version of s 292 could still be applied generally. A number of Court of Appeal decisions since 2007 have applied the repealed s 292.619 In Rea, Bell AJ said that the first three related to decisions that applied the old provision while it was still in effect. The Court of Appeal in Levin v Ratskar620 assumed that the old law applied generally, without any argument on s 27(5). Bell AJ therefore held that the old version did not apply generally, as it was clearly repealed, but s 27(5) saves those cases that would have been otherwise dealt with under the old provision from being avoided under the new provision. He therefore proceeded to consider whether the transactions were voidable under the new provision, and only if they were voidable would he consider whether they were saved by s 27(5) of the 2006 Act.

(v)

Procedure for setting aside

The use of the pre-2006 notice procedure was criticised by some, who accused liquidators of serving “blanket” notices, especially with regard to transactions or charges within the “restricted period” of six months prior to liquidation, in which case there are presumptions, such as inability to pay debts at the time of the transaction. Under the former procedure, it was up to the recipient of the notice, if it wished to challenge it, to serve proceedings within 20 working days of receiving the notice, otherwise the transaction would be automatically set aside. Many creditors might be unable to afford proceedings. A creditor would have the onus of proving that the company was solvent (without having access to the relevant financial information), or (under the pre-2006 Act law) proving that the transaction was in the ordinary course of business. In the case of a charge subject to s 293, a creditor would have the onus of proving that full [page 104] value was given at the time or after the charge. Despite issue of guidelines in 1999 by the Joint Insolvency Committee,621 which suggested that liquidators should consider the merits of each case before serving a notice, the government felt that the former procedure was too tilted in favour of liquidators. However,

the notice procedure, even in its amended form, does have the advantage that vulnerable transactions might lead to recovery in cases where, under other systems such as that of the United Kingdom or Australia, the liquidator would have to find scarce funding to initiate litigation. The new version of s 294 of the Companies Act 1993 continues to provide the liquidator with a notice procedure for the newly styled “insolvent transactions” (voidable preferences), and voidable charges. However, in an attempt to redress the perceived imbalance, the Companies Amendment Act 2006622 provides for a two-stage procedure which removes the need for a creditor to take proceedings in order to object to the notice. A liquidator must still serve a notice, with the effect that the transaction will be automatically set aside after 20 working days. The notice must be served on the other party to the transaction, or any other party from whom the liquidator wishes to recover, “as soon as practicable” after filing the notice with the Court. In Blanchett v McEntee623 the Court stated that the obligation to serve notice “as soon as practicable” arose after the decision to file the notice, so that there was no enforceable obligation to file the notice as soon as possible. Parties would be protected in this respect by the limitation period. Under the new provision,, on receipt of such notice, a creditor may counter-serve a notice of objection.624 If the liquidator then wants to continue to challenge the alleged vulnerable transaction, the liquidator must take proceedings and bear the onus of proof, although with the assistance of some presumptions in the “restricted period”. At the stage of the draft Insolvency Law Reform Bill, some in the insolvency profession objected that the tilting of the balance had gone too far the other way, and pointed out that it was far too easy for a creditor to serve a notice of objection, and creditors would have nothing to lose, so would probably do so in every case.625 The Act thus now provides that the creditor must give full particulars of the reasons for objecting and must identify [page 105] documents that evidence or substantiate such reasons.626 This does go some way to prevent spurious objections, and may actually have the effect in some cases of providing a liquidator with information that he or she did not have at the time of issue of the liquidator’s notice, which will inform the liquidator’s decision whether or not to continue to proceed with the matter.

Aspects of the Insolvency Act 2006 voidable transaction provisions have been harmonised with the new corporate provisions. The substantive provisions in the Insolvency Act 2006, and how they have been amended from the Insolvency Act 1967 position, have been dealt with in detail above.627 In terms of the procedure, the “cancellation procedure” which was in the Insolvency Act 1967,628 is the bankruptcy equivalent to the liquidator’s notice in s 294 of the Companies Act 1993. The cancellation procedure applies to a wider range of voidable transactions (which, in the Insolvency Act 2006, are called “irregular transactions”629) than its corporate equivalent. These include insolvent gifts (against which there is no equivalent provision in the Companies Act 1993), insolvent charges, insolvent transactions, and even to a transaction made voidable under another piece of legislation, namely certain dispositions of property (made with intention to prejudice creditors, by way of gift, or not made for reasonably equivalent value) under ss 344–350 of the Property Law Act 2007.630 As in the case of the liquidation notice procedure, the cancellation procedure under the Insolvency Act 2006 does not extend to transactions at an undervalue or contributions by the bankrupt to the property of another in circumstances where, under that Act, it amounts to an irregular transaction.631 The only differences between the liquidation notice and the bankruptcy cancellation procedures, which seem to be unintended legislative errors of transposition, are first, that in the case of the cancellation procedure (under the Insolvency Act 2006), there is no obligation on a creditor to provide evidence or particulars of reasons for objection, though reasons must still be given.632 Secondly, that unlike in the case of a liquidator’s notice,633 there is no requirement on an Assignee who wishes to cancel an irregular transaction [page 106] to serve the notice on the other party (and any other party from whom the Assignee wishes to recover) “as soon as practicable”.634

(vi)

Defence to liquidator recovery actions

The pre-2007 law provided a defence, in s 296(3) of the Companies Act 1993, to recipients of property where a liquidator was attempting to recover that property or its value. The defence applied if the respondent could show that the property

was received in good faith and had altered his or her position in the reasonably held belief that the transfer to that person was validly made and would not be set aside, and that it is, in the opinion of the court, inequitable to order recovery or full recovery. This defence echoed the wording of the defence to payments made under mistake of law, available in the Judicature Act 1908,635 and although located in s 296 of the Companies Act 1993 and mentioning the relief section, s 295, it expressly extended to any recovery by a liquidator under any section, any other Act, in equity or otherwise. The meaning of “inequitable” in the context of voidable transactions was open-textured.636 As it stood, the defence in s 296(3) made no mention of the recipient’s knowledge or suspicion of insolvency. However, in taking a policy decision to align insolvency law closer to that of Australia where possible, the government decided to incorporate the Australian defence of lack of suspicion of insolvency. This went hand in hand with the removal of the “ordinary course of business” test, which was at times blended with such a defence. This was seen in the judgments of Baragwanath J,637 where he regarded the ordinary course of business test as synonymous with lack of knowledge or suspicion of circumstances of insolvency. Although the Court of Appeal638 subsequently disapproved that approach as not open on a plain reading of the “ordinary course” proviso, it is somewhat ironic that this stretched interpretation, can now be said to reflect one of the real issues in insolvent transactions and voidable charges: namely, did the creditor/chargee know, or ought they to have known, about the insolvent circumstances that made a transaction a vulnerable one? [page 107] With regard to personal insolvency, the relief provision in the Insolvency Act 1967639 contained the same defence as the un-amended s 296(3) of the Companies Act 1993, requiring an alteration of position in circumstances where the court viewed it as inequitable to order recovery in favour of the Official Assignee. This provision has been harmonised with the new corporate provisions taken from Australia and is discussed in detail in this section.640 The new defence in the Companies Act applies with effect from 1 November 2007,641 irrespective of whether any transactions took place before that date.642 It states that:

(3) A Court must not order the recovery of property of a company (or its equivalent value) by a liquidator, whether under this Act, or any other enactment, or in law or in equity, if the person from whom recovery is sought (A) proves that when A received the property — (a) A acted in good faith; and (b) a reasonable person in A’s position would not have suspected, and A did not have reasonable grounds for suspecting, that the company was, or would become, insolvent; and (c) A gave value for the property or altered A’s position in the reasonably held belief that the transfer of the property to A was valid and would not be set aside.643

Thus in substitution for the Court’s view of “inequitable” factors, there is a “lack of suspicion” test.644 It should be noted that this defence, deriving as it does from the Judicature Act 1908, s 94B, is not confined to voidable transactions actions, or indeed to transactions under the Companies Act or any other Act. It applies to any action by a liquidator to recover property or its equivalent value. In Australia, there have been some problems in applying this complicated test, and it has been confirmed that each limb covers different, although overlapping, factors.645 The defence in s 296(3) contains both subjective and objective elements. The first element requires the recipient to have subjective good faith, but the [page 108] second requires him or her to prove that a reasonable person would not have suspected insolvency or future insolvency. However, even this ostensibly objective test refers to a “person in [the recipient’s] position”; that is, imbued with their characteristics in relation to the insolvent company. It has been held that this element means that the hypothetical reasonable person must be, not the “man on the Bondi bus”, or even an ordinary business person, but a person with the recipient’s business qualifications.646 In Blanchett v McEntee647 it was found that, despite the creditor’s assertions, the creditor had referred the company’s debts to a debt collection agency. The creditor attested that where it suspected financial problems, it was its practice to refer debts to the agency. The Court therefore found that it had not shown that a reasonable person “in the company’s position” would not have suspected insolvency. Secondly, the cumulative test requires proof that the recipient did not have reasonable grounds for suspecting, which can be interpreted as meaning that either they did not have any grounds, or the grounds which they had were

unreasonable ones (mere hunches or rumours, perhaps). This second limb does at least look at the recipient’s state of knowledge, and is therefore more subjective. Nevertheless, it is difficult for the recipient to bear the onus of proof of a negative, or actually a double negative, in this case. The defence has been described as “fairly demanding” for a recipient to satisfy.648 Fortunately, the test of a “suspicion” has been said to be “more than a mere idle wondering”, but rather “a positive feeling of actual apprehension or mistrust”.649 Further, many of the issues, such as pressure by a creditor that formerly arose under the guise of “ordinary course of business” may now arise under this defence, but at least they can now be dealt with as clearly pertaining to the creditor’s state of mind. One problem with the former test was that s 292(4), as now repealed, stated that the creditor’s state of knowledge was relevant to the ordinary course of business proviso, but only to the extent that the creditor had knowledge of the debtor’s intent to “prefer” the creditor or other recipient. It is suggested that the basis of the law will now be much clearer, in that the “effect” of the transaction, including a series of transactions, can now be adjudged, coupled with a defence which focuses primarily on the creditor’s state of mind. The previous existence of the “ordinary course” test as a proviso, and the lack of consideration of a series of transactions’ [page 109] ultimate effect, led to confusion. Difficulties were caused by liquidators issuing “blanket” notices. These issues all brought this area of the law into disrepute. That is not to say that there will not be litigation, but the litigation should be less frequent. Similarly, in New Zealand, litigation can now take place on a more clearly principled basis, especially given the ability to draw on Australian case precedent In Blanchett v McEntee650 the Court referred to s 296(3)(b) as embodying “two tests, the first wholly or mostly objective. The second element involves an enquiry as to the state of McEntee’s knowledge: The Court cited a passage in an article by Brown and Telfer, ‘The New Australasian Voidable Preference law: Plus Ça Change?’651 to the effect that ‘in determining whether a creditor has reasonable grounds for suspicion, it is a question of looking at the commercial circumstances at the time, as the parties perceive them to be, and not with hindsight’”. Further, undue weight should not be placed on late payment, since solvent persons often do not pay debts on time.652 A seeking and grant of

indulgence may not be decisive, but may be a factor in all the circumstances. Lastly, even where a dishonoured cheque had been paid after the issue of a statutory demand, the defence in s 296(3) was not necessarily precluded depending on the circumstances.653 While the third limb of the defence in s 296(3)(c) replicates part of the 1993 Act provision derived from the Judicature Act 1908,654 it has already been considered in a number of cases.655 Most recently, in Farrell and Rogan (liquidators of Contract Engineering Ltd) v Acme Engineering Ltd.656 it was [page 110] argued by the liquidators that under the new s 296(3)(c), the relevant value had to be given subsequent to the challenged payments. His Honour noted the change in the wording brought about in the Companies Amendment Act 2006, which had combined part of the former test originating in the Judicature Act 1908 (which did not refer to giving of value), and part of the Australian equivalent provision, s 588FG(2) Corporations Act 2001(Cth). He noted that neither the new s 296(3), nor the Australian provision, required new value, and that s 588FG(2) referred to “valuable consideration or change of position”: The purpose of the Australian and the New Zealand provisions is to protect creditors who have received payment from a debtor company in good faith, without suspecting insolvency, and who have given something in return for their payment. Equity allows them to retain that payment. Equity would not permit the debtor company to keep what it has received and to also recover what it paid for it.

If that is the purpose of s 296(3) then it is immaterial whether value is given before or after the property or payment is received. The transaction should be viewed as a whole and the equitable foundations of s 296(3) should prevail. Were it otherwise then a requirement that value be given post receipt of payment would have a very narrow scope in practice – the defence would not accord with normal business practice.657

(vii) Relief A small change has been made to s 295 to allow the courts more flexibility to make orders for partial repayment, consequently enabling an order tailored to the actual benefit received. In Carter Holt Harvey Ltd v Fatupaito,658 the Court of

Appeal held that it was unclear whether the court had power to make such an order. Section 295 has now been amended659 to include the words “some or all” of the money that the company has paid, and an order that a person pay an amount which, in the Court’s opinion, fairly represents “some or all” of the benefits that the person has received.660 [page 111]

(viii) Transactions at an undervalue Section 297 of the Companies Act 1993 has been amended661 by removing the requirement662 that the other party to a transaction with the company must be shown to have actual or constructive knowledge of the company’s insolvency or other inability to perform its obligations, or insolvency as a result of the transaction. It was not only difficult for a liquidator to prove this, so that few proceedings were brought (and the liquidator has the onus of initiating proceedings under s 297), but it was unclear why the knowledge element should be an element of the liability, given that it was concerned with depletion of the company’s asset base. More logically, lack of knowledge should be a defence. The new formulation simply addresses the disparity in value received from the company as compared with that given, at a time when the company was unable to pay its due debts, or where it was unable to pay them as a result of the transaction. A two-year period is substituted for the previous one year. Nevertheless, the removal of the knowledge requirement should make it easier to bring such proceedings. The other party can still avail itself of the s 296(3) defence, as now amended to focus on lack of reasonable suspicion of insolvency.

III.7 Director liability (a)

Carrying on business fraudulently — a new offence

A new offence is added to s 380(3) of the Companies Act 1993.663 At present it is an offence where someone is knowingly a party to a company carrying on business with intent to defraud creditors of the company or any other person, or

for a fraudulent purpose. It is also an offence for a director of a company who, with intent to defraud creditors, causes property to be transferred (including gifts), causes a charge to be given, or causes, or was a party to, execution being levied. The Ministry of Economic Development’s paper on phoenix companies raised the imposition of a new criminal offence.664 The new offence only applies to directors, and provides that a director is liable who, with intent to defraud a creditor or creditors, does anything that causes material loss [page 112] to creditors. The possible penalties are the same as for the other offences in s 380. The “actus reus” is potentially wider than for the existing offences. There will be an overlap with s 380(1), but that requires “carrying on business with intent to defraud”.665 Also, the words “does anything” in the new s 380(3), would seem to exclude pure omissions. The language of “material loss” mirrors that used in the civil liability provision for reckless trading, s 135. In any event, the “mens rea” of “intent to defraud” is notoriously difficult to prove, so it is doubtful whether this extra offence, which carries the same penalties, namely up to five years in prison or a fine up to $200,000,666 adds much to the armoury of the Insolvency and Trustee Service’s National Enforcement Unit.

(b) (i)

Phoenix companies667 Overview

“Phoenix companies” is a colloquial term that has come to mean companies that are established or used, often with common directors and/or shareholders, to take on the assets and business of a failed company, using a similar name, or one which has an association with the failed company.668 Use of phoenix companies, where they are part of a legitimate arrangement for the purchase of assets or shares at market value, is not abuse, even if the sale is to former directors or

shareholders. In many cases this may result in the greatest maximisation of value for creditors of the failed company. Nevertheless, phoenix company arrangements can be abused, and governments are aware of the anecdotal observations of members of the public that directors often leave a failed business and start up a similar one shortly afterwards. In Australia, the government established the Cole Commission669 as a Royal Commission to examine the problem in the building industry. The Cole Report provides much useful background.670 [page 113] Illegitimate phoenix activity may amount to one or more breaches of directors’ and others’ duties to the company and its creditors. While it is not claimed that the new provisions,671 which are modelled very closely on ss 216 and 217 of the Insolvency Act 1986 (UK), are a complete solution to the problem, they are designed to impose liability (both criminal and civil) on directors who abuse such arrangements to the detriment of creditors. The main abuse identified by the government is that the association with the failed company will mislead creditors, and also that directors will not necessarily pay fully for the goodwill (if any remains) associated with the name.672 The provisions are different from the English provisions in two respects. First, the three exceptions in New Zealand are contained in the Act, not the Rules as in England.673 Secondly, some aspects of the English provisions, particularly in relation to trading names, corporate groups and the third exception, were dealt with by the English Court of Appeal in ESS v Sully,674 and the New Zealand Government took the opportunity of clarifying those aspects in the wording of the provisions. Therefore, while English authorities will be directly applicable to most aspects of the provisions, differences should be borne in mind. Nevertheless, in relation to the discretion whether or not to grant leave to act as a director, the first contested New Zealand case on the new provision, Groves v TSSN Ltd (in liq),675 has taking into consideration a number of the leading English cases on the equivalent provision. It should be emphasised that the new provisions do not prohibit or restrict “phoenix” arrangements, but instead impose liability on directors (including shadow directors) in certain circumstances. As in the United Kingdom, directors may apply for leave to continue to use a similar name to that of a failed company

(for example, if the failed company’s insolvency was not through any fault of the director), and there are further exceptions to liability. Thus, the new provisions are targeted at a very specific set of circumstances,676 attempting to steer a careful course between permitting legitimate phoenix arrangements, and preventing and deterring their abuse.

(ii)

Definition of “phoenix company”

A “phoenix company” is defined677 as a company that either before, or within a five-year period after, insolvent liquidation of a failed company, is known [page 114] by a name by which the failed company678 was either known at any time in the 12 months before its liquidation, (and this includes any trading name by which the failed company was known) or known by a name that is so similar to the preliquidation name of a failed company as to suggest an association with that company. In Ricketts v Ad Valorem Factors Ltd,679 the English Court of Appeal examined the concept of “association”, and found that it could be met even in respect of a company that was not a phoenix company in the colloquial sense. Thus Mummery LJ said:680 It is necessary, of course, to make a comparison of the names of the two companies in the context of all the circumstances in which they were actually used or likely to be used: the types of product dealt in, the locations of the business, the types of customers dealing with the companies and those involved in the operation of the two companies. When viewed in that context I have no doubt that the name of Air Equipment suggests an association with Air Component. … The case falls within ss 216 and 217 even in the absence of proof that there has been any express misrepresentation or that anyone has actually been deceived or confused into thinking that there was an association.

A company is “known by a name”681 if it is either its registered name or it carries on business or part of its business under that name. Thus, even if it has carried on part of its business for some of the previous 12 months under a name which is the same or similar to that of the new phoenix company, that will suffice.682

(iii) Involvement in a phoenix company A person who, in a 12-month period prior to liquidation of the “failed company”, is a relevant director, and, unless leave of the court is given, such person must not, for a period of five years from the date of liquidation of the failed company, be a director of, or concerned in the promotion, formation or management of, a “phoenix company”.683 The words “concerned in” aims to catch directors who hide behind other company officers in order to avoid liability (and this principle extends to the civil liability dealt with below). They may in any event fall in the definition of director in s 126 of [page 115] the principal Act, but it will be easier to prove that they are “concerned in the management” of the new company.684 Furthermore, the restriction extends beyond companies, to directors of a failed company who directly or indirectly carry on a business that has the same or a similar name to the failed company’s pre-liquidation name. As with the United Kingdom provisions, there are three exceptions in New Zealand, and even if none of these apply, a director may apply to court for leave to be involved in the phoenix company.685 The three exceptions are as follows: First, legitimate phoenix arrangements are often used in so-called “hivedown” situations in insolvency, whereby an insolvency practitioner may sell shares or assets to a new company, often with some directors or shareholders common to that of the old company. Section 386D provides that the prohibitions will not apply where a successor company has acquired the whole or substantially the whole of the business from a liquidator or receiver, or under the terms of a DOCA. The section requires that a notice be sent to all known creditors of the failed company informing them of the circumstances, and naming the director of the failed company and his or her role in the successor company.686 Some practitioners feel that this exemption is too narrow, and should extend to partial sales of a business. Secondly,687 where a director applies to the court for leave to be involved in the phoenix company, no liability will attach for a temporary period until determination of the court’s decision on the leave application, or six weeks from liquidation of the failed company, whichever is later. However, the director must

apply to the court for leave within five working days from commencement of the liquidation. This is a very narrow exception which gives protection of a grace period so that a director may apply under s 386A in the meantime. In the first contested case688 to come before the New Zealand courts [page 116] under this provision, Mackenzie J noted that the director, despite being aware of the provisions, had not applied within the five-day period, and there was no scope for the Court to permit applications out of time or with retrospective effect. The third exception689 is designed to recognise the reality that companies do change their names, especially within corporate groups, for genuine reasons. While it would be an abuse for directors to be able to take the name and shell of a dormant company in a corporate group and use it, after liquidation of the failed company, to run a similar business, the liability should not catch situations where a trading company has used a name for a lengthy period which is the same as or similar to, or suggests an association with, the failed company.690 It might be that the failed company itself has changed its name shortly before liquidation to the same name, or something similar, as that of another active company in the group. For that reason, no director liability will attach provided that the nonfailed company has, for at least 12 months prior to liquidation of the failed company, been known by the same or a similar name as the failed company’s pre-liquidation name, and the non-failed company has not been dormant during those 12 months. An example given in the Explanatory Note691 is where ABC Ltd trades under the name “Wonderco” for at least 12 months before the liquidation of Wonderco Ltd; a director of ABC Ltd does not breach s 386A(1) when ABC Ltd continues to trade under the name “Wonderco”. The government’s drafting of this third exception took account of some of the problems which confronted the English Court of Appeal in ESS v Sully692 in the context of corporate groups and trading names. It would be quite difficult to prove that a company had “not been dormant” for such a period, and so the section states that to be non-dormant, there must have been recorded financial transactions “throughout” the 12-month period.693 An application for leave to act as a director of a “phoenix” company may be made at any time, since it might be necessary to apply after the situation has

arisen. If a person is already a director of the phoenix company when the need for permission arises, due to common directorship of a “failed company”, then the director commits an offence by continuing to act without permission. Thus, the application under s 386A should be made as soon as [page 117] possible. In Groves v TSSN,694 Groves was the director of a failed company “The Stepping Stones Nursery Ltd” (later called TSSN Ltd). With the aid of a company that specialised in turnaround services, which took a majority equity stake, a new company, Stepping Stones Nursery Ltd (which differed from the name of the failed company by omission of the definite article) was formed, the business was sold to the new company in May 2010, and Groves continued to be a director. The “failed company” (TSSN) went into liquidation in June 2011 and the evidence was that Groves was aware from around that time of the possible application of s 386A. Nevertheless, no application for permission was filed until late December 2011. One of the arguments put forward in favour of the application was that the sale of the business was an arms’-length transaction. His Honour found that the evidence was that the Groves family interests were involved as seller and buyer. Further, the evidence did not establish that the business was acquired for full value. If the application had been brought in a timely manner, the issue of whether or not the business was sold at an undervalue would be important, but his Honour held that s 386A did not permit the Court to consider factors which would have had relevance had the application been made at an earlier time. It was not consistent with the purposes of the provisions to allow a person to act as a director in contravention of s 386A and then consider the granting of permission by applying a test that might have been appropriate had the application been made earlier. The Court should look at the factors relevant to the time of the application. His Honour discussed leading English cases,695 and focused on factors relevant to the future governance of the new company, given that the transfer of the business was in the past. The applicant’s status as a director could not be retrospectively altered by a grant of permission now, and this was confirmed by English case law.696 The two questions were the consequences for the phoenix company and those dealing with it, of the applicant remaining a director, and secondly whether he was a person whose conduct (in relation to either the failed or the phoenix company) made him unfit

to be a director of the phoenix company. Mackenzie J concluded that Groves’ experience and contacts were important to the business, but that it was not necessary for him to continue to be a director, as opposed to having a managerial role. He had not had a governance role to date. The only relevant matter pertaining to misconduct was the fact that he continued as a director [page 118] of the phoenix company for seven months before making the application under s 386A, in full knowledge of the provision. His deferral to others’ wishes that he remain did not detract from his personal responsibility, and this was a relevant factor in considering his ongoing fitness to be a director. It was relevant to consider that continuation as a director in contravention of s 386A was a serious offence under s 373(4), and conviction could trigger a disqualification order under s 383. Mackenzie J therefore refused permission for Groves to continue to act as a director of the phoenix company (although he was permitted to continue in a management role). The phoenix provisions impose both criminal and civil liability on directors. The criminal penalty is up to five years in prison and up to a $200,000 fine.697 The civil liability makes the director of the failed company personally liable for all the debts incurred by the phoenix company for the period during which the liability in s 386A attached.698 Moreover, the liability extends to persons involved in the management of the phoenix company who act or are willing to act on instructions given by someone known to them to be contravening s 386A. The important point to emphasise about the civil liability is that it makes the director of the failed company liable for the debts of the phoenix company, rather than forcing them to contribute to the debts of the failed company. Presumably this liability would only be triggered if the phoenix company were unable to pay its own debts, though the phoenix company does not have to be insolvent for this liability to be triggered. The justification for this is that the abuse through the phoenix company may have misled people to give it credit, and therefore the director of the failed company should be liable to the creditors who were potentially misled.

III.8 Preferential claims

(a) (i)

Introduction Policy grounds for priority claims

As part of the insolvency law review, the Law Commission was asked to report on the “criteria which ought to be applied in determining whether any particular debt should be afforded preferential status”.699 The Law Commission’s report, Priority Debts in the Distribution of Insolvent Estates, identified a series of [page 119] policy factors that could be used to assess whether a priority claim should be recognised. In part, the Commission concluded: The balancing of private rights should generally be given precedence over public interest issues. Because insolvency law draws lines which determine which creditors suffer more loss than others, it is the competing rights of those creditors which should be given paramountcy. While certain types of priority may be considered desirable on public interest grounds (for example, the desirability of protecting the country’s revenue base, the social imperative in protecting employees …), the issue is whether it is appropriate in the particular case for these matters to be taken into account for insolvency law purposes.700

While the Law Commission generally concluded that private rights should take precedence over public interest issues, it acknowledged that community expectations may demand that public interest issues be given precedent. However, before granting priority the grounds for the preferred status should be clearly articulated. The Ministry of Economic Development Tier One Discussion Document also acknowledged that “giving preferential status to a particular debt should occur only if there are compelling public interest reasons for doing so”.701 The Explanatory Note to the Insolvency Law Reform Bill identifies the above themes as a key element of reform of priority claims. The Bill proposed to:702 … distribute the proceeds to creditors in accordance with their relative pre-insolvency entitlements, unless it can be shown that the public interest in providing greater protection to one or more creditors outweighs the economic and social costs of any such priority.

The Explanatory Note also acknowledged that over the years, categories of priority debts had been added both in insolvency legislation and in other statutes “without any consideration of the wider insolvency implications”.703 To avoid

this situation in the future, the Law Commission recommended that the Companies Act 1993 and the Insolvency Act 1967 be amended to make it clear that any member of Parliament introducing a Bill into the House must indicate whether there is anything in the Bill that [page 120] would affect the priority scheme in either the Insolvency Act 1967 or the Companies Act 1993.704 The Tier One Discussion Document recommended that the Cabinet Office Manual be amended to provide that “officials must consult with the Ministry of Economic Development before recommending to Ministers a provision that could affect priorities”. Further, it recommended that if any new priority was to be created, it be consolidated into Schedule 7 to the Companies Act 1993 and (what is now) s 274 of the Insolvency Act 2006,705 so that the complete and current priorities are always set out in the insolvency legislation. In the absence of a legislative method of ensuring that this happens, this initiative is welcome and it is to be hoped that the Cabinet Office Manual has been or will be amended as indicated.706

(ii)

Crown claims

One of the most contentious items arising from the review of priority claims was Crown claims. The protection of the public interest according to the Ministry of Economic Development Tier One Discussion Document included the protection of “the public interest in relation to the government’s income”.707 However, the Law Commission in its review of the Insolvency Act 2006 and the Companies Act 1993 recommended that the preferential entitlements to GST, customs duties and levies under the Fisheries Act and Telecommunications Act be abolished. The Commission recommended that the preferential status of nonresident withholding tax and resident withholding tax in corporate insolvencies should be retained and extended to personal bankruptcies.708 The government has taken some steps to consolidate some of the governmentrelated claims. Priority for levies under the Fisheries Act and debts owing under the Radiocommunications Act have been removed.709

However, priorities afforded to PAYE, GST, and customs duties have been retained under the Insolvency Act 2006, and the identical corporate insolvency [page 121] provision.710 The Associate Minister of Commerce, Hon Laila Harré, in announcing decisions in relation to Tier One Reform issues claimed that:711 The decision to retain the debts collected by the New Zealand Customs Service and the IRD is based on the need to maintain the Government’s revenue base and to further other objectives of the Government.

During the course of the Select Committee stage of the Bill, the Commerce Committee received several written and oral submissions to the effect that Crown priority for income tax, GST, and customs duties should be removed. The submissions pointed to the position in other jurisdictions, in particular, Australia712 and the United Kingdom,713 where the priority had been abolished, at the same time as introducing a new voluntary administration regime.714 The irony of introducing an Australian voluntary administration regime when Australia did not retain the Crown’s tax priority status when it introduced that regime, was not lost on many submitters. In many liquidations the Crown is by far the largest unsecured creditor, and it was thought that failure to remove the Crown’s priority would mean that the Inland Revenue Department would in many cases be able to effectively veto any DOCA unless it was accorded its statutory priority within the DOCA. The recent experience in the United Kingdom was that until the Crown priority was removed, the Inland Revenue often triggered a liquidation, rather than negotiate with other creditors towards a voluntary arrangement. The National Party, which for this reason alone voted against the passing of the Insolvency Law Reform Bill, have gone so far as to say that without removal of Crown priority, the new voluntary administration regime will be “redundant legislation”. An additional reason for removal of Crown priority is that it currently acts as a disincentive for that creditor to properly monitor its debtor,715 especially when the Crown has an array of other enforcement powers not available to ordinary unsecured creditors. The Inland Revenue does not have a strong incentive to negotiate a compromise; indeed its statutory duty arguably gives it an imperative

[page 122] not to do so, unless that duty is interpreted rather more broadly and on a longterm view than the Commissioner has done to date. The majority report of the Commerce Committee took the view that the Commissioner’s statutory obligation left room for the IRD to vote in favour of a voluntary administration where it is “likely that a company can be rehabilitated and ultimately return more tax than would have been paid under liquidation”.716 Others have pointed to the solution in Australia, where there is no Crown priority, but directors can be made personally liable for un-remitted company taxes on service of a notice upon them, unless they either pay it or initiate voluntary administration or liquidation.717 Select Committee considered this approach.718 Chris Tremain pointed out that in the Select Committee, the Labour members did not wish to increase director liability, and seemed to assume that this was tied to removal of Crown priority.719 Chris Tremain rightly pointed out in the Parliamentary Debates that there is no natural link between the two, and that Crown priority could be removed without imposing director liability, as has happened in the United Kingdom. Director liability is of course a large issue, and needs to be seen in the context of the existing liabilities upon directors for unpaid tax,720 and the possible defences which an individual director may have to any new liability. Another alternative would be to limit the IRD priority to four months of arrears, as with employees, or some other period. The Commerce Committee recommended,721 after hearing submissions that IRD allow some companies to accrue significant periods of PAYE and GST debts, must notify directors after two consecutive “payment due” periods in arrears, but this has not been enshrined in the legislation. Despite the strength of submissions,722 and the proportion of the debate during which members reiterated the point made in submissions, the government has not reversed its earlier policy decision (which was also [page 123] contrary to the Law Commission’s recommendations)723 to retain these Crown priorities in order to protect the Revenue base.

The majority report of the Commerce Committee stated:724 We have considered the issues raised by submitters, but … consider that Crown priority should be retained. We note that, although other creditors may protect themselves from the risks of not being paid by the debtor by reflecting that risk in the cost of the credit or obtaining security … Inland Revenue is an involuntary creditor. In addition, the GST charged by the company, and any monies deducted from an employee’s wages, have never belonged to the company, but were held on trust on behalf of the Crown, and should therefore be provided to the department.

A figure from an IRD source given to the Select Committee, quoted in the Parliamentary Debates, is that only $5 million per annum is gathered by the IRD under their preferential status.725 Arguably, its relative insignificance for the New Zealand Government revenue base, compared to its decisive influence in several insolvencies, is another factor pointing to its removal. A further possible solution might be to adopt a formal protocol between the Ministry of Economic Development and the IRD as to the latter’s treatment of voluntary administration proposals.726 However, the strength of feeling on this issue, combined with experience of the new voluntary administration regime in the early years may, as it did in the United Kingdom, lead to a reconsideration of this issue in future.727 The voluntary administration regime will still prove useful in many cases, and the authors do not share the view that it will be a “redundant” addition to the presently limited menu of rescue procedures in New Zealand. Nevertheless, the authors do believe that so long as the IRD tax priority remains in its current form, the procedure will be far less successful in achieving the full potential of its statutory objects and much, we would say, too much, will depend on the attitude of the IRD to the regime. [page 124] The changes with regard to specific categories of priority are set out below. The references are to the Companies Amendment Act 2006 version of Schedule 7, but apart from necessary differences for individual insolvency (bankruptcy) set out earlier,728 s 274 of the Insolvency Act 2006 includes the same priorities, so the corresponding subsections of s 274 will also be referred to within the relevant headings below.

(b)

Fees, expenses, and remuneration

The first category of preferential claims relates to the fees and expenses of the liquidation729 (and correspondingly, in relation to bankruptcy, the fees and expenses of the Assignee).730 Two important changes have been made to this provision. The first applies on liquidation and is consequential on introduction of voluntary administration — the properly incurred fees, expenses, and remuneration, of the administrator are now payable in a liquidation after the liquidators’ fees, expenses and remuneration.731 After that, the reasonable costs of a person who applied to court for compulsory liquidation are payable and here the new Act has extended this to the reasonable solicitor and client costs of procuring the order.732 This is intended to encourage creditors to place companies in liquidation early, rather than delay, which might lead to prejudice to the interests of all creditors. In the case of bankruptcy, the new priority similarly covers the reasonable costs of a creditor in procuring an order of adjudication, including the reasonable costs incurred between lawyer and client in procuring the order.733 Next, the actual out-of-pocket expenses of the liquidation committee are payable.734 (There is no equivalent committee on bankruptcy, therefore, no equivalent priority.) After that, a new category of preferential claim has been inserted,735 payable out of realisations of the relevant assets; namely, the costs, and an amount up to the total value of unsecured debt, of a creditor who protects, preserves the value of, or recovers assets of the company for the benefit of [page 125] creditors by payment of money or the giving of an indemnity. This priority is intended to allow the recovery of costs of those creditors who assist with funding or pursuit of claims, or enable ongoing value in a company to be preserved by payments, indemnities or otherwise, in order that the value can be realised for the benefit of all creditors. The identical priority is introduced in the Insolvency Act 2006.736

(c) (i)

Employees Changes made in the Companies Amendment Act 2004

The second category of preferential claims is employees.737 The identical priority to employees and employment-related claims within this category is given by the Insolvency Act 2006. 738 In the course of the insolvency review, policy decisions were taken affecting employee priority debts in Schedule 7, which were contained in the draft Insolvency Law Reform Bill issued in April 2004,739 and it was decided, perhaps for political reasons,740 to implement these ahead of the other amendments, particularly to give employees the benefit of the increased maximum threshold which was more than doubled, and to exclude directors from the benefit of such an increase. The Companies Amendment Act 2004741 (and an equivalent Insolvency Amendment Act 2004 in the case of bankruptcy742) increased the maximum financial threshold which applies to employee preferential claims. This applied to wages and salary, holiday pay and, from 2004, redundancy compensation, and other employee-related claims set out in para 2 of Schedule 7. The threshold was increased from $6,000 to $15,000. The Act provided for the first time that the threshold should be adjusted every three years by a mechanism tied to the percentage increase in average weekly earnings743 over [page 126] the adjustment period.744 The first period ended on 30 June 2006, and the sum was increased further,745 to $16,420 from 30 September 2006.746 With effect from 30 September 2009 it was increased to $18,700.747 From 28 September 2012 it will be $20,430.748 It was also decided, in respect of Schedule 7 to the Companies Act 1993, to exclude company directors from the definition of “employee”, excluding anyone who has been a director within last 12 months prior to liquidation, or a nominee, relative or trustee of a director.749 Whilst this is harsh on conscientious directors who have employment contracts with their company, on balance the government decided that directors are distinct from most employees with regard to their

information about the state of the company and their relative lack of vulnerability, and this change would also provide an incentive for prudent director conduct.750 The 2004 Act (and the Insolvency Amendment Act 2004 in the case of bankruptcy) also extended the coverage of employees’ preferential claims beyond wages, salaries and holiday pay for the four months prior to liquidation, to encompass redundancy compensation owed to an employee that accrues before “or by reason of” liquidation.751 This change was significant in principle, in that traditionally, the only debts capable of proof in a liquidation [page 127] have been pre-commencement debts.752 The government was aware that unlike other jurisdictions,753 New Zealand does not have an insurance or protection fund for employees in the event of insolvency. The government was of the view that the 2004 Acts would in part mitigate the absence of such a fund. The 2004 Acts also extended employee priority to awards made in personal grievance cases by the Employment Relations Authority, Employment Court or Court of Appeal in respect of wages or other money or remuneration lost for the four-month period prior to liquidation. However, this does not extend to awards for humiliation, loss of dignity or injury to feelings, or loss of any benefit.754

(ii)

Changes made in the Companies Amendment Act 2006

A technical change to the wording of the clauses in relation to holiday and redundancy pay has been made in the 2006 Act, which arises partly out of the amendments that were made in 2004 discussed in the previous paragraph. Unfortunately, the language chosen in the 2004 Act was inaccurate, since redundancy compensation does not accrue “by reason of the commencement of liquidation”. Therefore, the new Schedule 7755 replaces “by reason of” with “because”, which emphasises that the liquidation is merely the event which has triggered the termination of employment which has caused the holiday pay to be payable, or the redundancy entitlement to accrue. This small semantic change engendered more significant amendments to the Receiverships Act discussed below.756 The government also decided to remove other redundant priorities applicable

to apprentices and workers’ compensation legislation, which were no longer necessary because the protected categories of employees were [page 128] covered by the Employment Relations Act 2000.757 This was amended by the Companies Amendment Act 2006.758 In an attempt to ensure that priority categories can, as far as possible, be all found in Schedule 7 or the Insolvency Act equivalent,759 there has been a “tidying up” of the categories of employee deductions from wages or salary. Prior to this, some of these appeared separately in the previous version of Schedule 7,760 and some in different pieces of legislation.761 The consolidation of preferred claims is in keeping with the Law Commission’s earlier recommendations, which the government endorsed. Therefore, student loan and child support deductions have been included within the general clause covering “amounts deducted by the company from the wages or salary of an employee in order to satisfy obligations of the employee”.762 In 2007, one new government priority was consolidated into Schedule 7 of the Companies Amendment Act 1993 (and s 274 of the Insolvency Act 2006) in respect of deductions from wages or salary under the Kiwisaver scheme.763 Section 67 of the Kiwisaver Act 2006 provides that where an employer is obliged to deduct contributions under a Kiwisaver scheme, these are to be treated like PAYE deductions. In terms of Schedule 7, they are grouped in priority with other deductions on behalf of employees, such as student loan contributions, since both are deemed to be held on trust for the Crown.764 Kiwisaver deductions are given equivalent priority in the hierarchy of preferential payments, though are not included within the general [page 129] category of employee deductions mentioned above. Lastly, this category of preferential claims has been extended to untransferred amounts of an employee’s payroll deductions by an employer or intermediary under s 24Q of the Tax Administration Act 1994 during the four months prior to liquidation.765

(d)

Residual category

The government had intended that no new priorities be created without consultation with the Ministry of Economic Development. The intention was also that they be then incorporated into Schedule 7 to the Companies Act 1993 (as amended) and (where applicable) the Insolvency Act 2006. Nevertheless, there is no legislative mechanism in the Act to make this happen.766 As with the previous Schedule 7, and its Insolvency Act equivalent,767 a residual category covers “all sums that by any other enactment are required to be paid in accordance with the priority established by clause 1(2)” of Schedule 7.768 However, it is to be hoped that the recommendation for inclusion of the consultation requirements in the Cabinet Office Manual should ensure that there is no future piecemeal “creep” of priorities in separate legislation.769

(e)

Layby sales and compromise meeting or proposals under Part 14

There has been no change to the scope or priority of claims by a buyer under the Layby Sales Act 1971, which is next in priority after the employee-related claims dealt with above, in relation to both liquidation and bankruptcy priority.770 Thereafter, in the case of liquidation, the liquidator must pay the costs of any creditor or other person incurred under s 234(c) of the Companies Act 1993 in organising a meeting of creditors for the purpose of voting on a proposed compromise under Part 14.771 In the case of the Insolvency Act 2006, there is a similar priority at this point in the bankruptcy priority list (that is, after layby [page 130] sales) for the costs of any person other than the insolvent, incurred in organising and conducting a meeting of creditors for the purpose of voting on a proposal under Subpart 2 for the payment and satisfaction of the insolvent’s debts.772

(f)

Crown claims

The next category is Crown claims for unpaid tax (PAYE, Non-Resident Withholding Tax, and Resident Withholding Tax deducted by the debtor under the rules in the Income Tax Act 2004), GST and customs’ duty. This has been covered above, where it has been pointed out that, despite strong submissions, there has been no change to this priority or its extent, other than the removal of priority for levies under the Fisheries Act 1996 and Radiocommunications Act 1989.773

(g)

Subrogation

Formerly, where someone, typically the company’s bankers, provided funds for payment of employees’ wages, the funder was subrogated, and thus stepped into the shoes of the employee to the extent of the latter’s preferential debt.774 This has now been extended beyond funding of wages or salary, to any situation where money is advanced by someone else for payment by the liquidator of any preferential claim.775 The purpose of this is to remedy any unfair discrimination in favour of lenders who advance funds for payment of wages or salary, as compared to those who advanced funds in respect of other preferential debts, for example, liquidation expenses or payment of tax.

(h)

Subordination of secured debt to preferential claims

The 2006 Act also attempts to cure a problem arising out of a conflict between the determination of relative priorities between security interests under the Personal Property Securities Act 1999 (the PPSA), and the wording of the clause under Schedule 7 to the Companies Act 1993 with respect to the type of secured claim that is subordinated to preferential claims. During the course of the Insolvency Law Review, and after the 2002 PPSA consequential amendments to Schedule 7 [page 131]

had taken effect,776 it became clear that the exception from subordination to preferential claims in Schedule 7 for “purchase money security interests” over accounts receivable and inventory had set up a “circularity” problem. The background and the legislative solution to this issue are explained below.777 Since this involves complex issues of the interaction of the PPSA and insolvency legislation beyond the scope of this Guide and Commentary, readers who need to do so are encouraged to consult specialist texts on the PPSA.778 Under Schedule 7 to the Companies Act 1993 as originally worded, which applied until 2002,779 preferential debts, to the extent that there were insufficient uncharged assets available to meet them, were payable in priority over the claims of holders in respect of assets which were subject to a floating charge.780 With the passing of the PPSA, which effectively abolished the concept of the floating charge and the previously crucial distinction between fixed and floating charges,781 a consequential amendment was made to Schedule 7 of the Companies Act 1993 to reflect the new terminology of the new Act.782 The intention of the amendment was to preserve existing priorities, including the subordination of the former “floating charge” element of security.783 The amendment that prevailed784 [page 132] used terminology, which reflected as closely as possible, the categories of assets formerly charged under a floating charge. Therefore, the terms “accounts receivable” and “inventory” were substituted in Schedule 7.785 The PPSA also introduced the concept of a “purchase money security interest” (PMSI) to New Zealand statute law,786 This covered, among other things, retention of title claimants who, prior to the PPSA, would have had “priority”787 over preferential and other creditors, including secured creditors with a floating charge, by virtue of their proprietary common law claim. Therefore, in preserving the subordination of the former floating charge element of security, it was necessary, in the consequential amendments to the PPSA, to exclude from the effect of the subordination, security interests which amounted to PMSIs over accounts receivable and inventory. Prior to the PPSA, these would have included retention of title and similar proprietary claims over stock and other assets that would have taken priority over all other claims.

A later consequential amendment was made to exclude transfers of accounts receivable for new value, such as occurs in factoring.788 Again this was simply to preserve the priority which outright assignments had enjoyed prior to the PPSA, before they were brought within its wide definition of “security interest”.789 The “circularity” problem referred to above arose as follows.790 It was clearly the legislative intention to subordinate realisations of non-PMSI security interests over accounts receivable and inventory to be paid after preferential claims, and also to preserve the previous common law priority of PMSI holders over other claimants. However, the consequential amendment [page 133] took no account of the relative priority between the PMSI holder and the nonPMSI security interest as determined under the PPSA priority rules. Under the PPSA, the general default priority rule, in cases where the Act provides no other specific rule, is that a perfected security interest has priority over an unperfected security interest.791 However, specific rules do give PMSIs priority over perfected non-PMSI security interests,792 but perfection of the PMSI is still required in order to preserve this priority. Section 74 of the PPSA provides: A [PMSI] in inventory or its proceeds has priority over a [non-PMSI] in the same collateral given by the same debtor if the PMSI in the inventory or its proceeds is perfected at the time the debtor, or another person at the request of the debtor, obtains possession of the collateral, which is earlier.793

Accounts receivable, such as book debts, are treated as proceeds of inventory and are therefore covered by s 74.794 The consequential amendments to Schedule 7795 did not specify that PMSIs had to be perfected in the manner provided by the PPSA in order to have priority over preferential debts. The consequential amendment provided that all PMSIs whether they were perfected or not had priority over preferential claims arising under Schedule 7 to the Companies Act 1993. This meant that if left unamended, Schedule 7 provided that preferential claims had priority over general security interests in accounts receivable and inventory, and PMSIs (irrespective of whether or not perfected) had priority over preferential creditors. However, the PPSA perfection requirement was that the PMSI in inventory or its proceeds be

perfected at the time the debtor obtains possession of the collateral in order to have priority over non-PMSI. Accordingly, PMSIs did not necessarily have priority over perfected general security interests.796 Schedule 7 therefore obliged a liquidator (and identical provisions existed for a receiver)797 to pay preferential creditors in priority to a general security interest over accounts receivable and inventory, even if that security interest had priority over the PMSI under the PPSA. [page 134] Since priorities between security interests in goods are governed by the PPSA, this was a clear conflict between the PPSA and Schedule 7 to the Companies Act 1993. In order to cure the circularity problem, the Companies Amendment Act 2006 provides798 that the preferential claims listed in Schedule 7 will have priority over the claims of any person under a security interest over accounts receivable and inventory which “is not a purchase money security interest that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999”.799 The amendment is designed to ensure that a PMSI, which has been perfected in accordance with s 74 of the PPSA, will always have priority over non-PMSI security interests over accounts receivable, and over preferential creditors. In the case of bankruptcy, the subordination provisions of the Insolvency Act 1967 were not amended by the PPSA to reflect its terminology. This seemed to be an oversight (or it may have been assumed that security over accounts receivable and inventory had more practical relevance to companies rather than individual debtors). The Insolvency Act 2006 now incorporates identical wording to the amended Schedule 7 to the Companies Act 1993 in respect of subordination of security interests to preferential debts in bankruptcy.800 The 2006 amendment to Schedule 7 also affects receivers’ duty to pay preferential creditors, and is discussed below under Part V, dealing with the Receiverships Act 1993.801

(i)

Transitional provisions

The new Schedule 7 applies to all liquidations commencing after the 2006 Act comes into force.802 Similarly, though without specific transitional provisions in respect of priority debts, s 274 of the Insolvency Act 2006 will replace the Insolvency Act 1967 priority debts list when the Insolvency Act 2006, or the Part containing s 274, comes into force.803

[page 135]

IV RECEIVERSHIPS ACT 1993 IV.1 Introduction The Insolvency Law Reform Bill was not primarily concerned with the Receiverships Act 1993. The Receiverships Act was new legislation in 1993, and covers corporate and personal debtors. However, the Insolvency Law Reform Bill did make some significant consequential amendments, and other amendments had been made in 2004 and 2005. Because of the extent of recent amendments to what is a relatively short Act, and because of the significant role that receivership plays in corporate insolvency, the full consolidated text of the Receiverships Act 1993 is included here. The new voluntary administration regime in Part 15A of the Companies Act 1993 preserves the position of the category of secured creditor which is in the position to appoint a receiver under the terms of its charge or charges.804 The effect of a voluntary administration on receivership has been mentioned above.805 Although the voluntary administration regime gives such creditors the power to appoint an administrator if the charge is enforceable, and therefore encourages secured creditors to use the voluntary administration mechanism for the benefit of all creditors, out-of-court receivership will still continue to play an important role. The commentary below briefly highlights the amendments made to the Receiverships Act 1993 by the Companies Amendment Act 2006.

IV.2 Preferential debt of employees Receivers appointed under a relevant charge or charges have a duty to pay preferential debts in accordance with Schedule 7 to the Companies Act 1993, ahead of certain categories of charged assets. Liquidators have a similar duty.806 This obligation is imposed on receivers by providing in the Receiverships Act that references in Schedule 7 to the Companies Act to a “liquidator”, be read as

“receiver”, references to appointment of a liquidator be read as appointment of a receiver, and references to a company being put into liquidation be read as it being put into a receivership.807 Unlike liquidation, receivership does not automatically terminate employment contracts, unless they are incompatible with the receiver’s office [page 136] and functions. However, the receiver may of course choose to terminate employment contracts lawfully before the expiry of the 14-day grace period.808 The simple substitution of “receiver” for “liquidator” in Schedule 7 therefore leads to difficulty with respect of this 14-day period, because employment does not necessarily terminate on appointment of a receiver. This difficulty arose before the amendments made to the relevant clauses of Schedule 7 in 2004,809 and the further amendment in 2006.810 Therefore, the position up to 2006 has been that, while an employee’s wages or salary for the four months prior to receivership was, up to the prevailing financial maximum, a preferential claim,811 there was no priority for the subsequent 14-day period after receivership. Consequently, if the receiver eventually decided to terminate an employment contract, rather than adopt the contract and become personally liable, the employee would be an unsecured creditor for that period. The same applied for holiday pay, and (since 2004) redundancy pay. In the case of receivership, this lacuna of the 14-day period seems illogical and unfair, especially when the company in receivership might still be getting the benefit of the employee’s services, which might be vital to an ongoing trading situation and/or to assisting a receiver in the first two weeks.812 Since this difficulty existed prior to the Companies Amendment Act 2006, its rectification could not strictly be said to be “consequential” upon the amendment to Schedule 7 in the 2006 Act, at least as far as wages and salary was concerned (since there was no amendment to the wages and salary aspect of Schedule 7). Nevertheless, it was related to the amendments to the holiday pay and redundancy clauses of that Schedule.813 As stated above,814 the Companies Amendment Act 2006 amended the provisions of Schedule 7 which relate to the priority for employees’ holiday pay and redundancy pay, so that there is priority where the holiday pay is “payable to an employee on the termination of his or her employment before, or because of, the commencement of the liquidation”,

or, in the case of redundancy pay, where it“accrues before or because of the commencement of liquidation”.815 [page 137] At the Commerce Committee stage, the government took the opportunity to clarify the position with regard to the 14-day post-receivership period. It is now provided816 that the preferential period for wages and salary begins four months prior to the receivership, and ends either 14 days after the date of the appointment of the receiver. Alternatively, if notice of termination of employment is lawfully given within the 14-day period in accordance with the Receiverships Act 1993 (or within any extended period under that Act817), ends at the date of such termination. In the case of holiday pay and redundancy pay, the reference in Schedule 7 to the Companies Act 1993818 to liability accruing “before or because of” commencement, means, in the case of receivership, before the expiry of 14 days after appointment of the receiver, or because notice of termination is lawfully given within 14 days after the date of appointment (or a later date which has been extended under the Act).819 Accordingly, receivers have this 14-day period in which to decide whether or not to dismiss or retain particular employees. If they do decide to retain employees they will be personally liable, but ordinarily indemnified in respect of that liability.820 However, it is thought that one effect of the 2006 amendment might be to hasten their decision-making process if it is going to impact on the size of preferential claims, and as a result the size of recovery for their appointor.

IV.3 Subordination of secured debt to preferential claims The problem of circularity in relation to unperfected security interests in relation to Schedule 7 to the Companies Act 1993 on liquidation has been discussed above. Schedule 7 is applied to receivership by s 30 of the Receiverships Act 1993, with the effect that a receiver is obliged to pay the statutory list of preferential creditors out of realisations of secured accounts receivable and inventory. Therefore, the amendment of the Companies Amendment Act 2006 aimed at curing the “circularity problem” has also been incorporated in the

application of Schedule 7 to receivers.821 [page 138] A further provision has been added to clarify the order in which a receiver must pay preferential creditors and secured creditors under s 30 of the Receiverships Act 1993 out of accounts receivable and inventory.822 As a result, the receiver must apply realisations from accounts receivable and inventory as follows: first, to pay his or her expenses and remuneration; secondly, to pay the claims of holders of perfected purchase money security interests, and perfected assignments of accounts receivable for value; and thirdly to pay preferential claims in accordance with Schedule 7 to the Companies Act 1993 (as amended). Only after that, can realisations of accounts receivable and inventory be used to pay any other secured creditor (that is, one not falling into one of the categories above) and if there is more than one such creditor, they will be paid in order of priority between them.

IV.4 Voidable transactions by receivers The 2006 Act took the opportunity to clarify the position, after recent case law, as to whether payments or other transactions undertaken by receivers, or by the company acting through a receiver, could be challenged as voidable transactions. This has been discussed fully above.823

IV.5 Qualifications of receivers It should be noted that the current Insolvency Practitioners Bill 2010 proposes to introduce a registration requirement for insolvency practitioners, including receivers,824 and the Bill proposes certain changes consequential upon that, and certain changes to reporting requirements for receivers, and offences. The Bill is discussed in Part 6 below.

[page 139]

V INSOLVENCY (CROSS-BORDER) ACT 2006 V.1

History

The last 25 years have witnessed increasing globalisation of businesses, and increasing complexity of corporate multinational groups, so that group companies, assets and creditors are often spread across several countries. In New Zealand, there is an increasing number of international insolvency situations, especially as between New Zealand and Australia. While the basic elements of liquidation are similar in most jurisdictions, domestic laws tend to protect domestic creditors in such matters as preferential creditors, or revenue creditors, and the private international law of domestic courts tends to support this. Until recently, cross-border insolvencies have been marked by a “territoriality” principle, even though courts, including those in New Zealand, have indicated a willingness to use the judicial principle of “comity” to ameliorate this to some degree.825 Insolvency practitioners and governments worldwide have agreed that in principle, just as each creditor’s pursuit of his or her own interests does not maximise returns to all creditors, so also on an international scale, “territorialism”, with separate and sometimes conflicting insolvency proceedings, does not optimise returns to all worldwide creditors. As well as common law attempts to mitigate this through resort to “comity”, some courts and practitioners have adopted protocols for informal cooperation.826 However, these depend on agreement and goodwill, in circumstances where time is often of the essence, and therefore cannot alone provide the predictability and certainty required in international trade, banking, and insolvency. [page 140]

In New Zealand, s 135 of the Insolvency Act 1967 provided that New Zealand courts must assist the courts of other Commonwealth countries in bankruptcy matters, and the courts could extend that to non-Commonwealth countries at their discretion. There was no company law equivalent of s 135, which the Law Commission noted as an area also in need of reform. This has now been corrected in the Insolvency (Cross-border) Act 2006.827 While the Model Law will prevail in situations falling within its scope, there is still a role for the court to order requested mutual assistance to representatives in insolvency proccedings from Commonwealth and other specified countries, as enshrined in s 8. That was clearly seen in the recent Williams v Simpson litigation, where a United Kingdom trustee in bankruptcy of a New Zealand resident bankrupt could not be recognised under the Model Law,828 but it was possible for the court to provide assistance under s 8.829 However, none of the above common law or statutory solutions dealt comprehensively and expeditiously with the need for certainty and predictability in a globalised world.830 Therefore, bilateral and multilateral agreements have also been attempted. These have proved difficult to negotiate, given the different common law and civil law systems around the world, particularly within Europe, and given the different policies and priorities that shape domestic insolvency laws in different jurisdictions. For example, the attempt at some European Convention or regulation in this area began in the 1970s.831 On at least two occasions,832 the Conventions failed to be passed at legislative level, often for political reasons unconnected with the merits of the law. Cross-border insolvency is not an area of legislation likely to win many votes, despite its importance to business law and international investment. Successful examples of multilateral agreement in this area include the Montevideo Treaties and the Nordic Convention.833 In 2002, the European [page 141] Community Regulation on Insolvency Proceedings was finally passed and has been implemented in Member States.834 While work was being undertaken in the European Community, the United Nations Commission on International Trade Law (UNCITRAL) commenced work on a Model Law, which had its roots in work begun in the 1980s by the International Bar Association and INSOL.835 The Model Law on Cross-border

Insolvency was adopted on 30 May 1997, and approved by the General Assembly on 15 December 1997. The Law Commission produced a report in 1999 entitled Cross Border Insolvency: Should New Zealand Adopt the Model Law?836 This was written under the guidance of Paul Heath QC, as a consultant to the Commission. He had been involved as a New Zealand observer at the UNCITRAL Working Party deliberations on the Model Law. The New Zealand report has been influential in international discussions on adoption of the Model Law. The Model Law is a framework which domestic legislatures can import in whole or in part, and adapt to fit their local circumstances, insolvency law and policy. It does not have the status, or effect on signatories, of a Convention. Adoption of the Model Law is by incorporation into domestic law. In New Zealand, the Model Law is incorporated by the Insolvency (Cross-border) Act 2006. As recently stated by Heath J:837 The Act creates procedural, rather than substantive, rights. It provides the basis for a modern legal framework designed to facilitate efficient disposition of cases in which an insolvent debtor is subject to a collective insolvency regime in more than one country or has assets or debts in more than one country.

The Insolvency (Cross-border) Act 2006 states, in s 3, that its purpose is to “implement the Model Law …, and … provide a framework for facilitating insolvency proceedings when … a person is subject to insolvency administration in one country …, but has assets or debts in another country; or … more than 1 insolvency administration has commenced in more than 1 country in relation to a person.” 838 The 2006 Act incorporates the Model Law into domestic law by stating that Schedule 1 of the Act, which contains the modified Articles of the Model Law, [page 142] applies in the circumstances set out in art 1. Further references to Articles of the Model Law will be to the Articles as Schedule 1 to the Insolvency (Crossborder) Act 2006 incorporates them in New Zealand. The Act itself provides for the making of rules of procedure in relation to applications to the High Court and other matters,839 and allows for prescribed

forms to be made by regulations.840 If an insolvency proceeding has commenced prior to the Act coming into force, then the old law will apply. This transitional provision does not state that it is restricted to “New Zealand insolvency proceedings”, although the reference to specific types of officeholder in New Zealand might suggest that. Therefore, this provision could be used to govern applicability of the Act in relation to foreign insolvency proceedings that commenced overseas prior to the Act’s commencement. At the time of writing the second edition, the Model Law has been enacted into domestic law in several nations,841 including the United States842 and the United Kingdom.843 Australia passed the Cross-Border Insolvency Act in 2008, effective from 24 July 2008.844 The New Zealand Government decided to await implementation in Australia, and thus brought the New Zealand Act into force on the same date. 845 A small number of cases have already been decided by the New Zealand courts under the Insolvency (Cross-border) Act 2006, including, not surprisingly, several concerning Australian insolvency proceedings and practitioners. Conversely, there have been a small number of cases originating in New Zealand that have come before the Australian courts.846 [page 143]

V.2

Purpose and scope

The Model Law respects national substantive insolvency law, but gives foreign courts and foreign representatives access to that law. It also respects the need to adequately protect New Zealand creditors’ interests, and national public policy. The Model Law is essentially procedural, although it does include important provisions on relief that flows from recognition of a foreign representative or foreign proceeding. Article 1 states that the Model Law applies where either: (a) assistance is sought in New Zealand by a foreign Court or foreign representative in connection with a foreign proceeding; or (b) assistance is sought in a foreign State in connection with a New Zealand insolvency proceeding, or a foreign proceeding and a New Zealand proceeding are taking place concurrently, or (c) creditors or others in a foreign State have an interest in requesting the commencement of, or participation in, a New Zealand insolvency proceeding.

The Model Law does not apply to a registered bank that is subject to statutory management under the Reserve Bank of New Zealand Act 1989.847 The Model Law is designed to be flexible, which is why it has been possible for so many jurisdictions involved in UNCITRAL to agree on its Articles. It is a framework for recognition, relief and cooperation between practitioners and courts. There are many aspects of the Model Law which are optional for adoption in domestic law, although like Australia New Zealand has decided to adopt nearly all of the Articles as they stand. There is, for example, no requirement in New Zealand848 that the Model Law can only be used in respect of proceedings in a foreign country which has implemented the Model Law, and which countries could be designated for “specified insolvency proceedings”.849 Further, art 7 of the Model Law states that it does not exclude provision of assistance to foreign representatives under other laws of New Zealand, including the common law, and so is not exhaustive of jurisdiction. As stated above, s 8 of the 2006 Act enshrines (and extends to corporate insolvency) the statutory mutual assistance provision that was formerly in s 135 of the Insolvency Act 1967, and preserves other local sources of cross-border insolvency law. [page 144] The cases on s 135 are summarised in the Law Commission’s report.850 The Insolvency (Cross-border) Act 2006 modifies that provision851 so not only does it now apply to corporate insolvency, the limitation to Commonwealth countries has been removed at the suggestion of the Commerce Committee. In Williams v Simpson (No 7),852 Heath J stated that s 8(3) was declaratory of the court’s ability to exercise powers in aid of and auxiliary to a foreign court, which it would be able to exercise if the matter had arisen within its own jurisdiction. Nothing in s 8 ousts the inherent jurisdiction of the court. On that basis, he ordered appointment of an examiner to avoid wasteful costs and maximise returns to creditors by liaison between the Official Assignee and Williams, the United Kingdom trustee in bankruptcy, in resolving issues in relation to property and other matters. Heath J made orders (inter alia) entrusting Simpson’s New Zealand property to the Official Assignee, to assist the United Kingdom trustee. In doing so, he held that in applying s 8 in response to a letter of request from the United

Kingdom court, the purposes of the Model Law set out in s 3 of the Act should be borne in mind, as well as the principles of comity and universality. Referring to the mutual assistance cases under the United Kingdom insolvency legislation, he said that:853 Comity is one basis on which relief may be fashioned. At least in countries with similar provisions to s 8, the Court will generally exercise its discretion in favour of giving assistance, unless there is some compelling reason not to do so.

His Honour cited extensively from the opinion of Lord Hoffmann in Cambridge Gas Transport Corporation v Official Committee of Unsecured Creditors of Navigator Holdings,854 including the following key passage: The English common law has traditionally taken the view that fairness between creditors requires that, ideally, bankruptcy proceedings should have universal application. There should be a single bankruptcy in which all creditors are

[page 145] entitled and required to prove. No one should have an advantage because he happens to live in a jurisdiction where more of the assets or fewer of the creditors are situated.

Despite acknowledging the different views of some of their Lordships in Re HIH Casualty and General Insurance Ltd855 in relation to the equivalent United Kingdom mutual assistance provision856 to s 8 of the Insolvency (Cross-border) Act 2006, Heath J was of the opinion that the approach of Lord Hoffmann in Cambridge Gas should inform the exercise of the court’s discretion under s 8 in New Zealand. There must be some compelling reason why a universalist approach should not be applied. The court was given a general discretion to assist the requesting court by exercising any powers that it could exercise if the matter had arisen within New Zealand jurisdiction. Further art 22 of the Model Law should inform the exercise of this discretion in that the court “must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected” before making any orders. This was consistent with the principle of comity and the views expressed by Lord Hoffmann. It is fair to point out that the majority of the United Kingdom Supreme Court in Rubin v Eurofinance SA; New Cap Reinsurance Corp (in liq) v Grant857 has recently held that Cambridge Gas was wrongly decided. Although the case concerned the approach of English private international law to insolvency

preference proceedings where the creditor (judgment debtor) had not submitted to the jurisdiction of the foreign court, the Supreme Court has effectively restricted the scope for universalism in insolvency proceedings by rejecting the basis of the Court of Appeal’s decision in Rubin, (which itself was founded on the universalist approach of Lord Hoffmann in Cambridge Gas), to the effect that insolvency proceedings were sui generis and should not be treated in the same way as in personam proceedings as far as the English common law was concerned. Lord Collins, giving the majority judgment in the Supreme Court in Rubin made it clear that his rejection of the treatment of insolvency proceedings as subject to a distinct principle of universality was ultimately a matter of policy, and thus a matter for the legislature. Whilst Lord Collins did not think that the Model Law itself858 contained any jurisdiction for enforcement of judgments (including preference actions) against third parties, the very fact of incorporation of the Model Law in New Zealand, together with the endorsement of the views of Lord Hoffmann by Heath J, should be seen as an indication of the prevailing policy in New Zealand in any case where that [page 146] course is open to the court. To this end, the dissenting judgment of Lord Clarke in Rubin is to be preferred.

V.3

Interpretation

Thankfully there are useful documents that assist with interpretation of the Model Law. The Act provides that in its interpretation, reference may be made to any document originating from UNCITRAL relating to the Model Law, or its working group which prepared the Model Law.859 This provision expressly860 does not limit art 8, which provides that regard is to be had, in its interpretation, to its international origin and the need to promote uniformity in its application and the observance of good faith. The most important document to refer to for assistance on the Model Law is the UNCITRAL Guide to Enactment861 This takes the form of an article-byarticle commentary and will be a starting-point in cases of any uncertainty. It should also be pointed out that continuing work by UNCITRAL and other

international bodies such as INSOL is being undertaken, for example to work on guidelines for judicial cooperation,862 and the problem of corporate groups. New Zealand courts will not only have to get used to interpreting an international text in this area, but will gradually be able to draw on the applicable international and European case law on crucial matters such as the centre of main interests and definition of an insolvency proceeding. Such case law has already started to flow from Europe, and North America.863 [page 147]

V.4

Overview and definitions

The New Zealand Act defines an “insolvency proceeding”864 as: … a collective judicial or administrative proceeding, including an interim proceeding, pursuant to a law relating to insolvency (whether personal or corporate) in which the assets and affairs of a debtor are subject to control or supervision by a judicial or other authority competent to control or supervise that proceeding, for the purpose of reorganisation or liquidation.

Thus in relation to foreign proceedings, this definition limits the scope of the type of proceedings that can be considered under the Model Law in New Zealand. As stated recently by Heath J, “the term ‘collective’ distinguishes a formal insolvency regime (under which the debtors’ assets are realised for the benefit of all creditors) from private proceedings against a debtor, in which a single creditor seeks judgment for its own benefit”865 Although this extends to administrative proceedings that are initiated out of court, there has to be some degree of supervision by the court and the proceedings have to be for the purpose of reorganisation or liquidation. A rehabilitation procedure in the United States under Chapter 11 of the United States Bankruptcy Code has been recognised as a foreign proceeding under the Act.866 An Australian voluntary administration could be said to be subject to the supervision of the court, for example, but secured creditors’ out-of-court remedies such as receivership, and other forms of individual execution, would fall outside it. In Jeong v TPC Korea Co Ltd867 a court-appointed receivership under the Republic of Korea’s Debtor Rehabilitation and Bankruptcy Act was recognised as a foreign main proceeding. In respect of New Zealand insolvency proceedings, Schedule 1 to the Act, in incorporating the Model Law provisions, defines a “New Zealand insolvency proceeding” more specifically as a:868

… collective judicial or administrative proceeding pursuant to the law in New Zealand relating to bankruptcy, liquidation, receivership, judicial management, statutory management, or voluntary administration of a debtor, or the reorganisation of the debtor’s affairs, under which the assets and affairs of the debtor are administered, or the assets of the debtor are or will be realised, for the benefit of secured or unsecured creditors.

[page 148] The government has, as other countries will do, specified the types of proceedings which it sees as within its scope. It has taken a wide view of the type of New Zealand proceedings within the Model Law, including statutory management (despite the earlier remarks in this Guide and Commentary) and both Parts 14 and 15 of the Companies Act 1993 within the wording.869 Despite the reference to receivership, and the further reference in the definition of “insolvency administrator” to a receiver within the meaning of s 2(1) of the Receiverships Act 1993, it would seem that out-of-court receivers appointed by a secured creditor should not be within the scope of the Model Law here, since it is neither a “collective” procedure, nor for the benefit of unsecured creditors. Important concepts under the Model Law define whether foreign proceedings are “main” or “non-main” proceedings. The Act requires recognition of either a “main” or “non-main” proceeding. If the foreign proceeding does not fall into either of these categories, there is no residual discretion to recognise it under the Act or the Model Law. This was the outcome of a number of United States cases including Re Bear Stearns870 and has been confirmed by Heath J in Williams v Simpson (No 5).871 In the absence of proof to the contrary, in the case of a corporate debtor, the debtor’s registered office is presumed to be the “centre of main interests” (COMI) for the purposes of ascertaining whether any such proceedings is a “foreign main proceeding”.872 In the case of an individual, the presumption is that the COMI is the place of their habitual residence.873 In Williams v Simpson (No 5) Heath J, applying this test to assess whether or not a United Kingdom bankruptcy could be recognised as a foreign main proceeding in New Zealand, noted that the test of habitual residence was well known in international law, for example family law, and held that the debtor was habitually resident in New Zealand:874 [page 149]

Mr Simpson has lived in New Zealand for many years; he goes to England each summer to enjoy the cricket and to see family; he has a school aged daughter in New Zealand and regards this country as his home. Mr Simpson’s centre of main interests is in New Zealand. On that basis, it is not permissible for this Court to recognise the English bankruptcy as a “foreign main proceeding”.

The proceeding will be recognised as a “non-main proceeding” if the debtor has an “establishment” in a foreign state.875 That is, where there is any place of operation where the debtor carries on any non-transitory activity with human means and goods or services.876 In the case of a corporate debtor, main economic activity may take place in a place other than the place of incorporation. One issue in New Zealand may be the COMI of branches of an Australian enterprise. European authorities on the COMI will be relevant, and the registered office presumption is rebuttable, so other factors have been considered. One large issue is the way in which the COMI of a corporate group company is identified. The European Court of Justice’s long-awaited decision in Eurofood IFSC Ltd877 was a disappointment in terms of guidance in group situations. Eurofood was an Irish subsidiary of the Parmalat group, whose parent was incorporated in Parma, Italy. Insolvency proceedings were opened in the Italian Courts, but a provisional liquidator was appointed in Dublin, and the principal issue was whether the main proceedings, for the purposes of the European Regulation, were in Italy or Ireland. The presumption of the place of incorporation favoured Dublin, but there was very little economic activity in Dublin. Apart from saying that a mere “letter-box” company with only a registered office in the place of incorporation would not be the COMI, the European Court gave little practical guidance on how to decide the extent of the factor of genuine control or activity by a parent based in another jurisdiction, other than to say that the sole fact that there was some control by the parent in another location was not sufficient to rebut the presumption. In relation to the subsidiary, the Court said that the presumption of corporate seat could only be displaced where there was evidence to the contrary which was objective and ascertainable by third parties. Therefore, the COMI test becomes the most important test in wresting control of the insolvency through the main proceedings, to which any other non-main or local proceedings must be ancillary and, if local, confined to local assets. Inevitably, despite the universalist philosophy behind the Model Law, this approach will lead to forum-shopping.878 Another problem is where astute debtors try to shift [page 150]

location shortly before insolvency in order to affect the location of the COMI.879 It is less easy to ascertain an “establishment” in the case of an individual debtor, particularly one with no business.880 In Williams v Simpson (No 5),881 Heath J noted that the UNCITRAL Guide to the Model Law had recognised this difficulty and suggested that enacting states might wish to exclude consumer debtors from its scope. In Williams, Heath J had to consider whether a retired dentist, who had not worked for 12 years and was drawing a United Kingdom pension and a New Zealand one, had an “establishment” in the United Kingdom. The evidence was that his economic activity as a name at Lloyds of London was a past activity, and the test for this purpose in art 16(3) had to be present economic and non-transitory activity. Having held that his centre of main interests was in New Zealand not the United Kingdom, His Honour also held that Simpson had no “establishment” in the United Kingdom either. The European Court also said in Re Eurofood that, in the context of the equivalent regulation in the European Insolvency Regulation,882 the “manifestly contrary to public policy” exception for a local court to refuse to recognise a foreign proceeding883 should be construed strictly, in order to promote the universality principle behind the Model Law. This accorded with the early view taken in at least one case under the Model Law (in this case, incorporated into United States domestic law by Chapter 15 of the United States Bankruptcy Code).884 The Model Law does not apply to a registered bank in statutory management under the Reserve Bank of New Zealand Act 1989.885 The Law Commission recommended this exclusion, because otherwise some of the rights of a foreign representative under the Model Law might compromise the executive procedure of statutory management which, in the case of banks, is largely designed to safeguard against systemic risk to, or failure of, the New Zealand banking and financial system. The Model Law, at least without significant amendment, would impact on the Reserve Bank’s obligation and ability to protect the system.886 [page 151] No action may be taken under the Model Law that conflicts with a treaty or other agreement to which New Zealand and one or more other States are parties.887 No restriction has been placed on the content of any such treaty or agreement, for example, limiting it to insolvency, as recommended by the

UNCITRAL guide.888 However, the limitation to “conflict” should suffice to avoid any difficulty of reconciliation with treaties and agreements in civil procedure areas.

V.5

Procedures and relief

The relief depends on the urgency of relief sought, and the type of foreign proceeding, in particular whether it is a “main” or “non-main” proceeding. Limited interim relief may be sought from the time of filing an application for recognition. In Williams v Simpson (No 7) Heath J granted a series of consecutive limited interim relief orders as information came to light, under art 19 of the Model Law, to issue a warrant to permit the United Kingdom trustee to search premises in Hamilton where gold bullion was believed to be stored.889 Foreign representatives may apply directly to the High Court to commence a New Zealand insolvency proceeding if the conditions for commencing such a proceeding are otherwise met.890 Foreign creditors have the same rights regarding commencement of, and participation in, New Zealand insolvency proceedings as New Zealand creditors have (except that this does not affect the ranking of claims, and both foreign tax and social security claims are excluded).891 A foreign representative, on producing various pieces of evidence, may apply to the High Court for recognition of a foreign proceeding.892 If the court order, or certificate which evidences it, shows that the proceeding and representative are within the scope of article 2, the High Court can presume that this is so.893 Application to the High Court in New Zealand is a [page 152] prerequisite for recognition of a foreign proceeding or representative under the Model Law. Once the court has recognised the foreign proceeding, then if it is a main proceeding, there will be a wide automatic moratorium.894 However, creditors can apply to lift the moratorium in respect of particular actions or steps, and it does not affect the right to apply for New Zealand insolvency proceedings, or to file claims in such proceedings.

In respect of both types of foreign proceedings, discretionary relief is available, and the Court may provide for examination of witnesses or delivery of information. In Omegatrend International Pty Ltd,895 for example, Faire AJ refused a public examination of directors in the circumstances, but permitted private examination under s 261 of the Companies Act. In Pacific Northstar Property Group LLC, the Court, on the application of a United States debtor-inpossession under Chapter 11 of the Bankruptcy Code, ordered discovery of financial information held by New Zealand accountants in relation to debt litigation brought in the United States by a New Zealand finance company.896 The court may entrust the administration or realisation of local assets to the foreign representative, or some other person.897 More significantly, in the case of any foreign proceeding, the Court has discretion to entrust the distribution of local assets to the foreign representative, provided that New Zealand creditors are adequately protected.898 In the case of non-main proceedings, there are further safeguards before distribution. There is an additional mandatory obligation on the court, when granting or refusing relief, or granting it on terms, to consider the interests of creditors and interested persons, and the debtor.899 This is not confined to New Zealand creditors.900 On recognition of a foreign proceeding, the foreign representative may initiate any action in respect of voidable transactions that would be open to a New Zealand administrator.901 [page 153] One of the core features of the Model Law is the provision for cooperation and direct communication between courts and foreign representatives.902 The High Court, and insolvency administrators, are obliged to cooperate to “the maximum extent possible”,903 in relation to matters in art 2, which include facilitation of the rescue of financially troubled businesses. Certain forms of cooperation are referred to, but it is clear that they are not intended to be exhaustive.904 The cooperation listed in the Model Law includes coordination of the administration and supervision of the debtor’s assets and affairs; approval or implementation by courts of agreements concerning the coordination of proceedings; and coordination of concurrent proceedings regarding the same debtor.

After the court has recognised a foreign main proceeding, New Zealand insolvency proceedings can only be commenced if the debtor has assets in New Zealand.905 This reflects the common law principle that any liquidation in such circumstances is “ancillary” to the main liquidation in the place of incorporation.906 New Zealand has not opted to restrict this article further by reference to an “establishment” in New Zealand. The New Zealand proceeding will only be limited to New Zealand assets, or those which should be administered in that proceeding under New Zealand law, to the extent necessary to implement the co-operation and coordination obligations in arts 25–27 of the Model Law. The Model Law sets out rules for ensuring consistency where there are concurrent proceedings,907 the basic effect of which is that any relief must be consistent with the New Zealand insolvency proceeding and, that if the latter is first in time, the automatic stay in art 20 will not apply to the foreign main proceeding. [page 154]

V.6

Specified insolvency proceedings

The Insolvency (Cross-border) Act 2006908 allows for regulations to be made extending the law to other proceedings in specified countries (“specified insolvency proceedings”) to be specified by Order in Council. These proceedings can vary the application of the Model Law between New Zealand and the other country. This enables New Zealand to enter into bilateral agreements with jurisdictions that have also adopted the Model Law, provided that there is reciprocity, and New Zealand creditors and debtors are adequately protected in the other country’s insolvency laws. This might involve automatic recognition of foreign representatives, and recognition of a single insolvency proceeding, without the other requirements of the Model Law having to apply. It is likely that such regulations would specify that local insolvency law priorities would still apply.909 This would have relevance to Australia, with whom New Zealand has a Closer Economic Relations agreement, a Memorandum of Understanding with regard to commercial law, and now also, after the Companies Amendment Act 2006 (NZ), a very similar corporate insolvency law. It can be expected that, subject to further negotiations, now that the Model Law is in force in both Australia and New Zealand, Regulations will eventually

be passed which will mean that there may be automatic recognition of insolvency practitioners, automatic relief and possibly application of Australian insolvency law in New Zealand proceedings,910 and vice versa. These are only speculative possibilities as to what might be contained within specified insolvency proceedings, and there may be other jurisdictions with which such specified insolvency proceedings might be negotiated.

[page 155]

VI INSOLVENCY PRACTITIONERS BILL VI.1 Introduction At the time of writing, an Insolvency Practitioners Bill is awaiting its Second Reading, changes having been approved by Cabinet in October 2011911 following a Commerce Committee report on the Bill in May 2011.912 We set out below the history leading up to the current version of the Bill, and an overview of the proposed changes, with the caveat that, assuming the Bill is enacted, further amendments may be made during its passage through Parliament. The government began a discussion of this topic in 2004,913 with a formal review of practitioner regulation attached to its Consultation Paper in 2006 on the Insolvency Law Reform Bill,914 but having canvassed the options, in 2008 decided that in view of the size of New Zealand, there was no economic or other case for direct licensing, and no possibility of self-regulation or co-regulation given the lack of a sufficiently developed professional body.915 For this reason, the New Zealand Government instead decided to strengthen existing judicial and regulatory powers to remove delinquent officeholders.916 This came to be labelled by the government and other commentators as the “negative licensing” approach. The government introduced the Insolvency Practitioners Bill in April 2010. The pace of the legislative process has been unusually slow. The Bill was referred to the Commerce Committee in August 2010, and in May 2011, the Commerce Committee reported back on the Bill.917 The Commerce Committee did not endorse the Government Bill’s negative licensing but instead recommended it should be amended to include a [page 156]

register of insolvency practitioners, so the “public may access information about practitioners, and the Registrar of Companies may collect information from practitioners and more effectively regulate them”.918 It stated that: “the “negative licensing” measures would not “address the problems and risks associated with practitioners who are dishonest, or lack independence”919 and further that “the changes we recommend would clearly specify eligibility to undertake insolvency work … [and] strengthen the criteria for disqualification from appointments.”920 In October 2011, Cabinet921 approved the major recommendations of the Commerce Committee, and resolved to submit the amended Bill for a Second Reading, which at the time of writing this edition is still pending. The Cabinet Paper sets out four options:922 (a) Enhanced Negative Licensing — this would be the lightest form of regulation, as in the original Bill, with additional requirements for insolvency practitioners to supply information and data to the Registrar and creditors, and enhanced enforcement powers for the Registrar to remove insolvency practitioners disqualified because of breaches of the Companies Act 1993 or Receiverships Act 1993.923 (b) Register of practitioners — this would be supplemented by the enhancements in Option (a) above. The Paper identified the advantages as the reduction of one-off and “debtor-friendly” appointments and removal of the possibility of fictitious appointments. The Paper suggested that registration would assist to fill the information gap which the government acknowledged to exist between creditors and practitioners; for example, by making creditors more aware of the registration process and the Registrar of Companies’ authority to deal with complaints.

Yet at the same time the Cabinet Paper concedes that the Register may be viewed as a de facto licensing system by unsuspecting creditors. One of the main benefits it perceives from registration is that it will provide the Registrar with information about who practitioners are, thus rendering compliance easier to monitor. The Commerce Committee recommended, and inserted into the Bill,924 a review after four years. It seems that this review will be assisted by the enhanced requirement for registered practitioners to provide data [page 157]



relating to the insolvency proceedings.925 Thus, the main justification for this Register is that it gives the government information about who is currently practising or holding themselves out as insolvency practitioners, and data about their appointments, so that they can be monitored more effectively. Much of this information, albeit in not such an accessible form, is already supplied to the government on appointment and, on termination of appointment, of insolvency practitioners to administrations, liquidations and receiverships, through reports that are required to be filed at the commencement, during, and at termination of, these insolvency appointments.

(c) Formal licensing system — this would include entry examinations, a “fit and proper” person requirement, requirement to be subject to a Code of Conduct or other disciplinary system. This was rejected as costly and imposing undue barriers to entry for smaller practitioners, especially in remote areas of New Zealand. However, in terms of trans-Tasman insolvency coordination, such a system would move New Zealand closer in terms of regulation to the system in Australia, whereby ASIC licenses practitioners and they are subject to a “fit and proper” test and certain positive qualification criteria. Indeed, a recent joint Treasury and Attorney-General Department Discussion Paper suggested further criteria for qualification of insolvency practitioners in Australia, and enhanced and streamlined monitoring and licensing across personal and corporate insolvency in Australia. At the time of writing, the Australian Government, after receiving submissions, has not announced if it will be taking these reforms further.926 (d) Co-regulation — This option, canvassed in the 2006 Discussion Paper, was for New Zealand insolvency practitioners to become members of an Approved Professional Body (APB). This would be additional to the Register under Option (b), and would be implemented in phases, so that membership of an APB would eventually be required as a prerequisite to registration. While the Paper suggested that this option, if implemented in phases in order for an APB to obtain the necessary elements of coregulation such as a Code of Conduct and training programme, would have many benefits equivalent to Option (b), ultimately it was rejected for the same reasons as Option (c). It would impose undue barriers to entry on those practitioners who have experience but are not members of an APB, and this

[page 158]

would particularly affect smaller firms or IPs, and remote areas. Interestingly the government did not give the reason that there was not yet a suitable “professional body” or bodies that could take on the role, but suggested that the elements of a co-regulatory professional “partner” (or partners) with the government could be built up over time. Currently in New Zealand, there is an active branch of INSOL (the worldwide insolvency practitioner body) in both Wellington and Auckland, but it has not yet developed the elements which would enable it to take on an accredited role as a co-regulator in terms, for example, of training, discipline, development of standards, and complaints.

Ultimately, the Cabinet Paper recommended Option (b), largely on the basis of cost factors, particularly the fear of imposing costs and barriers to entry on smaller practitioners.

VI.2 Proposed Register practitioners

of

insolvency

The details of the registration scheme proposed in the Bill as recommended by the Commerce Committee and endorsed by Cabinet, are as follows.927 The Bill proposes a new Part 16A to be added to the Companies Act 1993 and Receiverships Act 1993 to provide for registration of insolvency practitioners. The cost of building and maintaining the new Register, to be administered and kept by the Registrar of Companies, is to be met from funds in the Liquidation Surplus Account. Where a natural person is over 18, he or she will be eligible to be a “registered insolvency practitioner”, unless otherwise disqualified.928 Section 280(2) currently lists the circumstances where, unless the court orders otherwise, a person is not eligible to be registered. Thus, if the Registrar accepts that a person who has applied to be registered has provided the basic information required under proposed s 316G of the Companies Act, which includes whether they satisfy the criteria in s 280, then the Registrar must register the person as an insolvency practitioner.929 However, the criteria laid down

[page 159] in s 280930 are simply the existing “negative” criteria under the Companies Act 1993, namely the specific grounds for disqualification. This bare registration model merely tells searchers that someone on it has (a) bothered to apply to register; and (b) is not otherwise disqualified. The Commerce Committee also recommended widening the range of “disqualifying” relationships to include relatives of shareholders, directors, promoters and auditors of the debtor company.931 In one respect the Bill proposes narrowing the existing “disqualificatory” grounds in s 280. It was mentioned above that there was considerable criticism in Parliament and from the insolvency profession about the extension of s 280 to relationships with secured creditors, since this effectively meant that insolvency practitioners in major accounting practices taking appointments as liquidators or administrators were inevitably in a conflict situation, requiring them to seek the leave of the court. Despite criticism by the National opposition at the time of passing of the Insolvency Law Reform Bill in 2006, their amendment to remove that provision was defeated. Fortunately, the government has now become convinced of the commercial imperative to remove this provision, and this appears in the current Insolvency Practitioners Bill.932 There are no academic, professional or experiential qualifications required before registration. It was apocryphally stated that even a plumber, over 18 years, could be an insolvency practitioner in New Zealand. The Cabinet Paper933 itself relates an account of a director who created a fictional accountant and appointed the fictional alias as liquidator. The Commerce Committee’s proposal may prevent this example, but will not deal with lack of qualifications or competence.934 The Commerce Committee mentioned the need for some trans-Tasman reciprocity, at least in the sense that under the Trans-Tasman Mutual Recognition Treaty implemented in both jurisdictions a “registration” authority is required before the automatic recognition of occupations can be effected.935 New Zealand practitioners cannot currently take advantage of it as they are not registered by any registration authority. While the proposed registration regime would provide a New Zealand registration authority, the Registrar of

[page 160] Companies, for mutual recognition purposes and thus reciprocate the ASIC registration process in Australia, the Insolvency (Cross-border) Act 2006 and equivalent legislation in Australia936 already allow for recognition of insolvency practitioners from other jurisdictions. In relation to any requirement for membership of a professional body, there is no suggestion in the Bill that membership of a professional body is to be required. Two professional bodies are expressly referred to in the Bill, the New Zealand Institute of Chartered Accountants and the New Zealand Law Society.937 Nevertheless, the only requirement is (a) that when applying to be entered on the register of insolvency practitioners proposed by the Commerce Committee, membership of either of these bodies must be referred to in the application, and (b) being disciplined either of these bodies with the consequence that membership is withdrawn, is expressed to be a ground for disqualification and thus removal from the register. Since the Registrar has no discretion to refuse registration to those who satisfy the criteria, failure to belong to either of these bodies cannot be relevant, except where a practitioner has previously been a member of one of these professional bodies but has since been removed from membership. While the proposals in the Bill may facilitate the government’s access to information about the size and nature of the insolvency profession, and possibly make monitoring easier, the lack of any positive qualification requirements, especially any test of competence or experience, will at best not result in any improvements to the standards and quality of the New Zealand insolvency profession and will not reduce cases of delinquent performance. At worst, it will, as the government conceded in the Cabinet Paper, falsely imply to creditors and other stakeholders that a registered practitioner has been licensed by the government as fit and competent. Once registered, the practitioner must annually file confirmation that he or she is still eligible to be registered, and/or must notify the Registrar whenever he or she ceases to be eligible. There is provision in the Bill for cancellation of registration where the practitioner is no longer eligible.938

VI.3 Other proposed changes in the Bill Other important changes which were agreed to by Cabinet include: a

requirement that the Registrar refer complaints to “recognised professional bodies” in cases where the insolvency practitioner is a member of such a body; provision of further information to be required through Regulations, in final receipts and payments reports or summaries thereof, and lastly empowering [page 161] the Registrar to seek compensation through the court from an insolvency practitioner to pay for creditors’ losses incurred by the practitioner’s breach of duties, although it emphasises that this would be reserved for the “most serious cases that meet a public interest threshold”.939 While currently it is a requirement that an administrator, deed administrator or liquidator must consent in writing to their appointment before it is effective, it will now be a requirement for both liquidators and administrators that they certify in writing that they are not disqualified from appointment.940 Currently an “interests statement” has to be completed by administrators. A proposed new provision extends the information that must be provided by all insolvency practitioners in an interests statement tabled, in the case of administrators, at the first creditors’ meeting. In particular it will be necessary to disclose any relationships (personal, professional or business) that he or she, or their firm, have with the company or its officers, shareholders or creditors.941 The current relationships will be expanded to include relationships between employees, directors, and trustees of the practitioner’s firm and the debtor. At the first creditors’ meeting, administrators will have to table a notice, in addition to the above interests statement, informing creditors of the registration requirement for practitioners, and that information is available about the registration and cancellation process from the Registrar.942 Liquidators and receivers will have to give this information at first meetings or first communications with creditors. Tighter requirements are proposed to address administrators’ independence in the areas of remuneration, purchase of company assets and goods, by aligning these with the provisions currently applicable to liquidators.943 Lastly, the Bill proposes to increase significantly the number of provisions in the Companies Act 1993 (Parts 15 through to a proposed new Part 16A), and the Receiverships Act 1993, which are capable of constituting offences. Currently,

there are no specific offences in Part 15A for administrators, and only two for liquidators. The Bill proposes a range of provisions which can constitute offences, some of which will apply generally to all insolvency practitioners, but some of which are specific to each appointment. Significantly, eight are specific to administrators and five to deed administrators. Most of these new offences relate to the new registration regime, acting whilst disqualified, or to existing or new reporting and accounting requirements. [page 162] The following amendments to the Companies Act 1993 and Receiverships Act 1993 were also agreed to by Cabinet:944 (a) aligning the disqualification requirements of liquidators and receivers; (b) requiring the Registrar to notify a person of their right to appeal to the High Court in relation to registration and deregistration; (c) requiring the Registrar, after removing a practitioner from appointment, to take into account the views of creditors when appointing a replacement practitioner; (d) requiring practitioners to summon a meeting of creditors if a solvent business becomes insolvent, in order for a resolution to be passed to appoint a registered insolvency practitioner; (e) requiring practitioners leaving office to provide their successors with information and property relating to the proceedings; (f)

removing the requirement in the original Bill for a replacement practitioner, on appointment, to notify the debtor and creditors of the grounds on which the Registrar cancelled the practitioner’s predecessor’s registration, and

(g) increasing the requirement on liquidators to keep records of insolvency proceedings, from two years to six years.

1

Insolvency Act 2006, s 436A.

2

Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement, at 1.

3

See the Appendix for a list of consultation documents.

4

Hon Laila Harré, Associate Minister of Commerce, “Tier One Decisions and Where to from Here” (Speech to Business Law Forum on Insolvency Review, November 2001); Hon Laila Harré, Associate Minister of Commerce, “Latest Decisions on Insolvency Law Review” (Butterworths Insolvency Law Conference, 28 February 2002); Hon Lianne Dalziel, Minister of Commerce, “Insolvency Law Changes Announced” (February 2003).

5

Ministry of Economic Development Draft Insolvency Reform Bill Discussion Document Wellington, April 2004.

6

Supplementary Order Paper 2006 No 61 (Hon Lianne Dalziel, Minister of Commerce, 10 October,

2006). 7

The Acts received Royal Assent between November 2006 and November 2007.

8

Companies Amendment Act 2006 Commencement Order 2007 (SR 2007/297).

9

Insolvency Act (Commencement) Order 2007.

10 Insolvency (Cross-border) Commencement Order 2008 (SR 2008/171). 11

Insolvency Act 2006, s 2.

12 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 1. See also Hon J Tizard (21 February 2006) 629 NZPD 1318–1320. 13 Ministry of Economic Development The Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 10, available at . 14 See statistics found at 15 For details of the New Zealand National Party minority view in the Commerce Committee report see Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 20. 16 Insolvency (Personal Insolvency) Regulations 2007; Companies (Voluntary Administration) Regulations 2007. 17 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 6. 18 Regulations to the new Insolvency Act 2006 may be found in the Insolvency (Personal Insolvency) Regulations 2007 (SR 2007/333). 19 Law Commission Insolvency Law Reform: Promoting Trust and Confidence An Advisory Report to the Ministry of Economic Development (NZLC SP11, 2001) at 59. 20 Hon Laila Harré, Associate Minister of Commerce “Keynote Speech to Butterworths Insolvency Law Conference” (28 February 2002). See also Ministry of Economic Development Draft Insolvency Law Reform Bill Discussion Document Wellington, 2004 at 33. 21 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 14, 31–33, available at . 22 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 21, available at . 23 Hon J Tizard (21 February 2006) 629 NZPD 1318–1320. 24 Hon J Tizard (21 February 2006) 629 NZPD 1318–1320. 25 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 2. 26 Law Commission Insolvency Law Reform: Promoting Trust and Confidence An Advisory Report to the Ministry of Economic Development (NZLC SP11, 2001) at 112. 27 Ministry of Economic Development Draft Insolvency Law Reform Bill Discussion Document Wellington, 2004 at 51. 28 Insolvency Act 2006, s 8. Section 8(2) makes it clear that the provision is only intended as a guide to the alternatives to bankruptcy. During bankruptcy creditors may accept a composition from the bankrupt in satisfaction of the debts due to them. Creditors must vote on the composition and it must be approved by the court. See Insolvency Act 2006, ss 312–324. 29 Bridgecorp Ltd (in rec and in liq) v Nielsen [2010] 1 NZLR 820 (NZHC) at [19]. 30 Section 7(2) of the Insolvency Act 2006 makes it clear that the provision is only intended as a guide. A fuller reading of the Act is required to determine all of the consequences of bankruptcy.

31 See Insolvency Act 1967, s 21; Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement. 32 Insolvency Act 2006, s 45. 33 Insolvency Act 2006, s 46. See reg 6 of the Insolvency (Personal Insolvency) Regulations 2007 (SR 2007/333). 34 Insolvency Act 2006, s 49. See reg 7 of the Insolvency (Personal Insolvency) Regulations 2007 (SR 2007/333). 35 Insolvency Act 2006, s 45. 36 Insolvency Act 2006, ss 10(2)(b) and 47(1). 37 Ministry of Economic Development Draft Insolvency Law Reform Bill Discussion Document Wellington, 2004 at 34. However, ss 67 and 68 contemplate that the Official Assignee may request a statement of affairs after adjudication where such document has not been filed under s 46. 38 Hon Laila Harré “Tier One Decisions and Where to Go From Here” (Speech to Business Law Forum on Insolvency Review, 22 November 2001). 39 Insolvency Law Reform Bill, 2005 No 14-1, cl 49(1). 40 See Insolvency (Personal Insolvency) Regulations 2007 (SR 2007/333). 41 Insolvency Act 2006, s 13(a). Compare Insolvency Act 1967, s 23(a). 42 Ministry of Economic Development Draft Insolvency Law Reform Bill Discussion Document Wellington, 2004 at 35. See Companies Act 1993, s 289(2)(a); Companies Act 1993 Liquidation Regulations 1994 (SR 1994/130), reg 5 (setting $1,000 as the prescribed amount for a statutory demand). 43 Insolvency Act 2006, ss 13(b) and 16(1). Although the Insolvency Act does not define “debtor”, in “the context of an application for an order of adjudication, it plainly means the person against whom the application is brought”: Bridgecorp Ltd (in rec and in liq) v Nielsen [2010] 1 NZLR 820 (NZHC) at [31]. 44 The creditor must also establish that the debt is a certain amount and that the debt is payable either immediately or at a date in the future that is certain: ibid, s 13(c)(d). 45 R Sutton Creditors’ Remedies in New Zealand Wellington, Butterworths, 1978 at 135. 46 R Sutton Creditors’ Remedies in New Zealand Wellington, Butterworths, 1978 at 135 and 136. 47 Insolvency Act 2006, s 17(1). 48 Insolvency Act 2006, s 17. 49 Insolvency Act 2006, s 29. 50 Insolvency Act 2006, s 17(4)(a). 51 Doody v Body Corporate 343562 [2012] NZHC 25 at [18]. 52 Insolvency Act 2006, s 17(1). Cross claim is defined in s 17(7). 53 ANZ National Bank Ltd v Chen [2012] NZHC 2270 at [11] citing Clark v UDC Finance Ltd [1985] 2 NZLR 636 (NZHC) at 637; Sharma v ANZ Banking Group (NZ) Ltd (1992) 6 PRNZ 386 (NZCA) at 389. See also Heath and Whale at [3.7]. 54 See Insolvency Act 2006, ss 18–28. Under the Insolvency Act 1967, the acts of bankruptcy were also relevant in determining when a bankruptcy actually commenced under the doctrine of relation back. As discussed below, the Insolvency Act 2006 abolishes the doctrine of relation back. 55 Insolvency Act 2006, s 36.

56 Insolvency Act 2006, s 37. 57 Bridgecorp Ltd (in rec and in liq) v Nielsen [2010] 1 NZLR 820 at [20]. 58 Slavich v Slavich [2012] NZHC 1513 at [18]. 59 Eide v Colonial Mutual Life Assurance Society Ltd [1998] 3 NZLR 632 (NZHC) at 635. 60 Perkins v Perkins HC Whangarei CIV-2010-488-765, 26 August 2011 at [19]. 61 See also Fleming v Rokos HC Auckland CIV-2010-404-006590, 16 May 2011 at [12] citing Baker v Westpac Banking Corporation CA212/92, 13 July 1993. 62 Reid v Tararua District Council HC Palmerston North CIV-2009-454-622, 15 October 2010 at [44]– [49]; Cutting v Gitmans [2010] NZCCLR 34 at 6. See also Heath and Whale at [3.10]. 63 Insolvency Act 2006, s 71. Section 73 enables the Assignee to dispense with the first meeting of creditors. 64 Insolvency Act 2006, s 86. 65 Insolvency Act 2006, s 86. 66 Insolvency Act 2006, s 87(1). 67 Insolvency Act 2006, s 93(2). 68 For an overview of the origins of the doctrine of relation back, see R Sutton Creditors’ Remedies in New Zealand Butterworths, Wellington, 1978 at 132–134. 69 Insolvency Act 1967, s 42(4)(a). 70 R Sutton Creditors’ Remedies in New Zealand Butterworths, Wellington, 1978 at 134. 71 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 36 (doctrine overlaps with role of voidable transactions), available at . 72 See Trustees Executors v Cary HC Auckland CIV-2011-404-1461, 29 September 2011 and 11 October 2011 at [12]. 73 However, see Insolvency (Cross-border) Act 2006, Schedule 1 (Model Law), art 23(3), which states that “to avoid any doubt” nothing in that article affects “the doctrine of relation back as it is applied in New Zealand”. 74 The phrase “whether in or outside New Zealand” is based upon a similar phrase found in the definition of “property” in the Insolvency Act 1967, s 2. 75 Insolvency Act 2006, s 101. Section 101 is subject to s 104 which provides that property held by the bankrupt in trust for another person does not vest in the Assignee. See Levin v Ikiua [2010] 1 NZLR 400 (NZHC) at [111] and [113]. 76 Insolvency Act 2006, s 3. 77 Insolvency Act 2006, ss 55 and 102. 78 For a review of the early case law on this issue see FC Spratt and PD McKenzie Spratt & McKenzie’s Law of Insolvency Butterworths, Wellington, 1972 at 99 and 100. 79 R Sutton Creditors’ Remedies in New Zealand Butterworths, 1978, Wellington at 166. 80 Gough v Fraser [1977] 1 NZLR 279 (NZCA) at 285. 81 Re Bertrand [1980] 2 NZLR 72. 82 Re Pascoe [1944] Ch 219 (UKCA), [1944] 1 All ER 281. 83 Insolvency Act 2006, s 114.

84 Insolvency Act 1967, s 42(5). 85 See Insolvency Act 2006, s 105(2). 86 R Sutton Creditors’ Remedies in New Zealand Butterworths, 1978, Wellington at 178. 87 Insolvency Act 1967, ss 75, 76, and 78. 88 Compare Insolvency Act 1967, s 75. 89 Insolvency Act 2006, s 117(3). 90 Compare Insolvency Act 1967, s 75. 91 Compare Insolvency Act 1967, s 75(3). 92 Insolvency Act 2006, s 120. 93 Onerous property does not include: (i) a netting agreement to which ss 255–263 apply; or (ii) any contract of the bankrupt that constitutes a netting agreement. See Insolvency Act 2006, s 117(4). 94 However, where there is a disclaimer of shares the special provisions of ss 125 and 126 of the Insolvency Act 2006 apply. 95 See Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 7. A similar amendment has been made to s 269(2)(a) of the Companies Act 1993 to enable a liquidator to disclaim an onerous litigation right. See Companies Amendment Act 2006, s 22. 96 Auckland CC v Glucina [1997] 2 NZLR 1 (NZCA). 97 Edmonds Judd v Official Assignee [2000] 2 NZLR 135 (NZCA). 98 Insolvency Act 2006, s 118(a). 99 See Re Callis (1996) 7 NZCLC 261,211; Edmonds Judd v Official Assignee [2000] 2 NZLR 135 (CA). 100 Insolvency Act 2006, s 118(a). See Liberty Financial Ltd v Pink-Martin HC Auckland CIV-2009-404008432, 31 May 2010 at [3]. 101 See Hardistey v Barney (1696) 90 ER 525 (KB); Sunbolf v Alford (1838) 3 M & W 247, 150 ER 1135 (Ex); TGW Telfer “Preliminary Paper on the Law of Personal Exemptions From Seizure” (Report for the Uniform Law Conference of Canada, 2004) at 2–3. High Court Rules, r 17.62(1); District Courts Act 1947, s 85(1)(a). 102 R Sutton Creditors’ Remedies in New Zealand Butterworths, Wellington, 1978 at 173. 103 District Courts Act 1947, s 85(1)(a). 104 High Court Rules, r 17.62(1). 105 TGW Telfer “The Proposed Federal Exemption Regime for the Bankruptcy and Insolvency Act” (2005) 41 CBLJ 279 at 306. 106 Insolvency Act 2006, s 160. 107 See, for example, Re Douglas [1959] NZLR 1214. 108 Insolvency Act 2006, s 158(3)(c). 109 Alberta Law Reform Institute Enforcement of Money Judgments Vol 1 ALRI, Edmonton, Alberta, 1991 at 275. 110 Insolvency Act 2006, s 158(5). 111 Insolvency Act 1967, s 52(1). 112 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 8. 113 On tools of trade see In re Lamacchia (A Bankrupt) [1933] NZLR 61.

114 Insolvency Act 2006, s 158(3)(a) and (b). 115 See, for example, TGW Telfer “Preliminary Paper on the Law of Personal Exemptions From Seizure” (Report for the Uniform Law Conference of Canada, 2004) at 4, 5, and 9. 116 Insolvency Act 2006, s 158. 117 Insolvency Act 1967, s 52(1). 118 Insolvency Act 2006, s 163. The broader language is also used in s 164 which is discussed below. 119 Insolvency Act 2006, s 164. This amount may be increased by Order in Council. Compare Insolvency Act 1967, s 53(2). 120 Official Assignee v Petricevic [2011] 1 NZLR 467 (NZHC) at [1]. 121 For an interpretation of the prior provision, s 60 of the Property Law Act 1952 see Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433. 122 Insolvency Act 2006, s 192(2). 123 Insolvency Act 1967, s 56(1)(a). 124 Tyree Power Construction v DS Edmonds Electrical Ltd [1994] 2 NZLR 268 at 273; Official Assignee v Wairarapa Farmers’ Co-operative [1925] NZLR 1 at 8. Pressure negated the debtor’s free will and allowed the transaction to stand. 125 See Companies Act 1993, s 292 (transactions having preferential effect). 126 Companies Act 1993, s 292(3). 127 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 58, available at . 128 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 58. 129 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 58. 130 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 59. 131 TGW Telfer “Voidable Preference Reform: A New Zealand Perspective on Shifting Standards and Goalposts” (2003) Int Insol Rev 55; Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 59. 132 See Insolvency Act 2006, ss 194–197. 133 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 8. 134 Insolvency Act 2006, s 195(1)(b). 135 Insolvency Act 2006, s 195. 136 Insolvency Act 2006, ss 194–196. 137 Insolvency Act 2006, s 197. 138 See, for example, Insolvency Act 2006, s 208. 139 Insolvency Act 2006, ss 198–203. 140 “Charge” is defined in the Insolvency Act 2006 as including “a right or interest in relation to property owned by a debtor, by virtue of which a creditor of the debtor is entitled to payment in priority to other creditors; but does not include a charge under a charging order issued by a Court in favour of a judgment creditor”: s 3. Compare the definition of security interest in the Personal Property Securities

Act 1999, s 17. Insolvent charges are governed by ss 198–203 of the Insolvency Act 2006. 141 Insolvency Act 2006, s 198. Compare Insolvency Act 1967, s 57(1). 142 Insolvency Act 2006, s 201. Compare Insolvency Act 1967, s 57(2)(b), which specified a 21-day period. 143 Insolvency Act 2006, s 212(a). 144 For the procedure for cancelling irregular transactions, see Insolvency Act 2006, s 206. The Assignee may not use this procedure for cancelling a transfer at undervalue. 145 Insolvency Act 1967, s 54(3). 146 Insolvency Amendment Act 2009, s 4. 147 Insolvency Amendment Act 2009, s 4. 148 Insolvency Act 2006, ss 213–216. Compare Insolvency Act 1967, s 55. 149 Insolvency Act 2006, s 206(1)(d). 150 Insolvency Act 2006, ss 192(1)(d) and 206(1)(d). 151 Insolvency Act 2006, ss 206–210. 152 Insolvency Act 2006, s 206(4). 153 Insolvency Act 2006, s 206(6). See Official Assignee v Petricevic [2011] 1 NZLR 467 at [14]. 154 Insolvency Act 2006, s 208. 155 Insolvency Act 2006, s 207. 156 See Insolvency Amendment Act 2009, s 5. 157 Law Commission Priority Debts in the Distribution of Insolvent Estates An Advisory Report to the Ministry of Commerce (NZLC SP2, 1999) at 61. 158 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 9. 159 Insolvency Act 1967, s 104(1)(g). 160 Insolvency Act 1967, s 104(1)(h). 161 Insolvency (Maximum Priority Amount) Order 2012 (SR 2012/253). 162 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 47, available at . 163 Insolvency Act 1967, s 107. See, for example, Re Anderson (A Bankrupt) HC Hamilton B213/89, 14 April 1992. 164 Insolvency Act 1967, s 108. 165 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 47, available at . 166 Insolvency Act 2006, s 46. 167 Insolvency Act 2006, s 67. 168 Insolvency Act 1967, s 119. 169 Insolvency Act 2006, s 310. 170 Insolvency Act 2006, s 309. 171 Insolvency Act 1967, s 146(1)(a).

172 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 38, available at . For a more detailed examination of the failure of the alternatives to bankruptcy in the Insolvency Act 1967, see TGW Telfer “New Zealand Bankruptcy Law Reform: The New Role of the Official Assignee and the Prospects for a No Asset Regime” in J Niemi-Kiesiläinen, I Ramsay and W Whitford (eds) Consumer Bankruptcy in Global Perspective Hart Publishing, Oxford, 2003 at 247. 173 Insolvency Act 2006, s 46. 174 Insolvency Act 2006, s 326. 175 Insolvency Act 2006, s 325. 176 Insolvency Act 2006, s 328. 177 Ministry of Economic Development Draft Insolvency Law Reform Bill: Discussion Document Wellington, 2004 at 34. 178 Meltzer v Commissioner of Inland Revenue HC Auckland CIV-2010-404-3177, CIV-2010-404-7750, 3, 4, 8, 9 November, 6 December 2010 at [57]. 179 Liguori v Golden Fund Ltd [2012] NZHC 2253 at [20]. 180 Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 at [29]. See also Herbert v New Zealand Guardian Trust Company Ltd [2012] NZCA 442. 181 Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 at [29]. See also Kelly v Structured Finance Ltd [2009] 2 NZLR 785 (NZHC). 182 Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 at [28]. 183 Farmer v Rowley [1992] 2 NZLR 195 (NZCA) at 199–200. 184 Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 at [43]. 185 Magsons Hardware Ltd (t/as Mitre 10 Mega) v Bogiatto [2011] NZCA 378 at [43]. On the Court’s general discretion under s 333(3) see Heath and Whale at [10.28]. 186 Insolvency Act 2006, ss 334, 335. 187 Insolvency Act 2006, s 340. 188 Insolvency Act 2006, s 343. Compare Insolvency Act 1967, s 146(1)(a). 189 Insolvency Act 2006, s 343. 190 Insolvency Act 2006, s 349. Compare Insolvency Act 1967, s 148(12). 191 See Insolvency (Personal Insolvency) Regulations 2007, reg 44. 192 Insolvency Act 2006, ss 341 and 343(1)(a) and (b). The $40,000 amount may be varied by Order in Council: s 343(4). 193 Insolvency Act 2006, s 345. 194 Insolvency Act 2006, s 346(2). 195 Insolvency (Personal Insolvency) Regulations 2007, reg 64. 196 Insolvency Act 2006, s 352. 197 Insolvency Act 2006, s 359. 198 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 30, 31, 37 and 38, available at . 199 “Insolvency Law Reform Bill:Approval for Introduction” (Cabinet Paper, Minster of Commerce, 20

December 2005) at 2. 200 “Insolvency Law Reform Bill” (Cabinet Paper, Minister of Commerce, 1 June 2005) at 4. 201 L Dalziel, Minister of Commerce, “Insolvency Law Changes Announced” (19 February 2003). 202 Hon J Tizard (21 February 2006) 629 NZPD 1318–1320,. See also Hon L Dalziel (24 October 2006) 634 NZPD 6042,. 203 D Brown “The Financial Health Benefits of a Quick ‘NAP’—New Zealand’s Solution to Consumer Insolvency” INSOL Academic Programme, 20 June 2009, Vancouver at 18. 204 Insolvency (Personal Insolvency) Regulations 2007, reg 65; Insolvency Act 2006, s 362. 205 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 10. 206 Re Gifkins HC Auckland CIV-2009-404-281, 20, 25 May 2009 at [12] and [36]. 207 Insolvency Act 2006, s 363(1). 208 P Heath “Consumer Bankruptcies: A New Zealand Perspective” (1999) 37 Osgoode Hall LJ 427 at 443 and 444. 209 Insolvency Act 2006, s 363(2). 210 D Brown “The Financial Health Benefits of a Quick ‘NAP’—New Zealand’s Solustion to Consumer Insolvency” INSOL Academic Programme, 20 June 2009, Vancouver at 10. 211 Insolvency Act 2006, s 363(1)(e). 212 D Brown “The Financial Health Benefits of a Quick ‘NAP’—New Zealand’s Solustion to Consumer Insolvency” (INSOL Academic Programme, 20 June 2009, Vancouver) at 10. 213 The Ministry of Economic Development No Asset Procedure Paper Wellington, April 2002at 3–5 suggested that as an entry criterion the debtor should not have a net disposable income of more than $50 per week. 214 Insolvency Act 2006, s 363(1)(b) and (c). Hon R Fairbrother (24 October 2006) 634 NZPD 6048: “One mistake is OK in the commercial world, but two are a bad habit and people cannot be placed in a no asset procedure again”. 215 Insolvency Act 2006, s 363(1)(d). 216 Insolvency Act 2006, s 369(2)(c). 217 For list of non dischargeable debts in bankruptcy see Insolvency Act 2006, s 304(2). See FE Investments Ltd v Klisser [2010] 2 NZLR 217 (NZHC) which held that, under s 304(2), fraud includes equitable fraud and fraud committed by a third party. 218 Insolvency Amendment Act 2009, s 7. 219 TGW Telfer “New Zealand Bankruptcy Law Reform:The New Role of the Official Assignee and the Prospects for a No Asset Regime” in J Niemi-Kiesiläinen, I Ramsay and W Whitford (eds) Consumer Bankruptcy in Global Perspective Hart Publishing, Oxford, 2003 at 247 and 265. 220 Hon R Fairbrother (24 October 2006) 634 NZPD 6048. 221 Insolvency Act 2006, s 364(d). 222 Insolvency Act 2006, s 369(2). 223 Insolvency Act 2006, s 366. The provision applies whether the debtor is making an application for credit alone or jointly. 224 Insolvency Act 2006, s 370(3). The provision applies whether the debtor is making an application for credit alone or jointly.

225 Insolvency Law Reform Bill, 2006 No 14-2, as reported from the Commerce Committee Commentary at 9. 226 Insolvency Act 2006, s 370(2). 227 Insolvency Act 2006, s 375. 228 Insolvency Act 2006, s 375, as amended by Insolvency Amendment Act 2009, s 8. 229 Insolvency Act 2006, ss 372(b) and 377. 230 Insolvency Act 2006, s 372(c). 231 Insolvency Act 2006, s 372(d). Debts that remain enforceable are amounts payable under a maintenance order under the Family Proceedings Act 1980, amounts payable under the Child Support Act 1991, or a student loan balance. 232 Insolvency Act 2006, s 373(1)(a). 233 Insolvency Act 2006, s 373(1)(b). 234 Insolvency Act 2006, s 370(2). 235 Re Gifkins HC Auckland CIV-2009-404-281, 25 May 2009 at [35]. 236 Insolvency Act 2006, s 374. The court may make preservation order on the terms and conditions it sees fit. 237 Insolvency Act 2006, s 376. The ability of creditors to apply for termination was inserted by the Commerce Committee. The initial form of the Bill enabled creditors to object to debtors entering into the procedure. The Committee was concerned that this might cause undue delay in the debtor being admitted to the procedure. The ability to object at the entry stage was replaced with a power to terminate. See Insolvency Law Reform Bill, 2006 No 14-2, as reported from Commerce Committee Commentary at 8 and 9. 238 Insolvency Act 2006, s 364. 239 Insolvency Act 2006, s 377(1). 240 Insolvency Act 2006, s 377(2)(a), as amended by Insolvency Amendment Act 2009, s 9. 241 Insolvency Act 2006, s 377(6), as amended by Insolvency Amendment Act 2009, s 9. 242 As amended by Insolvency Amendment Act 2009, s 10. 243 Insolvency Act 2006, s 377A(1). 244 Insolvency Act 2006, s 377A(2) and (3), as amended by Insolvency Amendment Act 2009, s 10. 245 Insolvency Act 2006, s 377B, as amended by the Insolvency Amendment Act 2009, s 11. 246 TGW Telfer “New Zealand Bankruptcy Law Reform: The New Role of the Official Assignee and the Prospects for a No Asset Regime” in J Niemi-Kiesiläinen, I Ramsay and W Whitford (eds) Consumer Bankruptcy in Global Perspective Hart Publishing, Oxford, 2003 at 247, 265 and 266. 247 Insolvency Act 2006, ss 62 and 308. 248 Insolvency Act 2006, s 354. 249 Insolvency Act 2006, s 355. The initial Insolvency Law Reform Bill did not contain a Public Register for summary instalment orders. The summary instalment order Public Register was added by the Commerce Committee. See Insolvency Law Reform Bill, 2006 No 14-2, as reported from the Commerce Committee Commentary at 7. 250 Insolvency Act 2006, s 368. 251 Insolvency Act 2006, ss 368 and 448(3)(a), as amended by Insolvency Amendment Act 2009, ss 13

and 12. 252 Insolvency Act 2006, s 449(4). 253 Insolvency Act 2006, s 449(5). 254 Insolvency Act 2006, s 449(4A), as amended by Insolvency Amendment Act 2009, s 13. 255 Insolvency Act 2006, s 449A(2) as amended by Insolvency Amendment Act 2009, s 14. 256 Insolvency Act 2006, s 448(4). Nothing in Part 7, Subpart 5 of the Act prevents the use of information contained in the Public Registers for statistical or research purposes if the information (a) does not identify any person; and (b) is not published in any form that could reasonably be expected to identify any person: s 455. 257 Insolvency Act 2006, s 449. The right of public access is subject to ss 447(2) and 451(1). The Explanatory Note to the Insolvency Law Reform Bill suggests that access to some information is restricted to creditors only. However, the broad wording of the Public Register provision suggest that it is not limited in that way. See Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 6. 258 Insolvency Act 2006, ss 452 and 453. 259 Insolvency Act 2006, s 454. The Act also recognises supporting the administrative functions of the Official Assignee, Ministry and Courts as a valid purpose. Finally, the statute recognises research purposes. See ss 454 and 448(4)(a)–(c). 260 See Part I, the Introduction to this Guide and Commentary. 261 The Ministry of Economic Development requested the Law Commission’s advice on specific areas of insolvency law reform. 262 Law Commission Priority Debts in the Distribution of Insolvent Estates An Advisory report to the Ministry of Commerce (NZLC SP11, 2001). 263 Law Commission Cross-border Insolvency: Should New Zealand Adopt the UNCITRAL Model Law on Cross Border Insolvency? (NZLC R52, 1999). 264 Law Commission Insolvency Law Reform: Promoting Trust and Confidence Advisory Report to the Ministry of Economic Development (NZLC SP11, 2001). 265 Hon Laila Harré, Associate Minister of Commerce “Tier One Decisions and Where to from Here” (Speech to Business Law Forum on Insolvency Review, November 2001). 266 Ministry of Economic Development Business Rehabilitation, Discussion Document Wellington, May 2002. 267 Hon Lianne Dalziel, Minister of Commerce “Insolvency Law Changes Announced” (February 2003). 268 Companies Amendment Act 2006 Commencement Order 2007 (SR 2007/297). 269 Companies Amendment Act 2006, s 6. For a general overview of the Act, see Part I of this Guide and Commentary, Introduction. 270 Companies Amendment Act 2006, ss 7–35. 271 Companies Amendment Act 2006, ss 36–39, 42, and Schedule 2. The Receiverships Act 1993 is amended by Schedule 2. Changes to the Receiverships Act are discussed below in Part IV of this Guide and Commentary. 272 Companies Amendment Act 2006, s 4(2), inserting definition into s 2(1) of the Companies Act 1993. 273 Companies Amendment Act 2006, s 5, amending s 227 of the Companies Act 1993. 274 Companies Act 1993, s 239C (company includes anoverseas company).

275 As amended by Insolvency (Cross-border) Act 2006, Schedule 2, which removes the previous reference to liquidation of “assets” of overseas companies. 276 C Rickett (ed) Essays on Corporate Restructuring and Insolvency Brookers, Wellington, 1996. See in particular P Heath “Voluntary Administration — Proposals for New Zealand” at 91–119; and TGW Telfer “Insolvency Policy and the Proposal for Voluntary Administration in New Zealand” at 120–142. 277 Australian Law Reform Commission General Insolvency Inquiry Canberra, 1988. 278 Corporate Law Reform Act 1992 (Aus), which came into force in June 1993. 279 D Brown Corporate Rescue, Report for the Ministry of Economic Development, November 2000, available at . 280 Law Commission Insolvency Law Reform: Promoting Trust and Confidence Advisory Report to the Ministry of Economic Development (NZLC SP11, 2001). Earlier in 2001, the Law Commission set up an advisory panel, of which David Brown was a member. 281 Ministry of Economic Development Business Rehabilitation, Discussion Document Wellington, May 2002. 282 See the Review of the Memorandum of Understanding between the Government of New Zealand and the Government of Australia on Co-ordination of Business Law Ministry of Economic Development, Wellington, and Australian Treasury, Canberra, 2006), available at . 283 Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004; Corporations and Markets Advisory Committee (CAMAC) Rehabilitating Large and Complex Enterprises in Financial Difficulties, CAMAC, Canberra, October 2004. 284 Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004 at xxi. 285 Companies and Securities Advisory Committee Corporate Voluntary Administration Final Report Canberra, June 1998. CASAC was later re-named CAMAC (Corporations and Markets Advisory Committee), and the paper now appears on the CAMAC website: . 286 Corporations Amendment (Insolvency) Act 2007 (Cth). 287 Companies Act 2006, s 253. Maxim Group Ltd v Jones Publishing Ltd HC Auckland CIV-2008-404008179, 17 December 2008. 288 Receiverships Act 1993, s 18(2) and (3). 289 For an overview, see Law Commission Insolvency Law Reform: Promoting Trust and Confidence (NZLC SP11, 2001) at 90–112. 290 Law Commission Insolvency Law Reform: Promoting Trust and Confidence (NZLC SP11, 2001) at 90 and 91. 291 The Law Commission saw a residual role for statutory management despite its recommendation of a new rescue procedure, for “emergency” situations involving essential industries or infrastructure companies, see Law Commission Insolvency Law Reform: Promoting Trust and Confidence (NZLC SP11, 2001) at 109 and 110. 292 Crawford v Pardington [2012] NZHC 1829 at [33]. 293 Reserve Bank of New Zealand Act 1989 and Corporations (Investigation and Management) Act 1989, amended by Companies Amendment Act 2006, Schedule 2.

294 See Companies Act 1993, ss 227–234. 295 Companies Act 1993, s 228. 296 See P Heath “Voluntary Administration — Proposals for New Zealand” in C Rickett (ed) Essays on Corporate Restructuring and Insolvency Brookers, Wellington, 1996 at 91 and 106. 297 See recently Commissioner of Inland Revenue v Park Estate Ltd HC Auckland CIV-2010-441-117, 23 September 2010 (liquidation application stayed due to approved Part 14 proposal); compare Commissioner of Inland Revenue v West Coast Brewery Ltd [2012] NZHC 1185. As it is by its nature an out-of-court procedure, statistics are unavailable. However, anecdotal suggestions are that it is used infrequently. See, for example, the comments of Hon Chris Finlayson (National MP) (24 October 2006) 29 NZPD 6059. 298 See Companies Act 1993, ss 235–239. 299 Corporations Act 2001 (Cth), Part 5.1. 300 See Suspended Ceilings (Wellington) Ltd v CIR [1995] 3 NZLR 143 (NZCA), [1998] 8 NZCLC 261,318; Relf v Zekor Ltd (1997) 8 NZCLC 261,436; Dominion Income Property Fund Ltd v Takeovers Panel CA 229/06, 26 October 2006. 301 Polymer Group Ltd v South Vineyard Ltd, HC Wellington CIV-2009-485-1298, 15 November 2010. 302 See, for example, Quintette Coal Ltd v Nippon Steel (1990) 51 BCLR (2d) 105 (BCCA), a decision under the Companies’ Creditors Arrangements Act (CCAA), RSC 1985, c C-36 (Canada). The CCAA only applies in respect of a debtor company or affiliated debtor companies where the total of claims against the debtor-company or affiliated debtor companies exceeds C$5m: s 3. The Bankruptcy and Insolvency Act, RSC 1985, c B-3 (Canada) provides an alternative reorganisation procedure. 303 Companies Amendment Act 2006, s 6. 304 See Part VI below. 305 Companies Act 1993, s 239A. 306 See Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004 at [5.52], Recommendation 14. 307 See cl 424 of the Draft Insolvency Law Reform Bill, April 2004, proposed s 239I of the Companies Act 1993. 308 Re Ansett Australia and Korda (2002) 40 ACSR 433. 309 Dallinger v Halcha Holdings Pty Ltd (1996) 14 ACLC 263. 310 Aloridge Pty Ltd v Christianos (1994) 13 ACSR 99; Downey v Crawford (2004) 51 ACSR 182. 311 Companies Act 1993, ss 239U, 239V and 239AE. 312 Companies Act 1993, s 239AS. 313 Companies Act 1993, s 239ABA. 314 Re Double V Marketing Pty Ltd (1995) 16 ACSR 498. 315 Companies Act 1993, Part 15A, Subpart 2. 316 Companies Act 1993, s 239I(1). 317 The “voluntary” label is not applied again anywhere else in the text, where it is simply called “administration”. 318 Companies Act 1993, s 239I(2). 319 Companies Act 1993, s 239G.

320 Companies Act 1993, s 239N. 321 Companies Act 1993, s 239D. 322 Companies Act 1993, ss 239H(1)(c) and 239J. 323 Note that despite the Personal Property Securities Act 1999’s use of the broader term “security”, the Government decided to retain the language of “charge” in the 2006 Act, as well as applying it to the Insolvency Act 2006. “Charge” is used elsewhere in the Companies Act 1993, and used in the Australian voluntary administration provisions. There could have been problems in using the wider term “security” in some contexts where “charge” is already used. See now Dunphy v Sleepyhead [2007] NZCA 241, [2007] 3 NZLR 602 for interpretation in light of the Personal Property Securities Act 1999. 324 Companies Act 1993, ss 239H(1)(d) and 239K. 325 Companies Act 1993, s 239ADX. 326 Companies Act 1993, ss 239ABK and 239ABL. 327 Enterprise Act 2002 (UK), s 250, inserting new Insolvency Act 1986, s 72A. 328 In Canada, a secured creditor who intends to enforce a security on all or substantially all of (a) the inventory, (b) the accounts receivable, or (c) the other property of an insolvent person is required to give an insolvent person ten days’ notice: Bankruptcy and Insolvency Act RSC 1985 (Canada): s 245. During the notice period an insolvent person may take steps to obtain the benefit of a stay of proceedings by commencing proposal proceedings. See ss 50.4, 50, 69, and 69.1. Under the Companies’ Creditors Arrangement Act RSC 1985 (Canada) secured creditors do not have the power to veto the commencement of a proceeding under the CCAA. 329 That is, unable to pay its due debts within the Companies Act 1993, ss 240, 239I(1)(a) and 239J(1). 330 Companies Act 1993, s 239I(3). 331 Companies Act 1993, s 239K(1). 332 Companies Amendment Act 2006, s 14, inserting s 301(4) of the Companies Act 1993. 333 See Companies Act 1993, s 135. For the scope of s 301 generally, see Benton v Priore [2003] 1 NZLR 564. 334 Mason v Lewis [2006] 3 NZLR 225 (NZCA). See also Re South Pacific Shipping Ltd (2004) 9 NZCLC 263,570. 335 Corporations Act 2001 (Cth), s 588H. 336 Companies Act 1993, s 239I(4) and (5). QBE Insurance (International) Ltd ACN 000 000 948 v Ley Marketing Ltd (in rec and voluntary administration) HC Auckland CIV-2010-404-3205, 16 July 2010. 337 Companies Amendment Act 2006, s 15, inserting new s 241AA of the Companies Act 1993. 338 Commerce Committee report on Insolvency Law Reform Bill, 10 August 2006, Commentary, p 13. 339 Companies Act 1993, s 239L(2)(a). 340 Jennian Services Ltd v Jennian Homes North Shore Ltd., HC Auckland CIV-2008-404-1495, 28 March 2008. 341 Strategic Options Ltd v Swordfish Lodge Management Ltd HC Auckland CIV-2008-404-1017, 4 March 2008. 342 Strategic Options Ltd v Swordfish Lodge Management Ltd HC Auckland CIV-2008-404-1017, 4 March 2008 at [20]. 343 Strategic Options Ltd v Swordfish Lodge Management Ltd HC Auckland CIV-2008-404-1017, 4 March

2008 at [13] and [24]. 344 Companies Act 1993, s 239L(2)(b). 345 Brash Holdings Ltd v Katile Pty Ltd (1994) 12 ACLC 472. 346 Companies Act 1993, s 239C. 347 Companies Act 1993, s 239ADW(1)(a) and (b). 348 Companies Act 1993, s 239ADW(1)(c) and (2). 349 Companies Act 1993, s 239AEB. 350 Companies Act 1993, s 239X(1). 351 Companies Act 1993, s 239X(2). 352 Companies Act 1993, s 239AC. 353 Companies Act 1993, s 239AD. 354 Companies Act 1993, s 239Z(1). 355 Companies Act 1993, s 239Z(2). 356 Companies Act 1993, s 239Z(3). 357 Companies Act 1993, s 239Z(4). 358 Companies Act 1993, s 239AA. 359 Companies Act 1993, s 239AB. 360 Employment Relations Act 2000, s 3. 361 Companies Act 1993, s 239Y(1), (2) and (5). 362 See Companies Act 1993, Part 15A, Subpart 9 (ss 239ABC–239ABJ). 363 Companies Act 1993, s 239ABF. 364 Maxim Group Ltd v Jones Publishing Ltd HC Auckland CIV-2008-404-008179, 17 December 2008. 365 Maxim Group Ltd v Jones Publishing Ltd HC Auckland CIV-2008-404-008179, 17 December 2008 at [43], citing J & B Records v Brashs Pty Ltd (1994) 13 ACSR 680 at 682 and Foxcraft v The Ink Group Pty Ltd (1994) 15 ACSR 203. 366 Companies Act 1993, s 239ABJ. Note that the moratorium against guarantee enforcement does not automatically continue during a DOCA, see Atlas Resources Ltd v Aull [2011] DCR 101 (NZDC). 367 Companies Act 1993, s 239AEF. 368 Companies Act 1993, s 239ABE. 369 Companies Act 1993, s 239ABP. 370 Companies Act 1993, s 239ABT. 371 See Re David Meek Plant Ltd [1994] 1 BCLC 680, a case on the English administration procedure, where no special provision exists regarding notices, but the case makes the point that such notices are not themselves “repossession”, but preludes to it. 372 Pacific Trawling Ltd v Coleman (as admin of E&B Management Ltd) HC Auckland CIV-2011-4041434, 29 March 2011. 373 Maxim Group Ltd v Jones Publishing Ltd HC Auckland CIV-2008-404-008179, 17 December 2008. 374 Re Java 452 Pty Ltd (1999) 32 ACSR 507; Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309.

375 Companies Act 1993, ss 239ABM and 239ABN. 376 Companies Act 1993, s 239Z. 377 Companies Act 1993, ss 239ABO and 239ABS. 378 11 USC §361. 379 Hamilton v National Australia Bank (1996) 14 ACLC 1201. 380 Re Atlantic Computer Systems Ltd [1993] Ch 505 (UKCA), discussed in Hamilton v National Australia Bank (1996) 14 ACLC 1201. 381 Companies Act 1993, s 239AN. 382 In accordance with Companies Act 1993, s 3(1)(b), see s 239AO. Earlier provisions requiring advertisement in a national newspaper were removed when it was realised that there was no such thing in New Zealand! 383 Companies Act 1993, s 239AQ. Membership of the committee is not limited in number or any other way, but comprises creditors or their authorised representatives: s 239AR. 384 Corporations Act 2001 (Cth), s 436E(1). 385 Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004, para 6. 24. This was implemented in Australia in the Corporations Amendment (Insolvency) Act 2007, see s 436E(2) of the Corporations Act 2001 (Cth). 386 Companies Act 1993, s 239AP. 387 Companies Act 1993, s 239AF(3)(a). 388 Companies Act 1993, s 239AFQ). 389 Companies Act 1993, s 239R(2)(b). 390 Companies Act 1993, s 239T. 391 Companies Act 1993, s 239AK(1). 392 Companies Act 1993, s 239AK(2). 393 Companies Act 1993, s 239AK(3). 394 Companies Act 1993, s 239AK(4) and (5). 395 Corporations Regulations 2001 (Cth), Reg 5.6.21(2). The Australian threshold has been reviewed, but it has been decided to retain it: see Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004 at [6.62]–[6.67]. 396 Corporations Act 2001 (Cth), s 411(4). 397 The Court of Appeal in Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] 1 NZLR 235 suggested that Parliament may wish to review that decision, in light of early voluntary administration cases in New Zealand. 398 See, for example, Cresvale Far East Ltd v Cresvale Securities Ltd (2001) 37 ACSR 394. 399 Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004, at [6.57]–[6.80]. 400 Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] 1 NZLR 235. 401 Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] 1 NZLR 235 at [45]. 402 Companies Act 1993, s 239AX. 403 CASAC Corporate Voluntary Administration-Final Report Canberra, June 1998 at [3.22]–[3.25],

Recommendation 15. 404 Exposure Draft — Corporations Amendment (Insolvency) Bill 2007 (November 2006), Explanatory Note at [7.68] (Reporting to creditors): . 405 Companies Act 1993, s 239AU(3)(a)(ii). 406 CASAC Corporate Voluntary Administration-Final Report Canberra, June 1998 at [3.54]–[3.60], Recommendation 20: . 407 Companies Act 1993, s 239AY 408 Companies Act 1993, s 245A. See III.6 Liquidation, for details of related party voting provisions. See now s 600A of the Corporations Act 2001 (Cth). 409 Companies Act 1993, ss 239U and 239V. 410 Companies Act 1993, s 239W. 411 Companies Act 1993, s 239ADH. 412 Receiverships Act 1993, s 32. 413 Unless the court exempts him or her: Companies Act 1993, s 239ADK. 414 Companies Act 1993, s 239ADI. 415 Companies Act 1993, s 239ADJ. 416 Companies Act 1993, s 239Y(2). 417 Companies Act 1993, s 239Y(3). The court may extend the period on such terms as it deems appropriate: s 239Y(4). Re WGL Retail Holdings Ltd [2011] NZCCLR 22 (NZHC) dealt with the administrators of New Zealand companies with several major retail book outlets including Whitcoulls and Borders, with 1,200 employees in New Zealand and an Australian parent company. They applied for extensions under s 239Y(4) on two occasions, the second extension being granted commensurate with the extension of the convening period for the “watershed” meeting, in order not to reduce the chances of success of the administration by making the administrators feel constrained to terminate employment contracts prior to the meeting to decide the company’s future. 418 Companies Act 1993, s 239ADH. 419 Companies Act 1993, s 239O. 420 Companies Act 1993, s 239O(3). 421 Companies Act 1993, s 239ADL. 422 Companies Act 1993, s 239ADM. 423 Companies Act 1993, s 239AG. 424 Companies Act 1993, s 239AH. 425 Companies Act 1993, s 239AI. 426 Companies Act 1993, s 239ACZ. 427 Hill v David Hill Electrical Discounts Pty Ltd (2001) 37 ACSR 617 at 621. 428 Companies Act 1993, s 239AE. 429 Companies Act 1993, s 239AU(3). 430 Companies Act 1993, s 239AS.

431 Companies Act 1993, s 239AT. Such extension can be applied for after the end of the convening period as well as before it. 432 Companies Act 1993, s 239AU. 433 Companies Act 1993, s 239AV. 434 Re Nylex (NZ) Ltd HC Auckland CIV-2009-404-1217, 11 March 2009 435 Re Nylex (NZ) Ltd HC Auckland CIV-2009-404-1217, 11 March 2009 at [12]. 436 See now Corporations Act 2001 (Cth), s 439A(5). Exposure Draft — Corporations Amendment (Insolvency) Bill 2007 (November 2006) at 83–84, available at . 437 Corporations Act 2001 (Cth), s 439B(2). The original 60-day period was reduced to 45 business days by the Corporations Amendment (Insolvency) Actl 2007, is actually for 45 working days. 438 Pursuant to their power either to extend the convening period, or their general power under Corporations Act 2001 (Cth), s 447A. See, for example, Re Pan Pharmaceuticals Ltd [2003] FCA 598, (2003) 46 ACSR 77. 439 Administrators will need to provide evidence of why an extension is required because extensions are viewed as the exception, even if it is in practice a frequent exception. See Re Madden Construction Ltd (1996) 14 ACLC 913. 440 See Corporations and Markets Advisory Committee (CAMAC) Rehabilitating Large and Complex Enterprises in Financial Difficulties, CAMAC, Canberra, October 2004 at [2.65] and [2.66]. 441 Re Nylex (NZ) Ltd HC Auckland CIV-2009-404-1217, 11 March 2009 at [13] and [18]–[19] citing re Brash Holdings Ltd (1994) 13 ACSR 793, re Pan Pharmaceuteicals [2003] FCA 598, (2003) 21 ACLC 1,144; re Diamond Press Australia Pty Ltd [2001] NSWSC 313. 442 Re WGL Retail Holdings Ltd [2011] NZCCLR 22 (NZHC). 443 Re Riviera Group Pty Ltd [2009] NSWSC 585, (2009) 72 ACSR 352. 444 Companies Act 1993, s 239AZ. The Australian provision is for 45 business days, Corporations Act 2001 (Cth), s 439B(2). 445 Companies Act 1993, s 239AW(1) and (2). 446 This was a recommendation of the Australian Companies and Securities Advisory Committee (CASAC) in Australia, Corporate Voluntary Administrations — Final Report Canberra, June 1998at [2.90]–[2.95], Recommendation 10. Note, CASAC was later renamed the Corporations and Markets Advisory Committee (CAMAC). The New Zealand Government adopted this along with other CAMAC recommendations, but it was not carried forward into the Corporations Amendment (Insolvency) Bill in Australia. See Exposure Draft — Corporations Amendment (Insolvency) Bill 2007 (November 2006): . 447 Companies Act 1993, s 239AW(1). 448 Companies Act 1993, s 239AW(4). 449 Companies Act 1993, s 239ABA. 450 Companies Act 1993, s 239ABA. 451 Companies Act 1993, s 239ACR. 452 Companies Act 1993, s 239ABY 453 Companies Act 1993, s 239ACN. 454 Companies Act 1993, s 239AEG.

455 Companies Act 1993, s 239ACO. 456 Re Ansett Australia Ltd and Mentha v Sydney Airports Corp Ltd (2002) 41 ACSR 352. 457 Companies Act 1993, s 239ACO(3). 458 Companies Act 1993, s 239ACR. 459 Companies Act 1993, s 239ACQ; Hieber v Reddington [2011] NZCA 679 at [33]–[40]. 460 Companies Act 1993, s 239ACO. 461 Companies Act 1993, s 239ACS. 462 Companies Act 1993, s 239ACT(2) and (3). 463 Companies Act 1993, s 239ACV. 464 Companies Act 1993, s 239ACW. This section provides that the release of the company from a debt through the DOCA does not discharge or otherwise affect the liability of a guarantor or indemnifier. 465 Lehman Brothers Holdings Inc v City of Swan [2010] HCA 11, (2010) 240 CLR 509, (2010) 265 ALR 1. The High Court of Australia held that a DOCA could not release creditors’ claims against other Lehman entities which were not party to the DOCA and were not the companies in administration. 466 Atlas Resources Ltd v Aull [2011] DCR 101 (NZDC). 467 Companies Act 1993, s 239ACT. 468 Re Andersons Home Furnishings Co Pty Ltd (1996) 14 ACLC 1,710. 469 Atlas Resources Ltd v Aull [2011] DCR 101 (NZDC) at [31]. 470 Atlas Resources Ltd v Aull [2011] DCR 101 (NZDC) at [52]. 471 Companies Act 1993, s 239ACC. 472 See Part III of this Guide and Commentary at III.5(e). 473 Companies Act 1993, s 239E(1). 474 Companies Act 1993, s 239e(2) 475 Companies Act 1993, s 239ADA. 476 Companies Act 1993, s 239ADF. 477 Surber v Lean (2000) 36 ACSR 176 (WASCA). 478 Companies Act 1993, s 239ADB. 479 Companies Act 1993, s 239ADE(1). 480 Companies Act 1993, s 239ADE(2) 481 Companies Act 1993, s 239ADD. 482 See, for example, Molit (No 55) Pty Ltd v Lam Soon Australia (1997) FCA 395, (1997) 24 ACSR 47; Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd [2005] FCA 902, (2005) 145 FCR 220, (2005) 23 ACLC 1328. 483 Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] 1 NZLR 235 at [66]. 484 The equivalent New Zealand provision is Companies Act 1993, s 239ADO. See the Australian cases cited by the Court of Appeal in Grant v Commissioner of Inland Revenue [2011] NZCA 390, [2012] 1 NZLR 235; Expile Pty Ltd v Jabb’s Excavations Pty Ltd [2004] NSWSC 284, (2004) 22 ACLC 667; and Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd [2005] FCA 902, (2005) 145 FCR 220, (2005) 23 ACLC 1328.

485 Companies Act 1993, s 239ADP. 486 Companies Act 1993, s 239ADR. 487 The other sections which are directed to the court’s supervisory role are set out in the Companies Act 1993, ss 239ADP–ADU in Part 15A, Subpart 17. 488 Brash Holdings Ltd v Katile Pty Ltd (1994) 12 ACLC 472. 489 Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. 490 See, for example, Re Madden (1996) 20 ACSR 10; Re Ricon Constructions Pty Ltd (1998) 26 ACSR 655. 491 Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (1996) 63 FCR 319, (1997) 24 ACSR 47; Re Bartlett Researched Securities Pty Ltd (1994) 12 ACSR 707; Re Pasminco Ltd (2003) 45 ACSR 1; Re Pasminco Ltd (No 2) (2004) 49 ACSR 470. 492 Re Ansett Australia Ltd and Korda (2002) 40 ACSR 433. 493 See text to fn 322 above. 494 Companies Act 1993, ss 239ABU, 239ACR and 239ABY 495 Companies Act 1993, s 239ABX. 496 Mercy & Sons Pty Ltd v Wanari (2000) 35 ACSR 70 (Austin J); Re One Tel Ltd (2002) 43 ACSR 305. 497 See now Corporations Act 2001 (Cth), s 482(1A); and CASAC Corporate Voluntary Administration — Final Report Canberra, June 1998 at [7.29]–[7.35], Recommendation 49. 498 Companies Amendment Act 2006, s 10, substituting s 250(2) of the Companies Act 1993. 499 Companies Act 1993, ss 239ABV and 239ABW. 500 Companies Act 1993, s 239ABY. 501 Companies Act 1993, s 239ACA. 502 Companies Act 1993, s 239ACB. 503 Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004. 504 See, for example, Companies Act 1993, s 3, as to advertising. 505 See, for example, Companies Act 1993, Fifth Schedule, with regard to creditors’ meetings. 506 Companies Act 1993, ss 271 and 272. 507 CASAC Corporate Groups Report Canberra, May 2000, Recommendation 20, available at ; and see CAMAC Rehabilitating Large and Complex Enterprises in Financial Difficulties, Canberra, October 2004 at 93–100. 508 Re Ansett Australia Ltd [2006] FCA 277, (2006) 151 FCR 41; (2006) 56 ACSR 718. See also J Harris “Pooling options for insolvent corporate groups” (2005) 26 Company Lawyer 127. 509 See now ss 571–579L of the Corporations Act 2001 (Cth). 510 Companies Act 1993, s 239AL(1). 511 Companies Act 1993, s 239AL(2). 512 Companies Act 1993, s 239AEQ. 513 Companies Act 1993, s 239AER. 514 Set out in Companies Act 1993, s 239AET.

515 See Re Dalhoff and King Holdings Ltd (1991) 5 NZCLC 66,974; Mountfort v Tasman Pacific Airlines of NZ Ltd [2006] 1 NZLR 104 (NZHC). 516 Companies Act 1993, s 272. 517 Companies Act 1993, s 239A. 518 Companies Act 1993, ss 239AEW, 239AER(3) and 239AEU (the court may add other companies in administration to pool). 519 Companies Act 1993, s 239AEV. 520 Ministry of Economic Development Draft Insolvency Law Reform Bill: Discussion Document Wellington. 521 Ministry of Economic Development Regulation of Insolvency Practitioners: A Discussion Document Wellington, October 2006: . 522 An earlier consultation paper was included with the Ministry of Economic Development Draft Insolvency Law Reform Bill: Discussion Document Wellington, 2004. 523 See, for example, a number of the suggestions in the submission of the New Zealand Institute of Chartered Accountants which seem to have been taken up by the government: Submission on Regulation of Insolvency Practitioners, June 2004: . 524 Insolvency Practitioners Bill 2010, cls 5C, 6 and 14. 525 See text to n 336 above. 526 Companies Amendment Act 2006, s 15, inserting the new s 241AA of the Companies Act 1993. 527 Companies Act 1993, s 241AA(4). See WHK (NZ) Ltd v Retail Media Ltd (in rec and liq) HC Auckland CIV 2009-404-003157, 16 July 2009. 528 Companies Act 1993, ss 241AA(3) and 283(4). See WHK (NZ) Ltd v Retail Media Ltd (in rec and liq) HC Auckland CIV-2009-404-003157, 16 July 2009. 529 Commissioner of Inland Revenue v Castor Bay Villas Ltd (2008) 23 NZTC 21,779, (2008) 10 NZCLC 264,334 (NZHC). 530 See s 7 of the Interpretation Act 1999. 531 See Foster v Pakuranga Earthmovers Ltd (in liq) HC Auckland CIV-2007-404-005622, 18 February 2008, where Her Honour also rejected, on grounds of the presumption against retrospectivity, an argument that the ten-day time period should run from 1 November 2007 (the commencement date of the 2006 Act). 532 Commissioner of Inland Revenue v Kecamaho Haulage Ltd (2008) 10 NZCLC 264,370, (2008) 23 NZTC 21,889 (NZHC). 533 Section 284 of the Companies Act 1955 required a meeting of creditors to initiate voluntary windingup. 534 However, this does not apply where creditors at a “watershed” meeting in a voluntary administration have resolved to appoint a liquidator: Companies Amendment Act 2006, s 9, adding s 243(11) of the Companies Act 1993. 535 Prescribed by Companies Act 1993, s 255. 536 Companies Amendment Act 2006, s 16, amending s 243 of the Companies Act 1993. 537 Companies Amendment Act 2006, s 18, inserting new s 245A of the Companies Act 1993. 538 Companies Amendment Act 2006, s 19, amending s 255(2)(c) of the Companies Act 1993.

539 Companies Amendment Act 2006, s 19(2), amending s 255(2)(c) of the Companies Act 1993. 540 Companies Amendment Act 2006, s 19(3), repealing s 255(5) and (6) of the Companies Act 1993. 541 Companies Amendment Act 2006, s 21, inserting new s 260A of the Companies Act 1993. 542 See Re Nautilus Developments Ltd (in liq) [2000] 2 NZLR 505. 543 Re Oasis Merchandising Ltd [1998] Ch 170. Compare Re Nautilus Developments Ltd (In Liquidation) [2000] 2 NZLR 505. See also ALF No 9 Pty Ltd v Ellis [2010] NZCA 529, noting the enactment of s 260A. 544 See Companies Act 1993, Schedule 7, para 1(1)(e) (inserted by Companies Amendment Act 2006, Schedule 1). 545 Companies Amendment Act 2006, s 21, inserting s 260A of the Companies Act 1993. 546 See Re Callis; Callis v Pardington (1996) 7 NZCLC 261,211 (NZCA), (1996) 7 NZCLC 261,211 (a bankruptcy case). 547 Companies Amendment Act 2006, s 22, amending s 269(2)(a) of the principal Act. 548 Edmonds Judd v Official Assignee [2000] 1 NZLR 135 (NZCA); Auckland CC v Glucina [1997] 2 NZLR 1 (NZCA). 549 Companies Act 1993, s 269(2)(a). 550 Edmonds Judd v Official Assignee [2000] 1 NZLR 135 (CA). Compare Moynihan v Berkett HC Tauranga CP3/94, 27 July 1998; and Re Hobbs (1999) 6 NZBLC 102,718 (Hammond J). 551 See the judgment of Richardson P in Edmonds Judd v Official Assignee [2000] 1 NZLR 135 (NZCA). 552 Companies Amendment Act 2006, s 18, inserting new s 245A of the Companies Act 1993. 553 Corporations Act 2001 (Cth), s 600A. 554 See text to n 408 above. 555 Companies Act 1993, s 245A(2). 556 Companies Act 1993, s 245AQ) 557 Companies Act 1993, s 245A(3). 558 Companies Act 1993, s 280(4). 559 Companies Amendment Act 2006, s 24, inserting s 280(1)(ca) and (cb) of the Companies Act 1993. 560 Companies Act 1993, s 239F(2). 561 New Zealand Institute of Chartered Accountants Performance of Insolvency Engagements (SES-1). This document is not publicly available. 562 Hon Katherine Rich (24 October 2006) 29 NZPD 6052 (Part 8 Companies Act 1993). 563 Icon Digital Entertainment Ltd v Westpac NZ Ltd HC Auckland CIV-2007-404-007124, 20 November 2007. 564 See McLoy v Titan Foundation Ltd HC Auckland CIV-2008-404-2243, 23 April 2008, liquidators petitioning as creditors (a related company) wishing to appointing themselves as liquidator of debtor; Huntleigh Downs Ltd v Fisk HC Wellington CIV-2009-485-001498, 11 August 2009; Re Joeleen Enterprises Ltd; Blanchett and Fatupaito HC New Plymouth CIV-2008-443-000485, 3 October 2008, on papers. 565 Insolvency Practitioners Bill 2010, cl 5(2), new s 280(3)(a) Companies Act 1993. 566 Note that the current Insolvency Practitioners Bill 2010 proposes to replace the reference to the Official Assignee with the Registrar of Companies here.

567 Companies Amendment Act 2006, s 25, adding new s 285(2) of the Companies Act 1993. 568 Companies Amendment Act 2006, s 26, amending s 286(5) of the Companies Act 1993. 569 Companies Amendment Act 2006, s 26(2), amending s 286(7) of the Companies Act 1993. 570 Part 1, cl 7A, inserting Part 16A of the Companies Act, s 316M. 571 Official Assignee v Norris [2012] NZHC 961, [2012] NZCCLR 10. 572 M Ross “The Ordinary Course of Business” [1997] NZLJ 335. 573 Corporations Act 2001 (Cth), s 588FA. 574 Re Modern Terrazzo Ltd [1998] 1 NZLR 160 (Fisher J). 575 Countrywide Bank v Dean [1998] 1 NZLR 385 (UKPC). 576 See cases listed in TGW Telfer “Voidable Preference Reform: A New Zealand Perspective on Shifting Standards and Goalposts” (2003) 12 Int Ins Rev 55 at 73. 577 Waikato Freight and Storage (1988) Ltd v Meltzer [2001] 2 NZLR 541 (CA). See also Number One Men Ltd; Meltzer v Axiom International Ltd (2001) 9 NZCLC 262,671 (NZCA) and further D Brown “Voidable Preferences on Liquidation — Steering the ‘Ordinary Course of Business’ Test back on Track” (2001) 7 NZBLQ 97. 578 See TGW Telfer “Voidable Preference Reform: A New Zealand Perspective on Shifting Standards and Goalposts” (2003) 12 Int Ins Rev 55 at 72–74. 579 Ministry of Economic Development Paper 2 — Voidable Transactions in Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 51, available at . 580 For a comprehensive examination of the topic, and criticism of the notice procedure in the context of the government proposals, see TGW Telfer “Voidable Preference Reform: A New Zealand Perspective on Shifting Standards and Goalposts” (2003) 12 Int Ins Rev 55. 581 Companies Act 1993, s 292. 582 Companies Act 1993, s 292(5). 583 Companies Act 1993, s 292(3). 584 Companies Act 1993, s 293(6) and (7). 585 Companies Act 1993, s 297(3). 586 Companies Amendment Act 2006, ss 28(4), 32(3) respectively amending ss 293(6) and 297(3) of the Companies Act 1993. 587 See Part II of this Guide and Commentary, Insolvency Act 2006, at I.4(e). 588 Companies Amendment Act 2006, s 27(1). 589 Companies Amendment Act 2006, s 27(2), substituting s 292(3) of the Companies Act 1993. 590 Companies Amendment Act 2006, s 27(2), inserting s 292(3)(f) of the principal Act. 591 Companies Amendment Act 2006, s 27(2), substituting s 292(4) of the principal Act. 592 Cripps v Lakeview Farm Fresh Ltd [2006] 1 NZLR 238 (NZHC). 593 Sheahan v Air-Con Pty Ltd (1997) 147 ALR 1 (HCA) (Kirby J dissenting). 594 Oorschott v Danfoss (NZ) Ltd (2004) 9 NZCLC 263,564 (NZCA). 595 See further D Brown “Receivers and Voidable Transactions” (2005) 11 NZBLQ 95. 596 Companies Amendment Act 2006, s 27(2), inserting s 292(4B) of the Companies Act 1993.

597 Airservices Australia v Ferrier (1996) 14 ACLC 1403 (HCA). 598 Corporations Act 2001 (Cth), s 588FA(3). 599 Bankruptcy Act 1966 (Cth), s 122, used the phrase “preference, priority or advantage” to describe the effect of the transaction. 600 There was some unsuccessful argument that it might be possible to achieve a “net effect” approach under the existing Companies Act 1993, s 292: see Re Island Bay Masonry (1998) 8 NZCLC 261,652. See, however, the Supreme Court’s concurrence, albeit obiter, with High Court of Australia statements as to the running account principle in Trans Otway v Shephard [2005] NZSC 76, [2006] 2 NZLR 289. 601 Airservices Australia v Ferrier (1996) 14 ACLC 1403 (HCA). 602 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [44]. 603 See also Re Claybrook Enterprises Ltd (in liq); Rea v Wolfgram (2009) 10 NZCLC 264,593, [2010] NZCCLR 6 cited in Blanchett at [45]. 604 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [47]. 605 Rothmans Exports Pty Ltd v Mr Mistmorn (1994) 12 ACLC 936 at 946, see also Sutherland v Eurolinx (2001) 37 ACSR 477 (Santow J). 606 Olifent v Australian Wine Industries Pty Ltd (1996) 14 ACLC 510. 607 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [50]. 608 Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004 at 217–219. 609 Rees v Bank of New South Wales (1964) 111 CLR 211 at 221 (Barwick CJ). 610 Airservices Australia v Ferrier (1996) 14 ACLC 1403 (HCA). 611 Corporations Act 2001 (Cth), s 588FA(3). 612 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [69]. 613 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [69]. 614 Sands & MacDougall Wholesale Pty Ltd (in liq) v Commissioner for Taxation for Commonwealth (1997) 15 ACLC 115; Sutherland v Liquor Administration Board (1997) 24 ACSR 176, 15 ACLC 875. 615 Wily v Eastern Elevators Pty Ltd [2003] NSWSC 377, (2003) 21 ACLC 1321; Walsh v Sazer Constructions Pty Ltd (2000) 3 VR 305 (CA). 616 Jollands and Joliffe v Mitchill Communications Ltd [2011] NZCCLR 20 (NZHC) at [18]; see also Rea v Russell [2012] NZHC 11, where payments by a finance company to a trust in relation to payments between the company and the trust without the trustee’s knowledge could not constitute a continuing business relationship or generate a legitimate expectation of future dealings, at [60]–[61]. 617 Companies Amendment Act 2006, s 27(2). 618 Companies Amendment Act 2006, s 27(5). For a case where some transactions fell before 1 November 2007 so that the “ordinary course of business” proviso was available to the creditor, see Shotblast Services (Auck) Ltd v Levin [2012] NZHC 2129. 619 Anzani Investments Ltd v Official Assignee [2008] NZCA 144; Stapley v Fletcher Concrete and Infrastructure Ltd [2008] NZCA 442; Higgs v P & W Painters Ltd [2008] NZCA 433, [2009]

NZCCLR 11; Levin v Ratskar [2011] NZCA 210. 620 Levin v Ratskar [2011] NZCA 210. 621 Joint Insolvency Committee of the New Zealand Law Society and Institute of Chartered Accountants of New Zealand “Guidelines for the Application of Voidable Transaction Provisions of the Companies Act” (1999) 516 Law Talk 32. 622 Companies Amendment Act 2006, s 29 substituting s 294 of the Companies Act 1993. 623 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [14]. 624 Companies Amendment Act 2006, s 29 substituting s 294 of the Companies Act 1993. See s 294(3) and (4) as amended. 625 Submissions of the Joint Insolvency Committee on the draft Insolvency Law Reform Bill 2004. 626 Companies Act 1993, s 294(4) (as amended); in what looks like a simple error, this late amendment to the Bill as undivided at Commerce Committee report stage has been omitted from the Insolvency Act provision: see Insolvency Act 2006, s 206(5). 627 See Part II of this Guide and Commentary, Insolvency Act 2006, at II.4(e). 628 Insolvency Act 1967, s 58(1). 629 Insolvency Act 2006, s 192. For the transitional provision in relation to the cancellation of irregular transactions, see Insolvency Act 2006, s 444(3). 630 Companies Act 1993, s 294. 631 Insolvency Act 2006, s 213. 632 Insolvency Act 2006, s 206(3)(f), and (5). Compare Companies Act 1993, s 294(4) (as amended by Companies Amendment Act 2006, s 29). 633 Companies Act 1993, s 294(1)(b), as amended by Companies Amendment Act 2006, s 29. 634 Insolvency Act 2006, s 206(2). 635 Judicature Act 1908, s 94B. 636 Macmillan Builders Ltd v Morningside Industries Ltd [1986] 2 NZLR 12; Re Excel Freight (1999) 8 NZCLC 261,827. 637 Re Anntastic Marketing [1999] 1 NZLR 615; Re Excel Freight (1999) 8 NZCLC 261,827. 638 Waikato Freight and Storage (1988) Ltd v Meltzer [2001] 2 NZLR 541 (CA). See also Meltzer v Axiom International (2001) 9 NZCLC 262,671 (CA). But see further in relation to creditor knowledge and the “ordinary course” test: Graham v Pharmacy Wholesalers (Wellington) Ltd CA37/04, 17 December 2004, applied Shotblast Services (Auck) Ltd v Levin [2012] NZHC 2129. 639 Insolvency Act 1967, s 58(6). 640 See Insolvency Act 2006, s 208. 641 Application under the Insolvency Act 2006 dates from 1 December 2007. 642 Levin v Ratskar [2011] NZCA 210 at [53]–[56]; Reynolds v Glengarry Hancocks Ltd HC Auckland CIV-2008-404-004745, 7 July 2009; Rea v Russell [2012] NZHC 11 at [65]. 643 Companies Amendment Act 2006, s 31, substituting s 296(3) of the Companies Act 1993. 644 On the meaning of “suspicion” of insolvency, see Trans Otway v Shephard [2005] NZSC 75 discussing the Australian cases, particularly Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266. 645 Sims v Celcast Pty Ltd (1998) 71 SASR 142; Sutherland v Eurolinx Pty Ltd (2001) 37 ACSR 477. For

an overview of the case law, see Wily v Commissioner of Taxation [2002] NSWSC 909 and also D’Aloia v Commissioner of Taxation (2003) FCA 1336 (FCA). 646 D’Aloia v Commissioner of Taxation (2003) FCA 1336 (FCA). 647 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC). 648 Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651. 649 Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 303 per Kitto J. 650 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC). 651 “The New Australasian Voidable Preference law: Plus Ça Change?” (2007) 13 NZBLQ 172, cited in Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [34]. 652 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) at [35], Citing Sutherland v Eurolinx Pty Ltd (2001) 37 ACSR 477 (Santow J). See also Farrell and Rogan (liquidators of Contract Engineering Ltd) v Acme Engineering Ltd [2012] NZHC 2874. 653 Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC), citing KEL Builders (Queensland} Pty Ltd v Brett Nash Electrics Pty Ltd [2001] QSC 178. 654 See n 635 above. 655 See Blanchett v McEntee Hire Holdings Ltd (2010) 10 NZCLC 264,763, [2011] NZCCLR 4 (NZHC) Christiansen AJ at [42] (“value” given after the debt had been paid in full does not suffice under s 296(3)), see also Jollands and Joliffe v Mitchill Communications Ltd [2011] NZCCLR 20 (NZHC) at [32] (Despite there was being no running account under s 292(4B), the Court held that, under s 296(3), the extent of the preferential effect was effected by invoiced services after the payments in question). However, see now Farrell and Rogan v Fences and Kerbs Ltd, HC Rotorua, Christiansen AJ, 1 November 2012, CIV 2012-463-000514, [2012] NZHC 2865. 656 Farrell and Rogan (liquidators of Contract Engineering Ltd) v Acme Engineering Ltd [2012] NZHC 2874; see also Farrell and Rogan v Fences and Kerbs Ltd [2012] NZHC 2865. 657 Farrell and Rogan (liquidators of Contract Engineering Ltd) v Acme Engineering Ltd [2012] NZHC 2874 at [64]–[66]. 658 Carter Holt Harvey Ltd v Fatupaito (2003) 9 NZCLC 263,285 (NZCA). 659 Companies Amendment Act 2006, s 30, substituting s 295(a) and (c) of the Companies Act 1993. 660 In Rea v Russell [2012] NZHC 11 at 67, Bell AJ obiter dicta, opined that an innocent agent or, as in that case, trustee who had not authorised payments to the trust, is not a person who “benefited” from the transaction, and thus need not be ordered to pay personally under s 295(a) — the court could order payment out of the trust assets. 661 Companies Amendment Act 2006, s 32. 662 Companies Act 1993, s 297(1)(c) (repealed). 663 Companies Amendment Act 2006, s 33. 664 Ministry of Economic Development “Paper 4 – Phoenix Companies” in Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents January 2001 at 99, available at . 665 See Morphitis v Bernasconi [2003] Ch 552. 666 Companies Act 1993, s 373(4). 667 For the definition of “phoenix companies” see text and n 673.

See also Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency 668 Laws: A Stocktake Canberra, June 2004 at 131; Ministry of Economic Development “Paper 4 – Phoenix Companies” in Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents January 2001 at 99. 669 Final Report of the Royal Commission into the Building and Construction Industry Regarding Phoenix Company Activity (Canberra, February 2003). 670 See also Parliamentary Joint Committee on Corporations and Financial Services Corporate Insolvency Laws: A Stocktake Canberra, June 2004, Ch 8 (phoenix companies). 671 Companies Amendment Act 2006, s 35, inserting ss 386A-386F in the Companies Act 1993. 672 See Groves v TSSN Ltd (in liq) [2012] NZHC 2402 at [29]–[30]. 673 See Insolvency Rules 1986 (UK), Rules 4.228–4.230. 674 ESS v Sully [2005] 2 BCLC 547 (CA). 675 Groves v TSSN Ltd (in liq) [2012] NZHC 2402. 676 Groves v TSSN Ltd (in liq) [2012] NZHC 2402 at [27]. 677 Companies Act 1993, s 386B (as amended). 678 Defined in Companies Act 1993, s 386B (as inserted by Companies Amendment Act 2006, s 35), as a company placed in liquidation at a time when it was unable to pay its debts. 679 Ricketts v Ad Valorem Factors Ltd [2004] BCC 164. See also IRC v Walsh [2005] 2 BCLC 455 (Ch). 680 Ricketts v Ad Valorem Factors Ltd [2004] BCC 164 at 170 (Mummery LJ). 681 Companies Act 1993, s 386B(2) (as inserted by Companies Amendment Act 2006, s 35). 682 See ESS Production Ltd v Sully [2005] 2 BCLC 547 (CA). 683 Companies Act 1993, s 386A(1) (as inserted by Companies Amendment Act 2006, s 35). 684 However, note that in Groves v TSSN Ltd (in liq) [2012] NZHC 2402, Mackenzie J refused an application by Groves to continue to act as a director of the new company, but commented that the applicant could still take part in the “management”, since significant damage to the business would be caused were he not permitted to take part in the management, as opposed to being a director, of the phoenix company, see [62]–[64]. 685 See Groves v TSSN Ltd (in liq) [2012] NZHC 2402; Re Lightning Electrical Contractors Ltd [1996] BCC 950. 686 The notice must be given prior to the director’s involvement in the new company, if it is to serve a valid purpose in informing creditors so that they can make a choice. The exception is to provide for hive-downs by practitioners to new management. See First Independent Factors and Finance Ltd v Churchill [2006] EWCA Civ 1623. 687 Companies Act 1993, s 386E (as inserted by Companies Amendment Act 2006, s 35). 688 Groves v TSSN Ltd (in liq) [2012] NZHC 2402. In this case, counsel’s researches discovered an earlier, uncontested, case, Bear v CDA Consulting Group Ltd (in liq) HC Auckland CIV-2011-404-2837, 1 June 2011. 689 Companies Act 1993, s 386F (as inserted by Companies Amendment Act 2006, s 35). 690 See ESS Production Ltd v Sully [2005] 2 BCLC 547 (CA). 691 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, Part 8 at 14. 692 ESS Production Ltd v Sully [2005] 2 BCLC 547 (CA).

693 Companies Act 1993, s 386F(2) (as inserted by Companies Amendment Act 2006, s 35). 694 Groves v TSSN Ltd (in liq) [2012] NZHC 2402. 695 Re Bonus Breaks Ltd [1991] BCC 546 (Ch), Penrose v Official Receiver [1996] 2 All ER 96 (Ch). Re Lightning Electrical Contractors Ltd [1996] BCC 950 (Ch). 696 Churchill v First Independent Factors & Finance Ltd [2007] Bus LR, [2006] EWCA Civ 1623; Hawkes v Cuddy [2009] 2 BCLC 427, [2009] EWCA Civ 291; First Independent Factors & Finance Ltd v Mountford [2008] EWHC 835(Ch), cited in Groves v TSSN at [59]. 697 Companies Act 1993, s 373(4) (as inserted by Companies Amendment Act 2006, s 39(2)). 698 Companies Act 1993, s 386C (as inserted by Companies Amendment Act 2006, s 35). 699 Law Commission Priority Debts in the Distribution of Insolvent Estates An Advisory Report to the Ministry of Commerce (NZLC SP2, 1999) at 1. 700 Law Commission Priority Debts in the Distribution of Insolvent Estates An Advisory Report to the Ministry of Commerce (NZLC SP2, 1999) at 8 and 9. 701 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 76. 702 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 2. 703 Insolvency Law Reform Bill, 2005 No 14-1, Explanatory Note, General Policy Statement at 3. 704 Law Commission Priority Debts in the Distribution of Insolvent Estates An Advisory Report to the Ministry of Commerce (NZLC SP2, 1999) at 11. 705 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 79. 706 The April 2001 version of the Manual, available at . 707 Ministry of Economic Development Insolvency Law Review: Tier One Discussion Documents Wellington, January 2001 at 75. 708 Law Commission Priority Debts in the Distribution of Insolvent Estates An Advisory Report to the Ministry of Commerce (NZLC SP2, 1999) at 62. 709 See text and fn 773. 710 Insolvency Act 2006, s 274(5); Companies Act 1993, Schedule 7 (inserted by Companies Amendment Act 2006, Schedule 1). 711 Hon Laila Harré, “Tier One Decisions and Where to From Here” (Speech to Business Law Forum on Insolvency Review, 22 November 2001). 712 Insolvency (Tax Priorities) Legislation Amendment Act 1993 (Cth), the same year as the voluntary administration regime came into effect. See C Symes “Reminiscing the Taxation Priorities in Insolvency” [2005] Journal of Australian Tax Teachers Association 23. 713 Enterprise Act 2002 (UK), s 251. 714 The United Kingdom moved to a system of out-of-court administration, closer to the Australian voluntary administration regime, in the Enterprise Act 2002 (UK), s 248, introducing Schedule B6, Insolvency Act 1986 (UK). Court-ordered administration orders are still possible: Insolvency Act 1986 (UK), s 8. 715 Royal Bank of Canada v Sparrow Electric Corp [1997] 1 SCR 411. 716 Insolvency Law Reform Bill, 2006 No 14-2, Commentary at 16.

717 Income Tax Assessment Act 1936 (Cth), ss 222AOB, 222AGB and 222AHA. This liability has been extended further in Tax Laws Amendment (2011 Measures No 8) Act 2011 (Cth) to superannuation guarantee charge and PAYG withholding obligations. 718 Insolvency Law Reform Bill, 2006 No 14-2, Commentary at 17. 719 See S Franks “Risky Business but IRD Deserves to be at the Head of the Debt Queue” (11 June 2006) Sunday Star Times at D6, for another example of that assumption. 720 Income Tax Act 2004, s HK11(3) and (5). 721 Insolvency Law Reform Bill, 2006 No 14-2, Commentary at 17. 722 See also Rt Hon Justice P Blanchard, “Approaches to Business Rehabilitation” (2005) 13 Waikato L Rev 46 (giving the Harkness Henry address at Waikato University Law School), available at . For a contrary view, see S Franks “Risky Business but IRD Deserves to be at the Head of the Debt Queue” (11 June 2006) Sunday Star Times at D6. 723 Rt Hon Justice P Blanchard, “Approaches to Business Rehabilitation” (2005) 13 Waikato L Rev 46 at 36–40. 724 Insolvency Law Reform Bill, 2006 No 14-2, Commentary at 16. 725 Hon Pansy Wong (National Party member of the Commerce Committee) (24 October 2006) 29 NZPD 6051 (Part 8 of the Insolvency Law Reform Bill, 10 October 2006). 726 An example of a protocol entered into by the IRD is that with the Charities Commission as to the treatment of registration applications for charitable status. See under Operational Statements. 727 If the government did decide to remove the priority, there would be a number of “design issues”, such as whether to adopt a “ring-fencing” of the saved amount, as in the United Kingdom (Enterprise Act 2002, s 276A), in order to ensure that the saving went to unsecured non-preferential creditors, rather than to the secured creditor with security over accounts receivable and inventory who is currently subordinated to preferential debt claimants. See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.4(h). 728 See Part II of this Guide and Commentary, Insolvency Act 2006, at II.4(f). 729 Companies Act 1993, Schedule 7, para 1(1)(a). This, and the following references to Schedule 7 to the Companies Act 1993, are as amended by the Companies Amendment Act 2006, Schedule 1. 730 Insolvency Act 2006, s 274(1)(a). 731 Companies Act 1993, Schedule 7, para 1(1)(b). 732 Companies Act 1993, Schedule 7, para 1(1)(c). 733 Insolvency Act 2006, s 274(1)(b). 734 Companies Act 1993, Schedule 7, para 1(1)(d). 735 Companies Act 1993, Schedule 7, para 1(1)(e). Compare Corporations Act 2001, s 564 (Aus), Bankruptcy Act 1966 (Aus), s 109. See Hon Laila Harré Insolvency Law Review, Priority Debts Cabinet Paper, Wellington, 27 August 2001 at [23] and [24]. 736 Insolvency Act 2006, s 274(1)(c). 737 Companies Act 1993, Schedule 7, para 1(2). 738 Insolvency Act 2006, s 274(2). 739 See .

740 A general election had to be held by 2005. 741 Companies Amendment Act 2004, s 4(3) and (4), amending para 6, and adding para 6A, to Schedule 7 to the Companies Act 1993. 742 Insolvency Amendment Act 2004, s 4(3). 743 As measured by the Quarterly Employment Survey published by Statistics New Zealand, or if it ceases to be published, an equivalent survey by the Government Statistician: Companies Amendment Act 2004, s 4(4), adding para 6A to Schedule 7 to the Companies Act 1993. See now Companies Amendment Act 2006, Schedule 7, para 3(2)(c). 744 If there has been a decrease in the relevant period, the amount will not be adjusted downwards: Companies Amendment Act 2004, s 4(4) adding para 6A to Schedule 7 to the Companies Act 1993. See now Companies Act 1993, Schedule 7, para 3(2) (d) (as inserted by Companies Amendment Act 2006, Schedule 1). The adjustments are to be implemented by Order in Council made within three months from expiry of a triennial review period. For parallel adjustment provisions in the Insolvency Act 2006, see Insolvency Act 2006, s 276(2). 745 By the Companies (Maximum Priority Amount) Order 2006 SR 2006/284, s 3. For the Insolvency Act equivalent limit, see Insolvency (Maximum Priority Amount) Order 2006 (SR 2006/285). 746 See now Companies Act 1993, Schedule 7, para 3(2) (as substituted by Companies Amendment Act 2006, Schedule 1). The Insolvency Act 2006 contained the same limit: s 276(1). 747 Companies (Maximum Priority Amount) Order 2009 (SR 2009/227). 748 Companies (Maximum Priority Amount) Order 2012 (SR 2012/252). 749 Companies Amendment Act 2004, s 4(7) inserting para 12(ab) in Schedule 7 to the Companies Act 1993. See now Companies Act 1993, Schedule 7, para 3(4)(b) (inserted by Companies Amendment Act 2006, Schedule 1). 750 Hon Laila Harré Insolvency Law Review, Priority Debts Cabinet Paper, Wellington, 27 August 2001, Min (01) 26/9. 751 Companies Amendment Act 2004, s 4(1) inserting paras 2(ba) and (bb) into Companies Act 1993, Schedule 7. See also Insolvency Amendment Act 2004, s 4(1). See now Companies Act 1993, Schedule 7, para 1(2) and Insolvency Act 2006, s 274(2). 752 In April 2004, the government also consulted on whether payments in lieu of notice should be accorded like priority to redundancy and holiday pay, but did not proceed with this after consultation: see Ministry of Economic Development Draft Insolvency Law Reform Bill 2004, Discussion Document, Wellington, April 2004. 753 For example, in Australia, see the General Employees Entitlements and Redundancy Scheme (GEERS), which is not based on legislation, available at . See also European Council Directive 80/987/(1980) on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer: International Labour Organisation, Protection of Workers Claims (Employers Insolvency) Convention 1992 (Convention 173): available at . 754 Companies Amendment Act 2004, s 4(2), Insolvency Amendment Act 2004, s 4(1). See now Companies Act 1993, Schedule 7, para 1(2)(e) and Insolvency Act 2006, s 274(2)(e). 755 Companies Act 1993, Schedule 7, para 1(2)(b) and (c). See also see Insolvency Act 2006, s 274(1)(b) and (c). 756 See Part IV of this Guide and Commentary, Receiverships Act 1993, at IV.2. 757 See also Modern Apprenticeship Training Act 2000.

758 Companies Amendment Act 2006, Schedule 1, substituting a new Schedule 7 to the Companies Act 1993, which omits para 2(c) (compensation under Workers Compensation Act 1956) and omits para 2(g) (amounts that Employment Relations Authority may order to pay to apprentice deprived of employment by reason of liquidation). 759 Insolvency Act 2006, s 274. 760 Companies Act 1993, Schedule 7, para 2(d)(e). 761 Student Loan Scheme Act 1992, s 25; Tax Administration Act 1994, s 167(2). 762 Companies Act 1993, Schedule 7, para 1(2)(d) (as inserted by Companies Amendment Act 2006, Schedule 1). See Insolvency Act 2006, s 274(2)(d). ACC levies are treated as an employer deduction under the PAYE tax priority: Companies Act 1993, Schedule 7, para 1(5)(b). The Law Commission recommended that these be consolidated with student loans and child support deductions, but advice from IRD was that ACC levies could not be treated as part of the general employee deduction priority. See Hon Lianne Dalziel Insolvency Law Review: Tier Two Papers — Overview Cabinet Paper, December 2003 at [19]–[24]: available at (Cabinet Papers). 763 Companies Act 1993, Schedule 7, para 1(2)(g) (as substituted by Companies Amendment Act 2006, Schedule 1), referring to the Kiwisaver Act 2006, s 67 (see also ss 231–232 and Schedule 3 to the Kiwisaver Act 2006 which, prior to the passing of the Companies Amendment Act 2006, had already provided for a new para 2(ea) to be inserted in the Schedule 7 to the principal Act (and a new s 104(1) (d)(via) of the Insolvency Act 1967), to come into effect by Order in Council). For the bankruptcy provision, see now Insolvency Act 2006, s 274(2)(g). 764 Tax Administration Act 1994, s 167(2). 765 Companies Act 1993, Schedule 7, para.1(2)(aa), introduced on 6 January 2010 by s 862 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). 766 See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.8(a). 767 Insolvency Act 2006, s 274(2)(h) (“all sums that by any other enactment are required to be paid in accordance with the priority established by this subsection”). 768 Companies Act 1993, Schedule 7, para 1(2)(h). 769 See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.8(a). 770 Companies Act 1993, Schedule 7, para 1(3) (as substituted by Companies Amendment Act 2006, Schedule 1); Insolvency Act 2006, s 274(3). 771 Companies Act 1993, Schedule 7, para 1(4); Insolvency Act 2006, s 274(4) (referring to s 333(4)(c) of that Act). 772 See Part II of this Guide and Commentary, Insolvency Act 2006, at II.5(b). 773 Companies Act 1993, Schedule 7, para 1(5) (as substituted by Companies Amendment Act 2006, Schedule 1); Insolvency Act 2006, s 274(5). 774 Companies Act 1993, Schedule 7, para 7 (as unamended). 775 Companies Act 1993, Schedule 7, para 4 (as inserted by Companies Amendment Act 2006, Schedule 1); Insolvency Act 2006, s 277. 776 The relevant amendments, in the Personal Property Securities Amendment Act 2001, s 13 and Schedule thereto, took effect on 1 May 2002, the same day that the PPSA came into effect. See SR 2002/60, cl 11. 777 See M Gedye “The Structure of New Zealand’s ‘New’ Priority Debts Regime” (2003) 9 NZBLQ 220. 778 M Gedye, R Cuming and R Wood Personal Property Securities in New Zealand Brookers, Wellington, 2002.

779 Personal Property Securities Amendment Act 2001, s 13 and Schedule, amending Companies Act 1993, Schedule 7, effective 1 May 2002, the same day that the PPSA itself came into effect: see Personal Property Securities Act Commencement Order 2002 (SR 2002/60) cl 1. 780 Companies Act 1993, Schedule 7, para 9(b). A “floating charge” was defined there as including “a charge which conferred a floating security at the time of its creation but has since become a fixed or specific charge”. 781 Personal Property Securities Act 1999, s 17(1) and (3). See also Agnew v CIR [2001] 1 AC 710. 782 PPSA, Schedule 1, s 191. 783 The government did not, through the PPSA, wish to amend the substance of any insolvency priorities, given that an insolvency law review was pending. 784 The initial legislative attempt in the PPSA itself to reflect and preserve existing priorities in the consequential amendment (see PPSA, s 191, Schedule 1, amending Schedule 7 to the Companies Act 1993) was flawed in its attempt to define and reflect the “floating charge” category of assets, especially, with hindsight, in the light of the reversal by the Court of Appeal, after the passing of the PPSA, of the High Court decision in Agnew v CIR (Re Brumark) (1999) 19 NZTC 15,159, [2000] 1 NZLR 223 (NZCA), confirmed by the Privy Council in Agnew v CIR [2001] 1 AC 710. For the amendment legislation which was passed in 2001 and came into force on 1 May 2002 at the same time as the PPSA came into force, see Personal Property Securities Amendment Act 2001, s 13 and Schedule thereto, amending Schedule 7 to the Companies Act 1993. This amendment substituted the terminology of “accounts receivable” and “inventory” discussed in the text. See Burns and Agnew v Commissioner of Inland Revenue (2011) 25 NZTC 25,594, (2011) 9 NZBLC 103,284, (2011) 10 NZCLC 264,885 (NZHC) and M Gedye “The Structure of New Zealand’s ‘New’ Priority Debts Regime” (2003) 9 NZBLQ 220. 785 Personal Property Securities Amendment Act 2001, s 13 and Sch 1, amending Schedule 7 to the Companies Act 1993. These terms are defined in Personal Property Securities Act 1999, s 16. 786 PPSA, s 16 definition of “purchase money security interest”. 787 The assets subject to the retention of title claim never became “assets of the company” for the purposes of Schedule 7 of the Companies Act 1993. See, for example, Len Vidgen Ski & Leisure Ltd v Timaru Marine Supplies (1982) Ltd (in rec) [1986] 1 NZLR 349. 788 Former Companies Act 1993, Schedule 7, para 9(b)(i)(C), as inserted by Personal Property Securities Amendment Act 2001, s 13 and Schedule 1. The exception for assignments for new value did not appear in the original PPSA amendment, Schedule 1, but was introduced in the 2001 Act as a result of submissions from the factoring industry and others. 789 PPSA, s 17. 790 The credit for raising this issue must go largely to Mike Gedye, Associate Professor at the University of Auckland, see M Gedye “The Structure of New Zealand’s ‘New’ Priority Debts Regime” (2003) 9 NZBLQ 220. 791 PPSA, s 66(a). The section also contains other default rules for determining relative priorities between security interests. See TGW Telfer and L Widdup “Priority between Security Interests” in Morison’s Company and Securities Law Butterworths, Wellington, at [43.8]–[43.13]. 792 See PPSA, ss 73–75A. 793 See PPSA, s 74. 794 For the definition of “accounts receivable”, “inventory” and “proceeds”, see PPSA, s 16. 795 PPSA, s 191, Schedule 1; Personal Property Securities Amendment Act 2001, s 13 and Schedule 1. 796 If not perfected under the PPSA, s 74 or s 75, the general default priority rule in s 66 might apply to

give an earlier perfected non-PMSI priority. 797 Receiverships Act 1993, s 30. 798 Companies Act 1993, Schedule 7, para 2(1)(b)(B) and (C), as inserted by Companies Amendment Act 2006, Schedule 1. 799 There is a further requirement of statutory perfection the case of the exception for transfers of accounts receivable for new value. The words in italics are the words added to the unamended provision in Schedule 7 to the Companies Act 1993. 800 Insolvency Act 2006, s 275. 801 See Part IV of this Guide and Comentary, Receiverships Act 1993. 802 Companies Act 1993, Schedule 7, para 6, as inserted by Companies Amendment Act 2006, Schedule 1. 803 Insolvency Act 2006, s 2. For the specific transitional rules in relation to the Insolvency Act 2006 see s 444. 804 Companies Act 1993, ss 239ABK and 239ABL (as inserted by Companies Amendment Act 2006, s 6). 805 See Part II of this Guide and Commentary, Insolvency Act 2006, at II.4(f). 806 Receiverships Act 1993, s 30(2)(b). 807 Receiverships Act 1993, s 30(3). 808 Receiverships Act 1993, s 32(1)(b). 809 Companies Amendment Act 2004, s 4, inserting Schedule 7, para 2(ba) in the Companies Act 1993, extending priority to redundancy compensation. 810 See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.8(a). 811 Companies Act 1993, Schedule 7, para 1(2)(a). 812 See Nicolls v Cutts [1985] 1 BCC 99,427. 813 Companies Act 1993, Schedule 7, para 1(2)(b) and (c) (as inserted by Companies Amendment Act 2006, Schedule 1). 814 See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.8(c)(ii). 815 Companies Amendment Act 2006, Schedule 7, para 1(2)(b) and (c). 816 Companies Amendment Act 2006, Schedule 2 (consequential amendments to the Receiverships Act 1993, adding new s 30(3)(d)). 817 Receiverships Act 1993, s 32(3). 818 Companies Act 1993, Schedule 7, para 1(2)(b) and (c) (as substituted by Companies Amendment Act 1993, Schedule 1). 819 Companies Amendment Act 2006, Schedule 2 (consequential amendments to the Receiverships Act 1993, adding new s 30(3)(e)). 820 Receiverships Act 1993, s 32(1)(b), (9), and (10). 821 Companies Amendment Act 2006, Schedule 2 (consequential amendments to the Receiverships Act 1993, amending s 30(1)(b) and (c), and repealing and inserting new s 30(2)). 822 Companies Amendment Act 2006, Schedule 2 (consequential amendments to the Receiverships Act 1993, inserting new s 30(2A)). 823 See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.8(h).

824 Insolvency Practitioners Bill 2010, Part 2. 825 Turners & Growers Exports Ltd v The Ship “Cornelis Verolme” [1997] 2 NZLR 110 (Williams J). Compare Fournier v The Ship “Margaret Z” [1997] 1 NZLR 629. See also Cambridge Gas Transport Corporation v Official Committee of Unsecured Creditors of Navigator Holding plc [2006] UKPC 26, [2007] 1 AC 508, [2006] 3 All ER 829 for a common law endorsement for universality. See also Lord Clarke (dissenting) in Rubin v Eurofinance SA, New Capt Reinsurance Corp (in liq) v Grant [2012] UKSC 46. The majority held that Cambridge Gas was wrongly decided, and their judgment can be said to be contrary to the spirit of universality in insolvency, since they held that, in English common law, there was no special rule to treat insolvency preference actions or insolvency proceedings differently from other in personam claims where the judgment debtor had not submitted to the foreign jurisdiction. 826 Most notably adopted in the Maxwell Communications Corporation litigation, between Courts in New York and London. For this and later United States and Canadian examples of protocols in particular litigation, see . 827 See Law Commission Cross-Border Insolvency: Should New Zealand Adopt the Model Law? (NZLC R52, 1999) at 12–16 and Insolvency (Cross-border) Act 2006, s 8. Section 8 was used by Heath J in Williams v Simpson [2011] 2 NZLR 380 (NZHC). 828 Interim relief was given under art 19 of the Model Law, see Williams v Simpson [2011] 2 NZLR 380 (NZHC). 829 Williams v Simpson [2011] 2 NZLR 380 (NZHC). 830 See Rubin v Eurofinance SA; New Cap Reinsurance Corp (in liq) v Grant [2012] UKSC 46, Lord Collins at [21]–[29] for a review of the history. 831 Cork Committee on EEC Preliminary Draft Convention 1976 (Cmnd 6002). 832 Council of Europe “Istanbul” Convention, opened for signature June 1990; Draft EC Bankruptcy Convention 1991. See J Dine “Proposals for an EC Bankruptcy Convention” (1992) 7 IL & P 178. 833 M Bogdan “The Organisation of Insolvency Proceedings with an International Element” in J S Ziegel (ed) Current Developments in International and Comparative Corporate Insolvency Law OUP, Oxford, 1994, Ch 31; K H Nadelmann “An International Bankruptcy Code: New Thoughts on an Old Idea” (1961) 10 ICLQ 70. 834 EC Council Regulation 1346/2000. 835 For a background to the Model Law, see Law Commission Cross-Border Insolvency: Should New Zealand adopt the Model Law? (NZLC R52, 1999) Ch 4. 836 Law Commission Cross-Border Insolvency: Should New Zealand adopt the Model Law? (NZLC R52, 1999). 837 Williams v Simpson [2011] 2 NZLR 380 (NZHC) at [5]. 838 See Williams v Simpson (No 7) HC Hamilton CIV-2010-419-001174, 10 November 2010 at [16]–[17]. 839 Insolvency (Cross-border) Act 2006, s 9. See the High Court Rules, subpart 15 (Cross-border insolvency). 840 Insolvency (Cross-border) Act 2006, s 11. No Regulations have been made under this provision. 841 Eritrea, Japan, Mexico, Poland, Romania, Montenegro, Serbia, South Africa, British Virgin Islands, United States, United Kingdom, Canada, Colombia, Mauritius, Slovenia, Republic of Korea, Greece. For an updated list of countries, see . 842 Bankruptcy Abuse Prevention and Consumer Protection Act 2005, s 256, adding new Chapter 15 to 11 USC, §1501 and following, and repealing §304.

843 Cross-Border Insolvency Regulations 2006 (SI 1030/2006). 844 This reflected the recommendation in the Commonwealth government’s corporate law reform programme, CLERP Cross-Border Insolvency: Promoting International Cooperation and Coordination Canberra, 2002, Paper No 8. 845 Hon Lianne Dalziel Insolvency Law Reform Bill: Approval for Introduction, Wellington, 21 December 2005, at [79], available at . 846 See, for example, Lawrence v Northern Crest Investments Ltd (in liq) [2011] FCA 672 (interim relief), and, in the same proceeding, Lawrence v Northern Crest Investments Ltd (in liq) [2011] FCA 925 (recognition of NZ liquidation as foreign main proceeding). 847 Insolvency (Cross-border) Act 2006, Schedule 1 (rules applying to cross-border insolvency proceedings), art 1(2), art 22(4). All subsequent references in the main text to Articles are to Schedule 1 to the Insolvency (Cross-border) Act 2006. 848 Most major jurisdictions apart from South Africa have omitted any reciprocity requirement. 849 See section (6) (Specified insolvency proceedings) on p 143 of this Guide. 850 Law Commission Cross-Border Insolvency: Should New Zealand adopt the Model Law? (NZLC R52, 1999) Ch 2 (Existing New Zealand Law). 851 Insolvency (Cross-border) Act 2006, s 8. This was introduced at the recommendation of the Commerce Committee. See report of the Commerce Committee, 10 August 2006, Commentary at 16. 852 Williams v Simpson (No 7) HC Hamilton CIV-2010-419-001174, 10 November 2010. 853 Williams v Simpson [2011] 2 NZLR 380 (NZHC) at [74]. 854 Cambridge Gas Transport Corporation v Official Committee of Unsecured Creditors of Navigator Holdings [2006] UKPC 26, [2007] 1 AC 508, [2006] 3 All ER 829 at [16]. The passage has been endorsed by Lord Clarke (dissenting) in Rubin v Eurofinance SA; New Cap Reinsurance v Grant [2012] UKSC 46 at [197], but the majority judgment in those two very recent cases (decided on 24 October 2012) has effectively restricted the scope of a universalist approach to insolvency proceedings as sui generis procedures, at least in the United Kingdom. 855 Re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008] 3 All ER 869. 856 Insolvency Act 1986 (UK), s 426. 857 Rubin v Eurofinance SA; New Cap Reinsurance Corp (in liq) v Grant [2012] UKSC 46. 858 Enacted as part of UK Law by the Cross-Border Insolvency Regulations 2006 (SI 2006/1030). 859 Insolvency (Cross-border) Act 2006, s 5. 860 Insolvency (Cross-border) Act 2006, s 5(2). 861 Available from the UNCITRAL website at . 862 See, for ongoing work programme of UNCITRAL: . See also the American Law Institute/International Insolvency Institute Guide to Court-to-Court Communications, available at . 863 See Re SphinX Ltd (SDNY Case No 06-11760); Re Muscletech Research and Development Inc [2006] OJ No 167 (Ont SCJ) and [2006] OJ 462; In re Muscletech Research and Development Inc (No 04 MD 1598), SDNY, 11 August 2006 (US Bankruptcy Court). There had been at least 28 US cases under Chapter 15 of the US Bankruptcy Code by October 2006. See J Sarra Eye on the Americas: Cross-

Border Developments and Receiver Liability, INSOL News, October 2006, available at . 864 Insolvency (Cross-border) Act 2006, s 4. 865 Williams v Simpson [2011] 2 NZLR 380 (NZHC). 866 Re Pacific Northstar Property Group LLC HC Auckland CIV-2009-404-006312, 29 September 2009. 867 Jeong v TPC Korea Co Ltd HC Auckland CIV-2009-404-006704, 15 October 2009. See also Lee v Korea Line Corporation HC Auckland CIV-2011-404-001315, 14 March 2011. 868 Insolvency (Cross-border) Act 2006, Schedule 1, art 2(i). 869 This accords with the Law Commission’s view: see Law Commission Insolvency Law Reform: Promoting Trust and Confidence (NZLC SP11, 2001) at 80–82. See Part III of this Guide and Commentary, Companies Amendment Act 2006, at III.4(a). 870 Re Bear Stearns 374 BR 122 (Bkrtcy SDNY 2007) and 389 BR 325 (SDNY 2008) cited by Heath J in Williams v Simpson [2011] 2 NZLR 380 (NZHC). 871 Williams v Simpson [2011] 2 NZLR 380 (NZHC). 872 Insolvency (Cross-border) Act 2006, Schedule 1, art 2(b). See Lee v Korea Line Corporation HC Auckland, CIV-2011-404-001315, 14 March 2011; Re Sheahan (in rec and liq) HC Auckland CIV2011-404-001623, 20 May 2011; Omegatrend International Pty Ltd (in liq) v New Image International Ltd HC Auckland CIV-2010-404-004098, 5 October 2010 (the recognition took place in earlier unreported proceedings). See also the Australian corporate case of Ackers v Saad Investments Co Ltd [2010] FCA 1221, (2010) 276 ALR 508, and, in relation to individuals, Gainsford v Tannenbaum [2012] FCA 904. 873 Model Law, art 16(3). 874 Williams v Simpson [2011] 2 NZLR 380 (NZHC) at [49]. 875 Insolvency (Cross-border) Act 2006, Schedule 1, art 2(c). 876 Insolvency (Cross-border) Act 2006, Schedule 1, art 2(f). 877 Case C-341/04, 2 May 2006. See also the French decision applying the European Court of Justice’s decision in SAS Isa Daisytek, Supreme Court, Commercial Chamber, Paris, Reference 03-19863, 27 June 2006, and the earlier UK first instance decision in Re Daisytek ISA [2004] BPIR 30. 878 See Re SphinX et Al, US Bankruptcy Court, SDNY, Case No 06-11760 (RDD). 879 See the English bankruptcy case of Re Staubitz-Schreiber (Case C-1/04) [2006] All ER (D) 65. 880 In Re Ran 607 F 3d 1017 (5th Cir 2010), cited in Williams v Simpson [2011] 2 NZLR 380 (NZHC). See Gainsford v Tannenbaum [2012] FCA 904, where the Federal Court of Australia, finding that an individual resident in Australia since 2007 did not have a COMI or an establishment in South Africa, approved the approach in Williams. 881 Williams v Simpson [2011] 2 NZLR 380 (NZHC). 882 EC No. 1346/2000, art 26 (EC Insolvency Regulation). 883 EC No. 1346/2000, art 6(1). 884 In re Muscletech Research and Development Inc No 04 MD 1598 (SDNY 11 August 2006) US Bankruptcy Court. 885 Insolvency (Cross-border) Act 2006, Schedule 1, art 1(2). 886 Law Commission Cross-Border Insolvency: Should New Zealand adopt the Model Law? (NZLC R52, 1999) at 12–16.

887 Insolvency (Cross-border) Act 2006, Schedule 1, art 3. 888 UNCITRAL Guide to Enactment, text to art 3. Available from the UNCITRAL website at: http://www.uncitral.org/pdf/english/texts/insolven/insolvency-e.pdf (last accessed 4 January 2007). 889 Williams v Simpson (No 7) HC Hamilton CIV-2010-419-1174, 29 September 2010 (oral judgment). 890 Insolvency (Cross-border) Act 2006, Schedule 1, art 11. 891 Insolvency (Cross-border) Act 2006, Schedule 1, art 13. 892 Insolvency (Cross-border) Act 2006, Schedule 1, art 15. 893 For early straightforward recognition cases, see Jeong v TPC Korea Co Ltd HC Auckland CIV-2009404-006704, 15 October 2009; Re Sheahan (in rec and liq) HC Auckland CIV-2011-404-001623, 20 May 2011; Lee v Korea Line Corporation HC Auckland, CIV-2011-404-001315, 14 March 2011. 894 Insolvency (Cross-border) Act 2006, Schedule 1, Art 20. In Commissioner of Inland Revenue v Compudigm (2011) 25 NZTC 25,110 (NZHC), while there was no application under the Model Law in either New Zealand or the United States to date, and no argument under the 2006 Act was put to the Court, Gendall AJ considered the impact and spirit of the Model Law in respect to proceedings in Nevada when refusing an anti-suit injunction. 895 Omegatrend International Pty Ltd (in liq) v New Image International Ltd HC Auckland CIV-2010404-004098, 5 October 2010. 896 In re Pacific Northstar Property Group LLC HC Auckland CIV-2009-404-006312, 29 September 2009. 897 Insolvency (Cross-border) Act 2006, Schedule 1, art 21(1). 898 Insolvency (Cross-border) Act 2006, Schedule 1, art 21(2) 899 Insolvency (Cross-border) Act 2006, Schedule 1, art 22. 900 Compare Insolvency (Cross-border) Act 2006, Schedule 1, art 21. 901 Insolvency (Cross-border) Act 2006, Schedule 1, art 23. See the discussion of art 23 by Lord Collins in Rubin v Eurofinance SA; New Cap Reinsurance v Grant [2012] UKSC 46 at [131], though he goes on to state that the Model Law does not permit enforcement of judgments against third parties. 902 Insolvency (Cross-border) Act 2006, Schedule 1, Chapter IV (Co-operation with foreign Courts and foreign representatives) arts 25–27. 903 Insolvency (Cross-border) Act 2006, Schedule 1, art 25. Under r 1.22 of the High Court Rules, all parties must consent to any judicial communication, must be consulted on the form of such communication, and any ensuing communications must form part of the court record. 904 Insolvency (Cross-border) Act 2006, Schedule 1, art 27. See also UNCITRAL: . See also the American Law Institute/International Insolvency Institute Guide to Court-to-Court Communications, available at . 905 Insolvency (Cross-border) Act 2006, Schedule 1, art 28. 906 Gavigan v Australasian Memory Pty Ltd (in liq) (1997) 8 NZCLC 261,449. 907 Insolvency (Cross-border) Act 2006, Schedule 1, art 29. 908 Insolvency (Cross-border) Act 2006, s 10. 909 See Hon Lianne Dalziel, Minister of Commerce Insolvency Law Review: Cross-Border Insolvency Cabinet Paper, Wellington, December 2003 at [13]–[22], available at (Cabinet Papers).

This possibility exists in Australia, as between Australia and the United Kingdom, for example. See 910 Insolvency Act 1986 (UK), s 426 and Corporations Act 2001 (Cth), ss 580 and 581. 911 Regulation of Insolvency Practitioners, Proposal from Ministry of Commerce to Cabinet Business Committee, 6October 2011, CBC (11) 83 (hereafter Cabinet Paper) available at . 912 Insolvency Practitioners Bill 141—2 (IPB 2010), as reported from Commerce Committee, May 2011. 913 Ministry of Economic Development, Draft Insolvency Reform Bill Discussion Document Wellington, 2004. 914 Ministry of Economic Development, Insolvency Practitioner Regulation, Options for Change, Discussion Document 2006, . 915 For a history and overview of the debate and policy development in New Zealand, see L Taylor “The Regulation of Insolvency Practitioners in New Zealand” (2008) 16 Insol LJ 150; M Berkahn “Regulation of Insolvency Practitioners in New Zealand” (2010) 18 Insol LJ 148. 916 See Companies Act 1993, s 286. 917 See n 912 above. 918 IPB 2010 Commentary at 4. 919 IPB 2010 Commentary at 1. 920 IPB 2010 Commentary at 3. 921 See n 911 above. 922 IPB 2010 Commentary at 16–24. 923 Cabinet Paper at 17. 924 Proposed Part 16A, s 316D. 925 Cabinet Paper at 3–1. 926 For the Proposals Paper, see . The submissions are at . 927 IPB 2010, Part 1, cl 7A would insert a new Part 16A into the Companies Act 1993; see also Part 2, cl 12, amending the Receiverships Act 1993 so that receivers must be registered insolvency practitioners within the proposed Companies Act 1993, Part 16A. 928 IPB 2010, cl 316F(1). 929 IPB 2010, cl 316H. 930 And corresponding provisions for administrators and receivers, see Companies Act 1993, s 239F and Receiverships Act 1993, s 5 respectively. 931 IPB 2010 Commentary at 4. 932 IPB 2010, cl 5(3). 933 Cabinet Paper at 19, n 4. 934 In fact, a newspaper report, “Insolvency – Kill or cure?” New Zealand Herald (21 March 2011) suggested that ‘in this country, there are ex-plumbers and ex-auto electricians who are practising as insolvency practitioners, available at .

935 IPB 2010, Commentary at 5. 936 Cross-Border Insolvency Act 2008 (Cth). 937 There is potential for other recognised professional bodies to be added by Regulations in future. 938 IPB 2010, Part 1, cl 7A, proposed s 316M of the Companies Act 1993. 939 Cabinet Paper, Recommendations at 8–9. 940 IPB 2010, cl 13B. 941 IPB 2010, cl 7A. 942 IPB 2010, cl 3I. 943 IPB 2010, cl 7A, proposed new ss 316ZA and 316ZB; see regs 29 and 31 of the Companies Act Liquidation Regulations 1994. 944 Cabinet Paper at 5–6.

[page 163]

PART 2 Legislation Insolvency Act 2006 Companies Act 1993 Receiverships Act 1993 Insolvency (Cross-border) Act 2006

[page 165]

Insolvency Act 2006 2006 No 55 Contents 1 2

Title Commencement Part 1 Interpretation and Scope

3 4 5 6

7 8 9 10 11 12 13 14

Interpretation Rights and powers under other Acts not affected Act binds the Crown Corporations and other entities not subject to Act Part 2 Nature of Bankruptcy, and Process of Being Made Bankrupt Subpart 1—Bankruptcy and its alternatives Nature of bankruptcy Alternatives to bankruptcy Subpart 2—Process of being made bankrupt Introduction to subpart 2 Adjudication Adjudication Adjudication by court Adjudication on debtor’s initiative Court adjudication on creditor’s application When creditor may apply for debtor’s adjudication Application by secured creditor

15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Court’s permission required for withdrawal of application Acts of bankruptcy Requirement of act of bankruptcy Failure to comply with bankruptcy notice Disposition of property to trustee for benefit of creditors Fraud or intent to prefer a creditor Departure from New Zealand Avoidance of creditors Notice of suspension of debts Admission to creditors of insolvency Possession under execution process Writ of sale Return that sufficient goods not found under execution process Removal or concealment of property Unsatisfied judgment for non-payment of trust money Bankruptcy notice Form of bankruptcy notice Effect of overstatement of amount owing Effect on execution process of filing creditor’s application Creditor’s execution process must not be issued or continued Execution processes by other creditors Execution process issued by another court No restriction on execution process if application for adjudication withdrawn or dismissed Meaning of execution process [page 166]

36

Court’s options when hearing creditor’s application Court may adjudicate debtor bankrupt

37 38 39 40 41 42 43 44 45 46 47 48 49

50 51 52 53 54

55 56 57 58 59 60

Court may refuse adjudication Court may halt application Orders if more than 1 application Orders if more than 1 debtor Order that disposition or proposal not act of bankruptcy Halt or refusal of application when judgment under appeal Court may halt application while underlying debt determined Substitution of creditor Debtor’s application When debtor may file application Debtor must first file statement of affairs Debtor automatically adjudicated bankrupt Debtors’ joint application Steps for filing debtor’s application Subpart 3—Appointment of receiver Power of court to appoint Assignee as receiver Application for appointment of Assignee as receiver Additional orders after receiver’s appointment Appointment of Assignee as receiver and manager must be advertised Execution process halted Effect when execution process halted Subpart 4—Adjudication Adjudication Bankruptcy commences on adjudication Date of adjudication Date and time of adjudication must be recorded Registrar must notify Assignee of adjudication by court Official Assignee must nominate Assignee Presumption that act or transaction entered into or effected after adjudication

61 62 63 64 65 66

67 68 69 70 71 72 73 74 75 76 77

Adjudication final and binding Public register of discharged and undischarged bankrupts Subpart 5—What happens on adjudication Debtor adjudicated bankrupt called the bankrupt Outline of what happens on adjudication Assignee must advertise adjudication Assignee must advertise adjudication Order that Assignee must not advertise pending appeal or application for annulment Bankrupt’s statement of affairs Bankrupt must file statement of affairs with Assignee Notice that bankrupt must file statement of affairs Time for filing statement of affairs Bankrupt may file additional or amended statements or answers Assignee must call meeting of creditors Assignee must call meeting of creditors Time when meeting must be held Assignee may dispense with first creditors’ meeting Notice that first creditors’ meeting should not be called Documents to be sent with notice of meeting Court proceedings are halted Effect of adjudication on court proceedings Execution process Execution process must not be begun or continued after adjudication advertised [page 167]

78

Bankrupt’s death Effect of bankrupt’s death after adjudication Subpart 6—Role of creditors

79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

101 102

Overview of creditors’ role in bankruptcy Creditors’ meetings Types of creditors’ meetings Subsequent meetings Meeting and resolution not defective for lack of notice Conduct of creditors’ meetings Chairperson Chairperson may adjourn meeting Assignee must report to meeting Attending creditors’ meeting Bankrupt may be required to attend and be questioned Attendance by non-creditors Minutes and record of meeting Number of persons for valid meeting Who may represent creditor or bankrupt Voting at meetings Postal and electronic votes Who may vote at creditors’ meeting When secured creditor may vote When creditor under bill of exchange or promissory note may vote Person disqualified from voting through preferential effect Creditor of partner Creditors may appoint expert or committee to assist Assignee Documents Creditor’s right to inspect documents Part 3 Dealing with Bankrupt And Bankrupt’s Property Subpart 1—Status of bankrupt’s property General Status of bankrupt’s property on adjudication Status of property acquired during bankruptcy

103 104 105 106 107

108 109 110 111 112 113 114 115 116 117 118 119 120 121

Property vests in replacement Assignee Property held in trust by bankrupt Effect of other laws Court may order that money due to bankrupt is assigned to Assignee Application of section 274 to payments by bankrupt or assignments by court Bankrupt’s property subject to execution process When execution creditor may retain execution proceeds Effect of notice to sheriff of adjudication Sheriff must retain proceeds of execution for 10 working days Purchaser under sale by sheriff acquires good title Court may set aside rights conferred on Assignee Validity of property transactions with bankrupt Transaction in good faith and for value after adjudication Executions and attachments in good faith When execution or attachment completed for purposes of section 108 or 114 Assignee’s interest in property passes Disclaimer of onerous property Assignee may disclaim onerous property Effect of disclaimer Position of person who suffers loss as result of disclaimer Assignee may be required to elect whether to disclaim Liability for rentcharge on bankrupt’s land after disclaimer [page 168]

122 123

Land subject to mortgage Transmission of interest in land Assignee cannot claim interest in land if bankrupt remains in

124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141

142 143

possession until discharge Shares and other securities Assignee may transfer shares and other securities Assignee may disclaim liability under shares Assignee may be required to elect whether to disclaim liability under shares Transfer of shares after disclaimer Company may prove for unpaid calls Consumer goods on hire purchase Meaning of hire purchase terms used in this subpart Restrictions on creditor dealing with consumer goods Assignee’s powers in relation to hire-purchase consumer goods Creditor in possession of consumer goods may prove in bankruptcy if Assignee has not exercised powers Creditor may assign consumer goods to Assignee Second bankruptcy Status of bankrupt’s property on second bankruptcy Effect of notice to Assignee of application for adjudication Persons jointly adjudicated bankrupt Separate accounts How joint and separate estates must be applied Subpart 2—Duties of bankrupt General duty of bankrupt Duties in relation to property Bankrupt must disclose property acquired before discharge Bankrupt must deliver property to Assignee on demand Bankrupt must take all steps required in relation to property and distribution of proceeds to creditors Duties to provide information Bankrupt must give Assignee accounting records and other documents Bankrupt must give Assignee information relating to property

144 145 146 147 148 149 150 151 152 153 154 155 156 157

158 159 160 161

Bankrupt must give Assignee information relating to income and expenditure Bankrupt must notify Assignee of change in personal information Bankrupt must give Assignee financial information Subpart 3—Control over bankrupt during bankruptcy Bankrupt may be required to contribute to payment of debts Onus of proof if bankrupt defaults in making payment Prohibition of bankrupt entering business Warrant to search for and seize bankrupt’s property Seizure of bankrupt’s property Bankrupt must vacate land or buildings if required to do so Bankrupt’s right to inspect documents Restrictions on bankrupt dealing with property No power to recover property or give release or discharge No steps to defeat beneficial interest Bankrupt’s bank accounts Bank must notify Assignee of bankrupt’s account Assignee may require bank to search account records Subpart 4—Provision for bankrupt during bankruptcy Provision for bankrupt Bankrupt may retain certain assets Bankrupt may retain certain assets with consent of creditors Retention of assets does not affect rights under charge or hire purchase agreement Retention provisions do not confer rights to other assets [page 169]

162 163

Relative or dependant may exercise bankrupt’s right to retain assets Assignee may make allowance to bankrupt

164 Assignee may allow bankrupt to retain money Subpart 5—Powers of Assignee and court to examine bankrupt and others Examination of persons summoned by Assignee 165 Assignee may summon bankrupt and others to be examined 166 Conduct of examination of person summoned by Assignee 167 Expenses of person summoned by Assignee 168 Creditor may inspect record of examination 169 Report of examination must not be published unless court consents 170 Examination provisions also apply when Assignee appointed receiver and manager of debtor’s property 171 Assignee may obtain documents 172 No lien over bankrupt’s documents and other records Bankrupt’s public examination 173 Court must hold public examination if Assignee or creditors require 174 Notice of examination 175 Time for holding examination 176 Assignee must file report before examination 177 Conduct of examination 178 Record of examination 179 When examination ends 180 Bankrupt’s failure to attend examination 181 Bankrupt’s expenses in attending examination Investigation of company controlled by bankrupt and associate 182 Assignee may examine company documents, personnel, and shareholders 183 Meaning of associate Privilege and representation of persons examined 184 No privilege against self-incrimination 185 Statement made by person examined or questioned not generally admissible in criminal proceedings against that person 186 Representation

187 188 189 190 191 192 193 194 195 196 197 198 199 200

Subpart 6—Status of bankrupt’s contracts Bankrupt’s contracts entered into before adjudication Assignee may continue or disclaim bankrupt’s contract Contract terminated by other contracting party Transaction with bankrupt in ignorance of adjudication Payment of money or delivery of property is good discharge Joint contractual liability Bankrupt’s co-contractor may sue and be sued Lawyers’ costs Lawyers’ costs Subpart 7—Irregular transactions before adjudication Overview of subpart 7 Extension of 2 years and 6 months periods Insolvent transactions Insolvent transaction may be cancelled Meaning of insolvent transaction Insolvent transaction presumed When series of transactions must be regarded as single transaction Insolvent charges Insolvent charge may be cancelled Charge for new consideration or charge in substitution not affected Presumption that bankrupt unable to pay due debts [page 170]

201 202 203 204

Charge for unpaid purchase price given after sale of property Appropriation of payments by bankrupt to secured creditor Charge agreed before specified period may not be cancelled Insolvent gifts Insolvent gift within 2 years may be cancelled

205

206 207 208 209 210 211 212 213 214 215 216

217 218 219 220 221 222

223 224

Insolvent gift within 2 to 5 years may be cancelled if bankrupt unable to pay debts Procedure for cancelling irregular transactions Procedure for cancelling irregular transactions Court may order retransfer of property or payment of value Limits on recovery Recovery by appointee Land Transfer Act 1952 does not limit sections 206 to 209 Transactions at undervalue Assignee may recover difference in value When Assignee may recover difference Bankrupt’s contribution to another person’s property Court may order recipient to pay value to Assignee Court’s powers in relation to bankrupt’s contribution to recipient’s property How Assignee must use repayment of bankrupt’s contribution to property Land Transfer Act 1952 does not limit sections 213 to 215 Subpart 8—Role and powers of Assignee Powers of Assignee Assignee’s general powers Assignee must not sell bankrupt’s property before first creditors’ meeting Title of purchaser from Assignee Obligation to bank and power to invest money Assignee may assign right to sue under this Act Proceedings by Assignee when bankrupt is partner in business partnership Notice by Assignee Means of giving notice to creditors Assignee’s decisions Assignee’s discretion

225

Assignee may apply for directions by court

226

Appeal from Assignee’s decision Assignee’s accounting records Assignee must keep proper accounting records Assignee’s final statement of receipts and payments Auditor-General may audit Assignee’s accounts Assignee may return or destroy accounting records Subpart 9—Creditors’ claims Provable debts Meaning of provable debt What debts are provable debts Procedure for proving debt Creditor must submit creditor’s claim form Role of Assignee in examining creditor’s claim form Assignee must examine creditor’s claim form Assignee must give creditor notice of grounds of rejection Assignee’s power to obtain evidence of debt Notice to Assignee to admit or reject creditor’s claim Court may cancel creditor’s claim Court may reverse or modify Assignee’s decision rejecting creditor’s claim Parties to application to court in relation to creditor’s claim

227 228 229 230

231 232 233 234 235 236 237 238 239 240

[page 171] 241 242 243 244

Which court may hear application in relation to creditor’s claim Court may make order as to costs Secured creditors Secured creditor’s options in relation to property subject to charge Assignee may require secured creditor to choose option

245 246 247 248 249 250

251 252

253 254 255 256 257 258 259 260 261 262 263

Assignee not required to act in relation to certain property subject to charge Realisation of property subject to security Valuation of charge and proof for balance due False claim by secured creditor Assignee’s powers when secured creditor values property subject to charge and proves for balance Secured creditor who surrenders charge may withdraw surrender or submit new creditor’s claim Creditors’ claims subject to uncertainty Assignee may estimate amount of uncertain creditor’s claim Application to court to determine amount of uncertain creditor’s claim Creditors’ claims payable after adjudication Creditor’s claim payable 6 months or more after adjudication Set-off Mutual credit and set-off Set-off under netting agreement Definitions relating to set-off under netting agreement Application of set-off under netting agreement Calculation of netted balance Mutuality required for transactions under bilateral netting agreements When mutuality required for transactions under recognised multilateral netting agreements Application of set-off under section 254 to transaction subject to netting agreements Transactions under netting agreement and insolvent transactions Set-off under netting agreement not affected by notice under section 206(2) Disclaimer of onerous property and termination of netting agreement not permitted Interest

264

Pre-adjudication interest

265 266

Post-adjudication interest at prescribed rate if surplus remains Additional post-adjudication interest on contract or judgment debt if surplus remains Meaning of prescribed rate Miscellaneous provisions relating to creditors’ claims Creditor must deduct trade discounts Proof when charge void Judgment creditor may prove for costs Company may prove for unpaid calls When guarantor for bankrupt may prove Subpart 10—Distribution of assets Priority of payments for distribution of bankrupt’s assets Preferential claims Priority of payments to preferential creditors Conditions to priority of payments to preferential creditors Provisions concerning preferential payments to employees Subrogation of persons if payment has been made Priority given to person who distrains on goods Creditors to have priority over creditors of joint bankrupt Payments to general creditors and to bankrupt Payment of remaining money to general creditors Payment of surplus to bankrupt

267 268 269 270 271 272 273 274 275 276 277 278 279 280 281

[page 172]

282 283 284

Undistributed money paid to Public Trust Definition of undistributed money Undistributed money to be paid to Public Trust Public Trust to hold undistributed money

285 286 287 288 289

290 291 292 293 294 295 296 297 298 299 300 301 302 303 304

Public Trust to pay undistributed money to bankruptcy surplus account Application of undistributed money held in bankruptcy surplus account Requisition of Minister required for payment under section 286(c) Approval of Official Assignee required for payment under section 286(d) Matters concerning bankruptcy surplus account Part 4 End of Bankruptcy Subpart 1—Discharge from bankruptcy Automatic discharge from bankruptcy Automatic discharge 3 years after bankrupt files statement of affairs Effect of automatic discharge Objection to automatic discharge Objection may be withdrawn Application for discharge from bankruptcy Bankrupt may apply for discharge Examination concerning discharge from bankruptcy When bankrupt must be examined concerning discharge Assignee’s report When creditor must give notice of opposition to discharge Court may grant or refuse discharge Court may restrict bankrupt from engaging in business after discharge Court may reverse order of discharge Grounds for reversing discharge Effect of reversal of discharge Bankrupt may apply for absolute discharge if conditions of discharge too onerous Debts from which bankrupt is released on discharge

305 306 307 308

Discharge conclusive evidence of bankruptcy Discharge does not release partners and others Discharged bankrupt must assist Assignee Information regarding bankrupt’s discharge must be contained in public register maintained under section 62 Subpart 2—Annulment 309 Court may annul adjudication 310 When Assignee may annul adjudication 311 Effect of annulment Part 5 Compositions, Proposals, Summary Instalment Orders, and No Asset Procedure Subpart 1—Composition during bankruptcy 312 Creditors may accept composition by passing preliminary resolution 313 Confirming resolution 314 Compositions with members of partnership 315 Court must approve composition 316 Procedure for court approval of composition 317 Deed of composition 318 Effect of deed 319 Bankrupt remains liable for unpaid balances of certain debts 320 Deadlines for steps to approve composition and execute deed 321 Procedure following court approval of composition 322 Enforcement of composition 323 Court’s exclusive jurisdiction 324 Law and practice in bankruptcy applies to deed [page 173]

325

Subpart 2—Proposals Meaning of debt, etc

326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353

Insolvent may make proposal Form of proposal Proposal must be filed in court Provisional trustee Provisional trustee must call meeting of creditors Procedure at meeting of creditors Who may represent creditors Court must approve proposal Effect of court approval Creditor must not take enforcement steps without court’s permission Duty of insolvent Duties of trustee Trustee must file 6-monthly summary of receipts and payments Cancellation or variation of proposal Subpart 3—Summary instalment orders Summary instalment order Who may apply for order Form of application Assignee may make summary instalment order Additional orders Appointment of supervisor Role of supervisor Assignee may require supervisor or past supervisor to provide documents Termination of appointment for failure to supervise adequately Period of instalments Variation or discharge of order Effect of order Proceedings against debtor Supervisor must give notice of summary instalment order to

creditors 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376

Public register of debtors subject to current summary instalment order Meaning of current summary instalment order Creditor’s claim Payment of debtor’s earnings to supervisor Distribution of money paid by debtor Default by debtor Offence of obtaining credit Subpart 4—No asset procedure Introduction to this subpart Entry to no asset procedure Application for entry to no asset procedure Criteria for entry to no asset procedure Debtor disqualified from entry to no asset procedure in certain cases Assignee must notify creditors Restrictions on debtor obtaining credit after application made When debtor admitted to no asset procedure Public register of persons admitted to no asset procedure Effect of entry to no asset procedure Creditors may not enforce debts Debtor’s duties after entry to no asset procedure Offence of obtaining credit Termination and discharge Termination When Assignee may terminate Assignee may apply for preservation order Effect of termination Creditor may apply to Assignee for termination

[page 174] 377 377A 377B

378 379 380 381 382 383 384 385 386

387 388 389 390 391 392 393 394 395 396

Time of discharge Effect of discharge Discharge does not release partners and others Part 6 Insolvent Deceased Estates Interpretation Application and order that estate be administered under this Part Court may order that estate be administered under this Part Application by administrator, etc Application by creditor or beneficiary for order under this Part Notice of application by creditor or beneficiary When Registrar may hear application Costs of application Court may order administration by Assignee or Public Trust Certificate filed by Public Trust or Māori Trustee has effect as application and order Effect of order that estate be administered under this Part Estate vests in appointee Appointee must realise, administer, and distribute estate Entitlement of surviving spouse to household furniture and effects Appointee may make allowance to surviving spouse Administration of estate under this Part Sections 392 to 398 apply in respect of estate administered under this Part Appointee’s authority, powers, and functions Distribution of estate Payment of surplus Creditor’s notice to administrator Appointee may act in relation to deceased’s irregular transactions

397 398

399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418

Appointee may cancel execution Administrator’s acts valid before notice Part 7 Offences and Miscellaneous Provisions Subpart 1—The Assignee Appointment of Official Assignee for New Zealand and others Assignee may act on behalf of another Assignee Assignee’s use of name, seal, etc Assignee’s additional rights and remedies Disqualification of Assignee Vacation of office by Assignee Protection of Assignee Assignee’s remuneration Rates of Assignee’s remuneration Assignee must apply for order of release Effect of order Subsequent order of release Subpart 2—The court Jurisdiction and powers of court Court may look at real nature of transaction When Registrar or District Court Judge may exercise powers and jurisdiction of court Rehearings and appeals Proceedings not halted pending appeal Suspension of adjudication pending appeal Court may extend time Defects in proceedings [page 175] Subpart 3—Offences by bankrupt

419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439

440 441

Indictable offences Offences in relation to debts Offences in relation to property Offence in relation to written statement to creditor, etc Offence in relation to documents, etc Offence in relation to fictitious losses or expenses Offences in relation to credit, etc Offences in relation to obtaining consent of creditors Offence in relation to leaving New Zealand Defence of absence of intent Penalties for indictable offences by bankrupt Offences in relation to record of transactions Failure to keep and preserve proper record of transactions Failure to keep proper records with intent to conceal Penalties for offences relating to records When bankrupt deemed not to have kept or preserved proper record Summary offences Summary offences Defences to summary offences of obtaining credit Penalty for summary offences by bankrupt Offences in relation to management of companies Offence by bankrupt in relation to management of companies Penalties for offence in relation to management of companies Assignee’s discretion to prosecute Assignee may prosecute if reasonable grounds certified by Crown Solicitor Assignee has immunity for prosecution if certificate given by Crown Solicitor Subpart 4—Miscellaneous provisions False or misleading statements or refusal to answer questions Regulations

442 443 444 445 445A

446 447 448 449 449A 450 451 452 453 454 455 456 457

Rules Repeal and revocation Transitional provisions Consequential amendments to other enactments Act subject to application of Cape Town Convention and Aircraft Protocol Subpart 5—Public registers Subpart applies to public register maintained under section 62, 354 or 368 When public register must be accessible Purposes of public registers General information that must be held in public registers Information kept indefinitely on public register after multiple insolvency events Restricted information that may be held in public register maintained under section 62 When Assignee may omit, remove, restrict access to, or amend, information contained in public registers Search of public registers Search criteria Search purposes Information contained in public registers may be used for statistical or research purposes When search breaches information privacy principle Crown and Assignee not liable for act or omission [page 176] Schedule 1 Assignee’s general powers Schedule 2

Consequential amendments to other enactments 206

1

Title This Act is the Insolvency Act 2006.

2

Commencement This Act comes into force on a date to be appointed by the GovernorGeneral by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.

Section 2: Insolvency Act 2006 brought into force, on 3 December 2007, by the Insolvency Act 2006 Commencement Order 2007 (SR 2007/332).

Part 1 Interpretation and Scope

3

Interpretation In this Part and Parts 2 to 7, unless the context otherwise requires,—

Assignee or Official Assignee means the Official Assignee for New Zealand, the Deputy Official Assignee for New Zealand, and any other Official Assignee or Deputy Assignee appointed under this Act bankrupt means a person who has been adjudicated bankrupt (see section 10) charge includes a right or interest in relation to property owned by a debtor, by virtue of which a creditor of the debtor is entitled to claim payment in priority to other creditors; but does not include a charge under a charging order issued by a court in favour of a judgment creditor company means any company within the meaning of the Companies Act 1993; and includes— (a) a building society within the meaning of the Building Societies Act 1965: (b) a society incorporated under the Incorporated Societies Act 1908: (c) a registered society within the meaning of the Industrial and Provident Societies Act 1908: (d) a society incorporated or registered overseas that is similar to any society in paragraphs (a) to (c) court means the High Court current summary instalment order has the meaning set out in section 355 document means a document in any form; and includes— (a) any writing on any material; and (b) information recorded or stored by means of a tape recorder, computer, or other device; and material subsequently derived from information so recorded or stored; and (c) a book, graph, or drawing; and

[page 177] (d) a photograph, film, negative, tape, or other device in which 1 or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced goods has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 Judge means a Judge of the High Court lawyer has the same meaning as in section 6 of the Lawyers and Conveyancers Act 2006 Ministry means the department of State that, with the authority of the Prime Minister, is for the time being responsible for the administration of this Act ordinary resolution means a resolution of creditors passed in accordance with section 92(1)(a) overseas company means a company that is incorporated outside New Zealand prescribed means prescribed by this Act or by regulations made under this Act or by rules property means property of every kind, whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise provable debt has the meaning given to it in section 231(1) Registrar means a Registrar of the court; and includes a Deputy Registrar relative, in relation to any person (A), means— (a) A’s parent, spouse, child, brother, or sister; or (b) the parent, child, brother, or sister of A’s spouse; or (c) a nominee or trustee for any of them rules means rules for the time being in force under this Act; and includes forms prescribed by the rules secured creditor means a person entitled to a charge on or over property owned by a debtor shares includes stock

sheriff includes any officer who undertakes the execution or process of any court special resolution means a resolution of creditors passed in accordance with section 92(1)(b) spouse, in relation to a person (A), includes a person with whom A has a de facto relationship (whether that person is of the same or a different sex as A) and a civil union partner student loan balance means a consolidated loan balance, as that term is defined in section 4(1) of the Student Loan Scheme Act 2011 supervisor means a person who is appointed under section 345. Compare: 1967 No 54 s 2 Section 3 student loan balance: replaced, on 1 April 2012, by section 223 of the Student Loan Scheme Act 2011 (2011 No 62).

4

Rights and powers under other Acts not affected This Act does not affect— (a) a local authority’s rights under any statute relating to rates and recovery of rates— (i)

to obtain a judgment of unpaid rates: [page 178]

(ii) to enforce payment of rates by selling or leasing the land for which the rates are payable: (b) the provisions of the Joint Family Homes Act 1964: (c) except where this Act expressly provides, a secured creditor’s power to realise or otherwise deal with the charge as if this Act had not been passed. Compare: 1967 No 54 s 3(1), (2), (3)

5

Act binds the Crown

This Act binds the Crown. Compare: 1967 No 54 s 4

6

Corporations and other entities not subject to Act A corporation, association, or company incorporated or registered under any Act must not— (a) be adjudicated bankrupt: (b) make a proposal to its creditors: (c) be the subject of a summary instalment order under this Act: (d) be admitted to the no asset procedure.

Compare: 1967 No 54 s 168

Part 2 Nature of Bankruptcy, and Process of Being Made Bankrupt

Subpart 1—Bankruptcy and its alternatives

7

Nature of bankruptcy

(1) Bankruptcy affects the legal status of a person and has important consequences. These include— (a) the bankrupt’s property vests in the Official Assignee: (b) the bankrupt is limited in the business activities he or she can undertake: (c) the Official Assignee may be entitled to recover assets that the bankrupt has transferred before bankruptcy. (2) This section is intended only as a guide to the consequences of bankruptcy. (2) This section is intended only as a guide to the consequences of bankruptcy.

8

Alternatives to bankruptcy

(1) A debtor who is insolvent may have an alternative to bankruptcy, such as— (a) making a proposal to creditors (see subpart 2 of Part 5); or (b) paying creditors in instalments under a summary instalment order (see subpart 3 of Part 5); or (c) entry to the no asset procedure (see subpart 4 of Part 5). (2) This section is intended only as a guide to the alternatives to bankruptcy.

Subpart 2—Process of being made bankrupt

9

Introduction to subpart 2

(1) This subpart describes how a person is adjudicated bankrupt. (2) In this subpart, the person who is adjudicated bankrupt is called the debtor. [page 179]

Adjudication

10 Adjudication (1) Adjudication occurs when a debtor is adjudicated bankrupt. (2) A debtor is adjudicated bankrupt if either— (a) a creditor of the debtor applies to the court for an order of adjudication, and the court makes the order; or (b) the debtor files an application with the Assignee for adjudication.

11 Adjudication by court (1) A court may adjudicate the debtor bankrupt if— (a) a creditor of the debtor has applied under section 13 for the debtor’s adjudication; and (b) the debtor has committed an act of bankruptcy. (2) The court’s options in dealing with a creditor’s application are set out in sections 36 to 44. (3) What is an act of bankruptcy is set out in sections 17 to 28.

12 Adjudication on debtor’s initiative (1) A debtor may be adjudicated bankrupt by filing an application for adjudication with the Assignee. (2) The requirements for a debtor’s application are set out in sections 45 and

46. (3) The procedure for filing a debtor’s application is set out in section 49.

Court adjudication on creditor’s application

13 When creditor may apply for debtor’s adjudication A creditor may apply for a debtor to be adjudicated bankrupt if— (a) the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and (b) the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and (c) the debt is a certain amount; and (d) the debt is payable either immediately or at a date in the future that is certain. Compare: 1967 No 54 s 23

14 Application by secured creditor The court must not make an order of adjudication on the application of a secured creditor unless the creditor has established that the amount of the debt exceeds the value of the charge by at least $1,000. Compare: 1967 No 54 s 25

15 Court’s permission required for withdrawal of application A creditor may only withdraw an application for adjudication with the permission of the court. Compare: 1967 No 54 s 26(10)

[page 180]

Acts of bankruptcy

16 Requirement of act of bankruptcy (1) A debtor must not be adjudicated bankrupt on a creditor’s application unless the debtor has committed an act of bankruptcy within the period of 3 months before the creditor files the application. (2) The acts of bankruptcy are set out in sections 17 to 28.

17 Failure to comply with bankruptcy notice (1) A debtor commits an act of bankruptcy if— (a) a creditor has obtained a final judgment or a final order against the debtor for any amount; and (b) execution of the judgment or order has not been halted by a court; and (c) the debtor has been served with a bankruptcy notice; and (d) the debtor has not, within the time limit specified in subsection (4),— (i)

complied with the requirements of the notice; or

(ii) satisfied the court that he or she has a cross claim against the creditor. (2) The form that the bankruptcy notice must take is set out in section 29. (3) The debtor must have been served with the bankruptcy notice in New Zealand, unless the court gave permission for the service of the notice on the debtor outside New Zealand. (4) The time limit referred to in subsection (1)(d) is,— (a) if the debtor is served with the bankruptcy notice in New Zealand, 10 working days after service; or (b) if the debtor is served outside New Zealand, the time specified in the order of the court permitting service outside New Zealand. (5) In this section, a creditor who has obtained a final judgment or a final order includes a person who is for the time being entitled to enforce a final judgment or final order.

In this section, if a court has given permission for enforcing an arbitration (6) award that the debtor pay money to the creditor,— (a) final order includes the arbitration award; and (b) proceedings includes the arbitration proceedings in which the award was made. (7) In subsection (1)(d)(ii), cross claim means a counterclaim, set-off, or cross demand that— (a) is equal to, or greater than, the judgment debt or the amount that the debtor has been ordered to pay; and (b) the debtor could not use as a defence in the action or proceedings in which the judgment or the order, as the case may be, was obtained. Compare: 1967 No 54 s 19(1)(d), (2)

18 Disposition of property to trustee for benefit of creditors (1) A debtor commits an act of bankruptcy if, in New Zealand or elsewhere, the debtor disposes of all, or substantially all, of the debtor’s property to a trustee for the benefit of all or any of the debtor’s creditors. (2) This section is subject to section 41(3)(a). Compare: 1967 No 54 s 19(1)(a)

[page 181]

19 Fraud or intent to prefer a creditor A debtor commits an act of bankruptcy if the debtor takes any of the following steps fraudulently or with an intent to give any creditor an advantage over other creditors: (a) disposes of his or her property, or part of it: (b) creates a charge on his or her property or gives any security in it: (c) makes any payment:

(d) incurs any obligation. Compare: 1967 No 54 s 19(1)(b)

20 Departure from New Zealand A debtor commits an act of bankruptcy if the debtor takes any of the following steps with intent to defeat or delay his or her creditors: (a) departs, attempts to depart, or prepares to depart, from New Zealand: (b) if the debtor is already outside New Zealand, remains there. Compare: 1967 No 54 s 19(1)(c)

21 Avoidance of creditors A debtor commits an act of bankruptcy if the debtor, with intent to defeat or delay his or her creditors, avoids them by, for example, leaving or keeping away from the debtor’s home, or by staying within that home. Compare: 1967 No 54 s 19(1)(c)

22 Notice of suspension of debts A debtor commits an act of bankruptcy if the debtor notifies any of the debtor’s creditors that the debtor has suspended, or is about to suspend, payment of the debtor’s debts. Compare: 1967 No 54 s 19(1)(e)

23 Admission to creditors of insolvency (1) A debtor commits an act of bankruptcy if the debtor admits at a meeting of creditors that he or she is insolvent and— (a) a majority of the creditors present at the meeting requires the debtor to file an application for adjudication; or (b) the debtor agrees to file an application for adjudication and does not do so within 2 working days after the meeting. (2) In subsection (1)(a), majority means a majority by number of creditors present and the value of their combined debts.

Compare: 1967 No 54 s 19(1)(f)

24 Possession under execution process (1) A debtor commits an act of bankruptcy if— (a) an execution process has been issued against the debtor or property of the debtor; and (b) property of the debtor has been taken into possession under the execution process; and [page 182] (c) the judgment or order for which the execution process has been issued is not satisfied within 5 working days after possession has been taken. (2) In this section, execution process means— (a) a writ of sale; or (b) a writ of possession; or (c) a writ of arrest; or (d) a writ of sequestration. (3) The period of 5 working days in subsection (1)(c) is qualified if an interpleader application has been made in respect of the debtor’s property that has been taken into possession. In that case the period of 5 working days does not include the days that elapse between— (a) the date when the application is made; and (b) the date when the application is finally determined, withdrawn, abandoned, or otherwise resolved. Compare: 1967 No 54 s 19(1)(g)

25 Writ of sale (1) A debtor commits an act of bankruptcy if— (a) a writ of sale directed against any land of the debtor, or any interest in

that land, has been delivered to a sheriff; and (b) as part of the execution process, the land or interest has been advertised for sale in at least 1 newspaper published or circulating in the town or district in which the land is situated. (2) However, subsection (1) does not apply, and an act of bankruptcy is not committed, if the judgment or the order under which the writ of sale has been issued is satisfied within 5 working days after the writ of sale has been both delivered to the sheriff and advertised. Compare: 1967 No 54 s 19(1)(h)

26 Return that sufficient goods not found under execution process A debtor commits an act of bankruptcy if, under an execution process issued against the debtor or the debtor’s property, a return is made that sufficient goods and chattels of the debtor could not be found on which to levy the debt. Compare: 1967 No 54 s 19(1)(i)

27 Removal or concealment of property A debtor commits an act of bankruptcy if the debtor takes any of the following steps with intent to prejudice his or her creditors, or to give one creditor an advantage over another: (a) removes or attempts to remove any of the debtor’s property from any place: (b) conceals or attempts to conceal any of his or her property. Compare: 1967 No 54 s 19(1)(j)

28 Unsatisfied judgment for non-payment of trust money A debtor commits an act of bankruptcy if— (a) the debtor is required by law to keep a trust account; and

[page 183] (b) judgment has been given against the debtor for nonpayment of trust money; and (c) the judgment is not satisfied within 5 working days after the date of the judgment. Compare: 1967 No 54 s 19(1)(k)

Bankruptcy notice

29 Form of bankruptcy notice (1) The bankruptcy notice must— (a) be in the prescribed form; and (b) require the debtor, in relation to the judgment debt or the sum ordered to be paid under a final order,— (i)

to pay the amount owing, plus costs; or

(ii) to give security for the amount owing that satisfies the court or the creditor; or (iii) to compromise the amount owing on terms that satisfy the court or the creditor; and (c) state what are the consequences if the debtor does not comply with the notice; and (d) be served on the debtor in the prescribed manner. (2) The bankruptcy notice may name an agent to act on behalf of the creditor in so far as the notice requires— (a) any payment to be made to the creditor; or (b) any other step to be taken that involves the creditor. (3) In this section,— (a) creditor includes a person entitled to enforce a final judgment or final order; and (b) final order includes an arbitration award that the debtor pay money to

the creditor, if the court has given permission to enforce the award. Compare: 1967 No 54 ss 19(2), 20(a)

30 Effect of overstatement of amount owing (1) Overstatement in a bankruptcy notice of the amount owing by the debtor does not invalidate the notice, unless— (a) the debtor notifies the creditor that the debtor disputes the validity of the notice because it overstates the amount owing; and (b) the debtor makes that notification within the time specified in the notice for the debtor to comply with the notice. (2) A debtor complies with a notice that overstates the amount owing by— (a) taking steps that would have been compliance with the notice had it stated the correct amount owing (for example, by paying the creditor the correct amount owing plus costs); and (b) taking those steps within the time specified in the notice for the debtor to comply. Compare: 1967 No 54 s 20(b)

[page 184]

Effect on execution process of filing creditor’s application

31 Creditor’s execution process must not be issued or continued (1) A creditor who applies for a debtor to be adjudicated bankrupt must not issue an execution process against the debtor in respect of the debtor’s property or person to recover a debt on which the application is based. (2) If the creditor has already issued the execution process, the creditor must not continue it. (3) However, the creditor may apply to the court for permission to issue or continue the execution process, as the case may be.

Compare: 1967 No 54 s 24(1)

32 Execution processes by other creditors (1) After a creditor’s application for adjudication has been filed, the debtor or any creditor may apply to the court for an order halting the issue or continuance of an execution process against the debtor in respect of the debtor’s property or person by any other creditor. (2) On an application under subsection (1), the court may— (a) halt the execution process, on the terms and conditions (if any) that the court thinks appropriate; or (b) allow the execution process to continue, on the terms and conditions (if any) that the court thinks appropriate. Compare: 1967 No 54 s 24(2)

33 Execution process issued by another court (1) This section applies if an execution process has been issued out of a court (Court 1) other than the court (Court 2) where the application for adjudication was filed. (2) If it is proved to Court 1 that an application for the adjudication of the debtor has been filed in Court 2, Court 1 may— (a) halt the execution process, subject to the terms and conditions (if any) that Court 1 thinks appropriate; or (b) allow the execution process to continue, but on the terms and conditions (if any) that Court 1 thinks appropriate. Compare: 1967 No 54 s 24(2)

34 No restriction on execution process if application for adjudication withdrawn or dismissed The restrictions in sections 31 to 33 on issuing or continuing an execution process do not apply if the application for adjudication is withdrawn or dismissed. Compare: 1967 No 54 s 24(5)

35 Meaning of execution process In sections 31 to 34, execution process means any of the following: (a) issuing or proceeding with any of the following writs or warrants under a judgment or order obtained against the debtor in any court in its civil jurisdiction (except a judgment or order for possession of any land or [page 185]

building obtained on the ground that the debtor is a trespasser or that the debtor’s tenancy has expired): (i)

a writ or warrant for the possession, seizure, or sale of any property:

(ii) a writ of attachment: (b) obtaining a garnishee order in favour of a judgment creditor under rule 638 of the District Courts Rules 1992: (c) obtaining an order that a judgment creditor may sue a subdebtor under rule 639(2)(c) of the District Courts Rules 1992: (d) having an interim charging order made final under rule 17.59 of the High Court Rules: (e) beginning or continuing proceedings in any court for the appointment of a receiver of any property, except an application for the appointment of the Assignee as receiver and manager under section 50: (f)

exercising any power of re-entry under a lease, or any power terminating a lease:

(g) seizing or selling any property by way of distress for rent. Compare: 1967 No 54 s 24(4) Section 35(b): amended, on 3 December 2007, pursuant to rule 676 of the District Courts Rules 1992 (SR 1992/109). Section 35(c): amended, on 3 December 2007, pursuant to rule 676 of the District Courts Rules 1992 (SR 1992/109). Section 35(d): substituted, on 7 July 2010, by section 4 of the Insolvency Amendment Act 2010 (2010 No 69).

Court’s options when hearing creditor’s application

36 Court may adjudicate debtor bankrupt The court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in section 13. Compare: 1967 No 54 s 26(1)

37 Court may refuse adjudication The court may, at its discretion, refuse to adjudicate the debtor bankrupt if — (a) the applicant creditor has not established the requirements set out in section 13; or (b) the debtor is able to pay his or her debts; or (c) it is just and equitable that the court does not make an order of adjudication; or (d) for any other reason an order of adjudication should not be made. Compare: 1967 No 54 s 26(2)

38 Court may halt application (1) The court may at any time halt the creditor’s application for adjudication. (2) The court may halt the application on the terms and conditions (if any), and for the period, that the court thinks appropriate. Compare: 1967 No 54 s 26(7)

[page 186]

39 Orders if more than 1 application (1) If there is more than 1 application for adjudication, and 1 application has been halted by a court order, the court may, if there is a good reason, make an order of adjudication on the application that has not been halted.

(2) If the court makes an order of adjudication under subsection (1), the court must dismiss the application that has been halted, on the terms and conditions (if any) that the court thinks appropriate. Compare: 1967 No 54 s 26(6)

40 Orders if more than 1 debtor If a creditor’s application for adjudication relates to more than 1 debtor, the court may refuse adjudication of 1 or some of the debtors without affecting the application in relation to the remaining debtor or debtors. Compare: 1967 No 54 s 26(8)

41 Order that disposition or proposal not act of bankruptcy (1) This section applies if the debtor— (a) has made a disposition of all, or substantially all, of the debtor’s property to a trustee for the benefit of all or any of the debtor’s creditors; or (b) has made a proposal under Part 5; or (c) has applied for a summary instalment order under Part 5. (2) The debtor or the trustee or any creditor may apply for an order under this section. (3) On the application, the court may make any of the following orders: (a) order that the disposition or proposal is not an act of bankruptcy: (b) halt or refuse the application for adjudication: (c) order that any other application for adjudication must not be filed: (d) make any order as to costs that the court thinks appropriate: (e) if it orders that costs must be paid to the creditor who has applied for adjudication, order that the costs must be paid out of the debtor’s estate. (4) This section does not limit the powers of the court under section 37. Compare: 1967 No 54 s 26(3)

42 Halt or refusal of application when judgment under appeal (1) This section applies if the creditor’s application for adjudication relies on one of the following acts of bankruptcy: (a) the debtor failed to comply with a bankruptcy notice (see section 17): (b) a judgment against the debtor for non-payment of trust money is not satisfied within 5 working days after the date of the judgment (see section 28). (2) If the debtor has appealed against the judgment or order underlying the bankruptcy notice or the judgment for nonpayment of trust money, as the case may be, and the appeal is still to be decided, then the court may— (a) halt the creditor’s application for adjudication; or (b) refuse the application. Compare: 1967 No 54 s 26(4)

[page 187]

43 Court may halt application while underlying debt determined (1) This section applies if the debtor appears in opposition to a creditor’s application and the debtor says either— (a) that he or she does not owe a debt to the creditor; or (b) that he or she does owe a debt to the creditor, but the debt is less than $1,000. (2) The court may, instead of refusing the application, halt the application so that the question of whether the debt is owed, or how much of the debt is owed, can be resolved at a trial. (3) As a condition of halting the application, the court may require the debtor to give security to the creditor for any debt that may be established as owing by the debtor to the creditor, and for the costs of establishing the debt.

Compare: 1967 No 54 s 26(5)

44 Substitution of creditor (1) The court may substitute another creditor (Creditor 2) for the creditor making the application for adjudication (Creditor 1), if— (a) Creditor 1 has not proceeded with due diligence or at the hearing of the application offers no evidence; and (b) the debtor owes Creditor 2 $1,000 or more. (2) In that case, Creditor 2 must file another application for adjudication, but can rely on the act of bankruptcy to which Creditor 1’s application related. Compare: 1967 No 54 s 26(9)

Debtor’s application

45 When debtor may file application A debtor may file an application with the Assignee to have himself or herself adjudicated bankrupt if the debtor has combined debts of $1,000 or more.

46 Debtor must first file statement of affairs (1) A debtor may not file an application for adjudication unless the debtor has first filed with the Assignee a statement of the debtor’s affairs in the prescribed form. (2) The Assignee may reject a statement of affairs that in the Assignee’s opinion is incorrect or incomplete.

47 Debtor automatically adjudicated bankrupt (1) A debtor who files an application with the Assignee to have himself or herself adjudicated bankrupt is automatically adjudicated bankrupt when the application is filed. (2) That adjudication has the same consequences as if the debtor had been adjudicated bankrupt by the court. Compare: 1967 No 54 s 21

48 Debtors’ joint application (1) Two or more debtors who are partners in a business partnership may file a joint application. [page 188] (2) The debtors are automatically adjudicated bankrupt both separately and jointly when the application is filed. Compare: 1967 No 54 s 22

49 Steps for filing debtor’s application (1) To file an application for adjudication, a debtor must— (a) complete the prescribed application form; and (b) lodge it with the Assignee in accordance with the prescribed procedure. (2) The debtor files the application when it is endorsed by the Assignee as having been received.

Subpart 3—Appointment of receiver Power of court to appoint Assignee as receiver

50 Application for appointment of Assignee as receiver (1) After a creditor’s application for adjudication has been filed, a creditor of the debtor may apply to the court for an order appointing the Assignee as receiver and manager of all or part of the debtor’s property. (2) The court may make the order at any time before it makes an order of adjudication. (3) As part of the order, the court may authorise the Assignee to take all or any of the following steps: (a) take possession of any property: (b) sell any perishable property or property that is likely to fall rapidly in value: (c) control the debtor’s business or property as directed by the court. (4) An order for the Assignee’s control of the debtor’s business must be confined to what is necessary, in the court’s opinion, for conserving the debtor’s property. Compare: 1967 No 54 s 27

51 Additional orders after receiver’s appointment After the appointment of the Assignee as receiver and manager, the court may, on an application by a creditor or the Assignee, make additional orders under section 50. Compare: 1967 No 54 s 27(2)

52 Appointment of Assignee as receiver and manager must be advertised The appointment of the Assignee as receiver and manager of the debtor’s

property must be advertised in accordance with regulations made under this Act for that purpose.

53 Execution process halted (1) A creditor of the debtor must not issue an execution process of the kind referred to in section 35 after the appointment of the Assignee as receiver and manager has been advertised. (2) A creditor must not continue an execution process already issued before the advertisement. [page 189] (3) However, a creditor or any other person interested may apply to the court for an order allowing the issue or continuation of an execution process, and the court may make an order on the terms and conditions that it thinks appropriate. Compare: 1967 No 54 s 27(3)

54 Effect when execution process halted If the execution process is halted under section 53, then sections 77, 108 to 112, and 115 apply as if the order halting the execution process were an adjudication. Compare: 1967 No 54 s 24(3)

Subpart 4—Adjudication Adjudication

55 Bankruptcy commences on adjudication The bankruptcy commences on the date and at the time when the debtor is adjudicated bankrupt.

56 Date of adjudication In this Act, date of adjudication means,— (a) if the debtor is adjudicated bankrupt on a creditor’s application, the date and time when the court made the order of adjudication; or (b) if the debtor is adjudicated bankrupt on the debtor’s application, the date and time when the debtor filed the application (see section 49(2)). Compare: 1967 No 54 s 28

57 Date and time of adjudication must be recorded (1) If the debtor is adjudicated bankrupt on a creditor’s application, the court must record the date and time when the order was made. (2) If the debtor is adjudicated bankrupt on the debtor’s application, the Assignee must record on the application the date and time when the debtor filed the application. Compare: 1967 No 54 s 28A

58 Registrar must notify Assignee of adjudication by court The Registrar must notify the Official Assignee as soon as possible after the court makes an order of adjudication.

59 Official Assignee must nominate Assignee The Official Assignee must nominate an Assignee to be the Assignee of the

debtor’s property, and may at any time direct that another Assignee is the Assignee of the debtor’s property.

60 Presumption that act or transaction entered into or effected after adjudication (1) This section applies if there is doubt whether an act was done, or a transaction entered into or effected, before or after the date of adjudication. [page 190] (2) The presumption is that the act was done, or the transaction entered into or effected, after the date of adjudication, but the presumption does not apply if the contrary is proved.

61 Adjudication final and binding Unless an adjudication is appealed under this Act,— (a) no one can later assert that the adjudication was not valid or that a prerequisite for adjudication was absent; and (b) the adjudication is binding on all persons. Compare: 1967 No 54 s 30

62 Public register of discharged and undischarged bankrupts (1) The Assignee must maintain a public register of discharged and undischarged bankrupts. (2) The register must be maintained in accordance with subpart 5 of Part 7.

Subpart 5—What happens on adjudication

63 Debtor adjudicated bankrupt called the bankrupt In this Act, a debtor who has been adjudicated bankrupt is called the bankrupt.

64 Outline of what happens on adjudication (1) On adjudication— (a) the Assignee must advertise the adjudication; and (b) the bankrupt must file with the Assignee a statement of his or her affairs, if the bankrupt has not already done so; and (c) the Assignee may call a meeting of the bankrupt’s creditors; and (d) proceedings to recover certain debts must be halted; and (e) the property of the bankrupt vests in the Assignee. (2) This section is a guide only to the immediate consequences of adjudication.

Assignee must advertise adjudication

65 Assignee must advertise adjudication (1) The Assignee must advertise the adjudication of the bankrupt as soon as practicable after it has occurred. (2) The Assignee must advertise the adjudication in the prescribed manner. (3) Subsection (1) is subject to section 66. Compare: 1967 No 54 s 31

66 Order that Assignee must not advertise pending appeal or application for annulment The court may order that the Assignee must not advertise the adjudication if the bankrupt has appealed against an order of adjudication or if the bankrupt has applied for an annulment of the adjudication.

[page 191]

Bankrupt’s statement of affairs

67 Bankrupt must file statement of affairs with Assignee After adjudication, the bankrupt must file with the Assignee a statement of the bankrupt’s affairs in the prescribed form, unless the bankrupt has already filed a statement under section 46. Compare: 1967 No 54 s 33

68 Notice that bankrupt must file statement of affairs (1) As soon as practicable after adjudication, the Assignee must send the bankrupt a notice in the prescribed form stating— (a) that the bankrupt has been adjudicated bankrupt; and (b) that the bankrupt must file a statement of the bankrupt’s affairs in the prescribed form; and (c) the time when the statement must be filed. (2) The Assignee must send the notice to the address of the bankrupt given in the application for adjudication or the bankrupt’s last known address. (3) This section does not apply if the bankrupt has already filed a statement under section 46. Compare: 1967 No 54 s 33(1)

69 Time for filing statement of affairs The bankrupt must file a statement of the bankrupt’s affairs in the prescribed form with the Assignee within 10 working days after receiving the Assignee’s notice under section 68(1) that the statement must be filed.

70 Bankrupt may file additional or amended statements or answers

At any time after filing a statement of affairs with the Assignee under section 46 or 67, the bankrupt may file additional or amended statements or answers.

Assignee must call meeting of creditors

71 Assignee must call meeting of creditors (1) After adjudication, the Assignee must call the first meeting of the bankrupt’s creditors, unless the Assignee dispenses with the meeting under section 73. (2) The Assignee may call the meeting by giving notice of the time and place of the meeting to— (a) the bankrupt; and (b) each creditor named in the bankrupt’s statement of affairs; and (c) any other creditors known to the Assignee. (3) The Assignee must advertise the time and place of the meeting in the prescribed manner. Compare: 1967 No 54 s 34(1), (2)

72 Time when meeting must be held (1) The first creditors’ meeting must be held— (a) within 25 working days after the bankrupt files the bankrupt’s statement of affairs; or (b) if the bankrupt is late in filing the statement or does not file a statement at all, at the latest within 25 working days after adjudication. [page 192] (2) However, the Assignee may delay calling the first creditors’ meeting if the Assignee considers that there are special circumstances that justify the delay. Compare: 1967 No 54 s 34(1)

73 Assignee may dispense with first creditors’ meeting (1) The Assignee need not call a first creditors’ meeting if the Assignee— (a) decides that the meeting should not be called; and (b) sends each creditor named in the bankrupt’s statement of affairs, and any other creditor known to the Assignee, a notice that complies with section 74; and (c) does not receive, within 10 working days after the Assignee’s notice was sent, written notice from a creditor requiring the Assignee to call the meeting. (2) In deciding whether the meeting should not be called, the Assignee must consider— (a) the bankrupt’s assets and liabilities; and (b) the likely result of the bankruptcy; and (c) any other relevant matters. Compare: 1967 No 54 s 34A

74 Notice that first creditors’ meeting should not be called The Assignee’s notice to creditors under section 73(1)(b) must— (a) state that the Assignee considers that the first creditors’ meeting should not be called; and (b) give the reasons for not calling the meeting; and (c) state that the Assignee will not call the meeting unless a creditor gives the Assignee written notice, within 10 working days after the Assignee’s notice was sent, requiring the Assignee to call the meeting. Compare: 1967 No 54 s 34A

75 Documents to be sent with notice of meeting (1) The Assignee must send the following documents with the notice of the

first creditors’ meeting: (a) a summary of the bankrupt’s statement of assets and liabilities; and (b) extracts from, or a summary of, the bankrupt’s explanation of the causes of the bankruptcy; and (c) any comments on the bankruptcy that the Assignee chooses to make. (2) However, subsection (1) does not apply if the Assignee has not received the bankrupt’s statement of affairs when the notice is sent. (3) A failure in sending or receiving the documents in subsection (1) does not affect the validity of the proceedings at the meeting. Compare: 1967 No 54 s 35

Court proceedings are halted

76 Effect of adjudication on court proceedings (1) On adjudication, all proceedings to recover any debt provable in the bankruptcy are halted. [page 193] (2) However, on the application by any creditor or other person interested in the bankruptcy, the court may allow proceedings that had already begun before the date of adjudication to continue on the terms and conditions that the court thinks appropriate. Compare: 1967 No 54 s 32

Execution process

77 Execution process must not be begun or continued after adjudication advertised (1) A creditor must not begin or continue an execution, attachment, or other process in respect of the bankrupt’s property or person, for the recovery of a debt provable in the bankruptcy, after— (a) the Assignee has advertised the bankrupt’s adjudication; or

(b) the Assignee has given notice of the adjudication to the creditor. (2) After advertisement of the adjudication or notice by the Assignee to the creditor, a creditor must not seize or sell any property by way of distress for rent due and owing by the bankrupt, but the creditor may continue with the distress procedure if already begun. Compare: 1967 No 54 s 50(5)

Bankrupt’s death

78 Effect of bankrupt’s death after adjudication If the bankrupt dies after adjudication, the bankruptcy continues in all respects as if the bankrupt were alive. Compare: 1967 No 54 s 137

Subpart 6—Role of creditors

79 Overview of creditors’ role in bankruptcy The role of the creditors in the bankruptcy is primarily to— (a) attend meetings of the creditors; and (b) submit proofs of the debts of the bankrupt.

Creditors’ meetings

80 Types of creditors’ meetings (1) There are 2 types of creditors’ meetings: (a) the first creditors’ meeting; and (b) subsequent meetings. (2) The rules for calling the first creditors’ meeting are set out in sections 71 to 75.

81 Subsequent meetings (1) The Assignee may call subsequent meetings of creditors. (2) The Assignee must call a subsequent meeting if required to do so by onequarter in number and value of the creditors who have proved their debts. [page 194] (3) The Assignee must call the meeting by taking the steps set out in section 71(2) and (3). Compare: 1967 No 54 s 36

82 Meeting and resolution not defective for lack of notice A creditors’ meeting, and the resolutions passed at the meeting, are valid

even if some creditors did not receive the notice of the meeting, unless a court orders otherwise. Compare: 1967 No 54 s 40(6)

Conduct of creditors’ meetings

83 Chairperson (1) The chairperson of a creditors’ meeting is the Assignee or a person appointed by the Assignee to be the chairperson. (2) However, if neither the Assignee nor the person (if any) appointed by the Assignee to be the chairperson attends the meeting, the creditor or creditors may elect one of themselves to act as chairperson for the purpose of the meeting, but only if that person is entitled to vote at the meeting. (3) A person appointed by the Assignee or elected by the creditors to act as chairperson may administer any oath that the Assignee could have administered if the Assignee had attended the meeting. Compare: 1967 No 54 s 37(1)

84 Chairperson may adjourn meeting The Assignee or the chairperson of a meeting may adjourn the meeting from time to time and place to place. Compare: 1967 No 54 s 37(3)

85 Assignee must report to meeting If the Assignee attends a creditors’ meeting or an adjournment of the meeting, the Assignee— (a) must report on the administration of the bankrupt’s estate; and (b) must give any creditor any further information that the creditor may properly require; and (c) must, if reasonably required, produce for the meeting (or its adjournment) all accounting records, deeds, and papers in the Assignee’s possession that relate to the bankrupt’s property. Compare: 1967 No 54 s 37(4)

86 Attending creditors’ meeting (1) A person may attend a creditors’ meeting— (a) by being physically present at the time and place appointed for the meeting; or (b) if the Assignee makes it available, by means of an audio or audiovisual link, so that all those participating in the meeting can hear and be heard by each other. [page 195] (2) A creditor may also attend by voting by postal or electronic vote under section 93 or by proxy on any resolution to be put to the meeting.

87 Bankrupt may be required to attend and be questioned (1) The bankrupt must, if required by the Assignee, attend all creditors’ meetings by being physically present or present by an audio or audio-visual link. (2) The Assignee, the chairperson of a creditors’ meeting, a creditor, or a representative of a creditor may question the bankrupt as to his or her property, conduct, or dealings. The chairperson of the meeting must allow only questions that relate to the bankrupt’s property, conduct, or dealings. (3) The questioning may be on oath. (4) The bankrupt must sign a statement of the bankrupt’s evidence given under the questioning, if required to do so by the Assignee or the chairperson of the meeting. Compare: 1967 No 54 s 37(2)

88 Attendance by non-creditors A person who is not a creditor of the bankrupt may attend a creditors’ meeting with the consent of—

(a) the Assignee; or (b) the creditors attending the meeting, voting by ordinary resolution. Compare: 1967 No 54 s 37(5)

89 Minutes and record of meeting (1) The Assignee must ensure that minutes are kept of every creditors’ meeting. (2) The Assignee or the chairperson must sign the minutes. (3) The Assignee may record the meeting, but only with the consent of each person attending the meeting. Compare: 1967 No 54 s 37(6)

90 Number of persons for valid meeting (1) For a valid creditors’ meeting, at least the following persons must attend: (a) the Assignee or a person who represents the Assignee; and (b) a creditor or a person who represents a creditor. (2) The meeting lapses if those persons do not attend, and the Assignee may call another meeting. Compare: 1967 No 54 s 38

91 Who may represent creditor or bankrupt (1) At a creditors’ meeting, any of the following persons may represent a creditor and, if the bankrupt attends, any of the following persons except the person in paragraph (d) may represent the bankrupt: (a) a lawyer: (b) an accountant: (c) a person who keeps the creditor’s or bankrupt’s accounts: (d) in the case of a creditor, a person who is the creditor’s authorised agent under a power of attorney: [page 196]

(e) a person who satisfies the Assignee that he or she represents the creditor or bankrupt: (f)

in the case of a partnership, a partner.

(2) In addition to the persons listed in subsection (1), a creditor may be represented,— (a) in the case of the Crown, by any officer of the appropriate government department: (b) in the case of a public body, by an officer of that body: (c) in the case of a company, by a director, or its general manager or accountant, or by a person authorised in writing by one of those persons. Compare: 1967 No 54 s 39

92 Voting at meetings (1) For a creditors’ meeting to pass— (a) an ordinary resolution, a majority in number and value of the creditors (or their representatives) who attend and who vote on the resolution must vote in favour of it: (b) a special resolution, three-quarters in number and value of the creditors (or their representatives) who attend and who vote on the resolution must vote in favour of it. (2) For the purposes only of determining whether the requisite majority by value has voted in favour of a resolution,— (a) the Assignee may admit or reject proofs of debt; and (b) the Assignee may adjourn the meeting in order to admit or reject proofs of debt; and (c) a person whose debt has been admitted is a creditor. Compare: 1967 No 54 s 40(1)

93 Postal and electronic votes (1) A creditor who is entitled to vote at a creditors’ meeting may vote on a

resolution to be put to the meeting— (a) by postal vote; or (b) by electronic vote, if the voting paper for the resolution allows it, in accordance with the procedure specified in the voting paper. (2) A postal or electronic vote must reach the Assignee at least 2 working days before the meeting begins if it is to be counted at the meeting. (3) A voting paper for each resolution to be put to a creditors’ meeting must accompany the notice of the meeting, together with instructions for returning the voting paper or electronic vote (if allowed by the voting paper under section 93(1)(b)) to the Assignee at least 2 working days before the meeting begins.

94 Who may vote at creditors’ meeting Creditors of the bankrupt who are entitled to vote, or their representatives, may vote at a creditors’ meeting, but this rule is qualified by the provisions of sections 95 to 97.

95 When secured creditor may vote A debt that is secured does not entitle the creditor to vote unless the creditor has taken one of the following steps under this Act: (a) surrendered the charge; or [page 197] (b) valued the charge; or (c) realised the charge. Compare: 1967 No 54 s 40(2)

96 When creditor under bill of exchange or promissory note may vote (1) A debt on, or secured by, a current bill of exchange or promissory note does

not entitle the creditor to vote unless the creditor is willing to take the following steps: (a) treat a qualifying liability (which is defined in subsection (2)) as a charge in the creditor’s hands; and (b) estimate the value of the charge; and (c) deduct the value of the charge from the creditor’s claim for the purposes of voting (but not for the purposes of distribution under subpart 10 of Part 3); and (d) show the bill or note to the Assignee when the Assignee requires it. (2) In this section, qualifying liability means the liability to the creditor on the bill or note of every person who— (a) is liable on the bill or note antecedently to the debtor; and (b) is not a bankrupt. Compare: 1967 No 54 s 40(3)

97 Person disqualified from voting through preferential effect (1) A person (A) must not vote in favour of a resolution that would directly or indirectly enable any of the persons listed in subsection (2) to receive any remuneration out of the bankrupt’s estate other than as a creditor sharing rateably with the other creditors. (2) The persons referred to in subsection (1) are— (a) A: (b) A’s business partner, employer, or employee: (c) a creditor that A represents: (d) the business partner, employer, or employee of a creditor that A represents. Compare: 1967 No 54 s 40(4)

98 Creditor of partner

The adjudication of a partner in a firm who is indebted to a creditor jointly with 1 or more of his or her partners entitles the creditor to prove the debt for the purpose of voting at any creditors’ meeting, and to vote. Compare: 1967 No 54 s 40(5)

99 Creditors may appoint expert or committee to assist Assignee (1) A creditors’ meeting may pass an ordinary resolution— (a) appointing an expert to assist the Assignee in the administration of the bankrupt’s estate; and (b) providing for the expert’s remuneration out of the estate. (2) A creditors’ meeting may pass an ordinary resolution appointing a committee of any persons to assist the Assignee in the administration of the bankrupt’s estate, but in that case the court must approve any remuneration of the members of the committee out of the estate. Compare: 1967 No 54 s 41(1), (2)

[page 198]

Documents

100 Creditor’s right to inspect documents A creditor, or a lawyer or accountant acting for that creditor, who has lodged a creditor’s claim form may at any reasonable time inspect and take extracts or copies of— (a) the bankrupt’s accounting records: (b) the bankrupt’s answers to questions under section 87: (c) the bankrupt’s statement of affairs: (d) all proofs of debt: (e) the minutes of any creditors’ meeting. Compare: 1967 No 54 s 131

Part 3 Dealing with Bankrupt and Bankrupt’s Property

Subpart 1—Status of bankrupt’s property General

101 Status of bankrupt’s property on adjudication (1) On adjudication,— (a) all property (whether in or outside New Zealand) belonging to the bankrupt or vested in the bankrupt vests in the Assignee without the Assignee having to intervene or take any other step in relation to the property, and any rights of the bankrupt in the property are extinguished; and (b) the powers that the bankrupt could have exercised in, over, or in respect of any property (whether in or outside New Zealand) for the bankrupt’s own benefit vest in the Assignee. (2) This section is subject to section 104. Compare: 1967 No 54 s 42(1), (2)

102 Status of property acquired during bankruptcy (1) Between the commencement of bankruptcy and discharge of the bankrupt, — (a) all property (whether in or outside New Zealand) that the bankrupt acquires or that passes to the bankrupt vests in the Assignee without the Assignee having to intervene or take any other step in relation to the property, and any rights of the bankrupt in the property are extinguished; and (b) the powers that the bankrupt could have exercised in, over, or in respect of that property for the bankrupt’s own benefit vest in the Assignee. (2) This section is subject to section 104 and section 123. (3) This section does not apply to property that is vested in the bankrupt under an order made under section 119(3). Compare: 1967 No 54 s 42(2)

103 Property vests in replacement Assignee If the Assignee is replaced, the property and powers vested in the former Assignee under section 101 or 102 vest in the replacement Assignee. Compare: 1967 No 54 s 42(1)

[page 199]

104 Property held in trust by bankrupt Property held by the bankrupt in trust for another person does not vest in the Assignee. Compare: 1967 No 54 s 42(3)

105 Effect of other laws (1) Nothing in the Land Transfer Act 1952 restricts the operation of sections 101 to 104. (2) Sections 101 to 104 do not affect the operation of any other law that prevents any property from vesting in the Assignee. Compare: 1967 No 54 s 42(5)

106 Court may order that money due to bankrupt is assigned to Assignee (1) The court may, on the application of the Assignee, order that any money due to the bankrupt, or any money to become due or payable to the bankrupt, is assigned or charged to, or in favour of, the Assignee. (2) The assignment or charge is a discharge to the person who pays the Assignee. Compare: 1967 No 54 s 45A

107 Application of section 274 to payments by bankrupt or assignments by court The Assignee must apply the following payments in accordance with section 274: (a) any amount paid by the bankrupt under section 147: (b) any amount paid to the Assignee under an order made under section 106. Compare: 1967 No 54 s 45B

Bankrupt’s property subject to execution process

108 When execution creditor may retain execution proceeds (1) This section applies to a creditor who has, before adjudication,— (a) issued execution against the bankrupt’s property; or (b) attached a debt due by the bankrupt. (2) The creditor may retain the benefit of the execution or attachment (including the proceeds) only if the creditor completed the execution or attachment— (a) before adjudication; and (b) before the creditor had notice that an application for adjudication had been filed or that the bankrupt had committed an act of bankruptcy (other than an act of bankruptcy arising out of the creditor’s execution or attachment). (3) The creditor may retain as against the Assignee a payment made by the bankrupt in the course of the execution or attachment to avoid the execution or attachment as if— (a) the payment was the proceeds of the execution or attachment; and (b) the execution or attachment was completed when the payment was made.

[page 200] (4) The right of a creditor under this section to retain the benefit of an execution or attachment is subject to sections 194 to 197. Compare: 1967 No 54 s 50(1), (2), (6)

109 Effect of notice to sheriff of adjudication (1) This section applies if the sheriff has taken the property of a debtor in execution and is served with notice of the debtor’s adjudication before the property is sold or before the execution is completed by the receipt or recovery of the full amount of the levy of execution. (2) If the Assignee requires it, the sheriff must deliver to the Assignee any goods and money seized or received in part satisfaction of the execution. (3) The costs of the execution are a first charge on the goods or money delivered to the Assignee, and the Assignee may sell the goods or part of the goods to satisfy the charge. Compare: 1967 No 54 s 50(3)

110 Sheriff must retain proceeds of execution for 10 working days (1) This section applies if, under execution of a judgment for a sum of more than $100, the sheriff sells property of the debtor or is paid money in order to avoid a sale. (2) The sheriff must deduct the costs of the execution from the proceeds of sale or the money paid and retain the balance for 10 working days (which in this section is called the 10-day period), to be applied in accordance with subsection (3) or subsection (4). (3) If the sheriff is served with notice within the 10-day period that the debtor has filed an application for adjudication, the sheriff must pay the balance to the Assignee, who is entitled to retain it as against the execution creditor. (4) If the sheriff is served with notice within the 10-day period that a creditor has filed an application for the adjudication of the debtor, subject to subsection (3),—

(a) the sheriff must retain the balance until the application (and any other application of which notice is served on the sheriff pending disposal of the first application) has been disposed of; and (b) the sheriff must,— (i)

if adjudication results, pay the balance to the Assignee; or

(ii) if adjudication does not result, pay the balance to the execution creditor, who is entitled to retain it as against the Assignee (subject to section 112). (5) If the sheriff is not served with notice within the 10-day period that an application for the adjudication of the debtor has been filed, the sheriff must pay the balance to the execution creditor, who is entitled to retain it as against the Assignee. Compare: 1967 No 54 s 50(4)

111 Purchaser under sale by sheriff acquires good title A purchaser in good faith of a debtor’s property, on which execution has been levied and which is sold by the sheriff, acquires a good title to the property as against the Assignee. Compare: 1967 No 54 s 50(7)

[page 201]

112 Court may set aside rights conferred on Assignee The court may set aside the rights conferred on the Assignee under sections 109 and 110 in favour of the execution creditor, to the extent and on the terms and conditions (if any) that the court thinks appropriate. Compare: 1967 No 54 s 50(8)

Validity of property transactions with bankrupt

113 Transaction in good faith and for value after

adjudication (1) This section applies to a transaction between a person (A) and the bankrupt in relation to property that the bankrupt has acquired, or that has passed to the bankrupt, after adjudication. (2) The transaction is valid as against the Assignee if— (a) A deals with the bankrupt in good faith and for value; and (b) the transaction is completed without an intervention by the Assignee. (3) If A is the bankrupt’s bank, a transaction by A dealing with the bankrupt for value includes— (a) the receipt by A of any money, charge, or negotiable instrument from the bankrupt or by the bankrupt’s order or direction; and (b) a payment by A to the bankrupt or by the bankrupt’s order or direction; and (c) the delivery by A of a charge or negotiable instrument to the bankrupt or by the bankrupt’s order or direction. (4) A payment of money or delivery of property by a legal personal representative to, or by the direction of, the bankrupt is a transaction for value. Compare: 1967 No 54 s 49(1)(a), (3), (4)

114 Executions and attachments in good faith (1) This section applies to property that the bankrupt has acquired, or that has passed to the bankrupt, after adjudication. (2) An execution or attachment against the property is valid as against the Assignee if it is— (a) in good faith; and (b) in respect of a debt or liability incurred by the bankrupt after adjudication; and (c) completed before an intervention by the Assignee. Compare: 1967 No 54 s 49(1)(b)

115 When execution or attachment completed for purposes of section 108 or 114 For the purposes of section 108 or 114— (a) an execution against goods is completed by seizure and sale: (b) an attachment of a debt is completed by receipt of the debt: (c) an execution against land is completed by sale or, in the case of an equitable interest, by the appointment of a receiver. Compare: 1967 No 54 s 50(2)

[page 202]

116 Assignee’s interest in property passes (1) This section applies to the Assignee’s interest in property that is acquired by or passes to the bankrupt after adjudication. (2) The Assignee’s interest in property to which this section applies ends and passes in the manner and to the extent necessary to give effect to a transaction, execution, or attachment to which section 113 or 114 applies. Compare: 1967 No 54 s 49(2)

Disclaimer of onerous property

117 Assignee may disclaim onerous property (1) Subject to section 120, the Assignee may disclaim onerous property. (2) Subsection (1) applies even if the Assignee has taken possession of the property, tried to sell it, or otherwise exercised rights of ownership in relation to it. (3) The Assignee must, within 10 working days after the disclaimer, send a written notice of the disclaimer to every person whose rights are, to the Assignee’s knowledge, affected by it. (4) For the purposes of this section and section 120, onerous property—

(a) means— (i)

an unprofitable contract; or

(ii) property of the bankrupt that is unsaleable, or not readily saleable, or that may give rise to a liability to pay money or perform an onerous act; or (iii) a litigation right that, in the opinion of the Assignee, has no reasonable prospect of success or cannot reasonably be funded from the assets of the bankrupt’s estate; but (b) does not include— (i)

a netting agreement to which sections 255 to 263 apply; or

(ii) any contract of the bankrupt that constitutes a transaction under that netting agreement. Compare: 1993 No 105 s 269(1), (2), (4)

118 Effect of disclaimer A disclaimer by the Assignee— (a) brings to an end, on and from the date of the disclaimer, the rights, interests, and liabilities of the Assignee and the bankrupt in relation to the property disclaimed: (b) does not affect the rights, interests, or liabilities of any other person, except in so far as is necessary to release the Assignee or the bankrupt from a liability. Compare: 1993 No 105 s 269(3)

119 Position of person who suffers loss as result of disclaimer (1) A person suffering loss or damage as a result of disclaimer by the Assignee may— [page 203]

(a) claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the court under paragraph (b): (b) apply to the court for an order that the disclaimed property be delivered to, or vested in, that person. (2) The bankrupt may also apply for an order that the disclaimed property be delivered to, or vested in, the bankrupt. (3) The court may make an order under subsection (1)(b) or (2) if it is satisfied that it is fair that the property should be delivered to, or vested in, the applicant. Compare: 1993 No 105 s 269(5), (6)

120 Assignee may be required to elect whether to disclaim The Assignee loses the right to disclaim if— (a) a person whose rights would be affected by the disclaimer has sent the Assignee a written notice requiring the Assignee to elect whether to disclaim the onerous property in question; and (b) the notice specifies a date to disclaim that is not less than 20 working days after the Assignee has received the notice; and (c) the Assignee does not disclaim the onerous property before the close of that date. Compare: 1993 No 105 s 270

121 Liability for rentcharge on bankrupt’s land after disclaimer (1) The vesting of land subject to a rentcharge after disclaimer by the Assignee in the Crown, any other person, or their successors in title does not make any of those persons personally liable for the rentcharge. (2) However, this section does not affect the liability of a person in subsection (1) for rentcharge accruing after that person has taken possession or control of the land or has entered into possession of it.

Compare: 1967 No 54 s 79

Land subject to mortgage

122 Transmission of interest in land (1) This section applies to an interest in land that— (a) is owned by the bankrupt; and (b) is subject to a mortgage or a charge; and (c) is not disclaimed by the Assignee. (2) The Assignee must— (a) register, under the Land Transfer Act 1952, the transmission of the interest in the land to the Assignee; or (b) give notice to the mortgagee or other person entitled under the charge that the Assignee cannot, or does not intend to, register transmission of the interest in the land. (3) Notice under subsection (2)(b) is notice that the interest has vested in the Assignee, and the mortgagee or person entitled under the charge is, in the event [page 204]

of entering into possession or selling, liable to account to the Assignee as if the Assignee were the registered proprietor of the interest.

Compare: 1967 No 54 s 80(1), (2)

123 Assignee cannot claim interest in land if bankrupt remains in possession until discharge (1) The Assignee cannot, after the bankrupt’s discharge, claim an interest in land to which section 122(1) applies and for which the Assignee has not registered a transmission if the bankrupt— (a) was in possession of the interest at the time of adjudication; and (b) remained in possession until discharge from bankruptcy.

(2) Subsection (1) applies whether or not the Assignee gave a notice under section 122(2)(b). (3) However, the Assignee may apply to the court for an order that the Assignee is entitled, after discharge, to claim the bankrupt’s interest in the land, and the court must have regard to— (a) the good faith of the bankrupt; and (b) the time that has elapsed since adjudication; and (c) the value of any improvements made by the bankrupt; and (d) all other relevant matters. Compare: 1967 No 54 s 80(3)

Shares and other securities

124 Assignee may transfer shares and other securities (1) The Assignee may transfer the following property belonging to the bankrupt in the same way as the bankrupt could have transferred it if the bankrupt had not been adjudicated bankrupt: (a) securities in a company: (b) securities of the New Zealand Government: (c) securities issued by a local authority: (d) shares in ships: (e) any other property transferable in the records of a company, office, or person. (2) A person whose act or consent is necessary for the transfer of the property must, on the Assignee’s request, do whatever is necessary for the transfer to be completed. (3) In the case of the transfer by the Assignee of securities in a company, a shareholder to whom the securities must be offered for sale under the constitution and who agrees to purchase must pay a reasonable price for the securities, whether or not the constitution provides a procedure for fixing the price. Compare: 1967 No 54 s 74(1), (2), (3)

125 Assignee may disclaim liability under shares The Assignee may disclaim any liability under shares owned by the bankrupt in any company by disclaiming the shares as onerous property under section 117, but section 119 (which relates to the position of a person who [page 205] suffers loss as result of disclaimer) and section 120 (which provides that the Assignee may be required to elect whether to disclaim) do not apply to a disclaimer of liability under shares. Compare: 1967 No 54 s 78(1)

126 Assignee may be required to elect whether to disclaim liability under shares The Assignee loses the right to disclaim liability under shares if— (a) the company or a person who has an interest in the shares has sent the Assignee a written notice requiring the Assignee to elect whether to disclaim liability under the shares; and (b) the notice specifies a date to disclaim that is not less than 20 working days after the Assignee has received the notice; and (c) the Assignee does not disclaim liability under the shares before the close of that date. Compare: 1967 No 54 s 78(3)

127 Transfer of shares after disclaimer (1) After disclaimer, the Assignee may, subject to the rules of any other Act and to the constitution of the company, transfer the shares in question to any person who has an interest in them. (2) If that person refuses to accept the transfer or if no person has an interest in them, the Assignee may transfer the shares to the bankrupt if the bankrupt

consents, and in that case the bankrupt is entitled as against the Assignee to retain the shares and the proceeds if the bankrupt sells them. (3) If the Assignee does not transfer the shares to a person who has an interest in them or to the bankrupt, the board of the company may— (a) sell the shares; or (b) with the court’s approval and whatever any other Act may say, cancel the shares as it thinks appropriate. (4) The Assignee is a director of the company for the purposes of transferring, selling, or cancelling the shares under this section if— (a) immediately before adjudication the bankrupt was a director of the company; and (b) the number of directors is less than the minimum number of directors required by law or the company’s constitution as a result of the bankrupt’s disqualification as a director. Compare: 1967 No 54 s 78(4), (5), (6)

128 Company may prove for unpaid calls (1) This section applies if the Assignee has disclaimed liability under shares and the company has not been put into liquidation. (2) The company may prove in the bankruptcy for— (a) the amount of unpaid calls made before adjudication in respect of the bankrupt’s shares; and (b) the value of calls to be made in respect of the bankrupt’s shares within 1 year after adjudication. [page 206] (3) The court must determine the value of the calls to be made if the Assignee and the company cannot agree. Compare: 1967 No 54 s 78(7)

Consumer goods on hire purchase

129 Meaning of hire purchase terms used in this subpart In sections 130 to 133,— cash price, consumer goods, creditor, debtor, and post-possession notice have the same meanings as in section 2(1) of the Credit (Repossession) Act 1997 hire purchase agreement has the same meaning as in section 2(1) of the Administration Act 1969 (except that an agreement made otherwise than at retail is not a hire purchase agreement for the purposes of this Act) purchaser means the person to whom consumer goods are disposed of under a hire purchase agreement, and, if the rights of that person are transferred by assignment or by operation of law, includes the person for the time being entitled to those rights. Compare: 1967 No 54 s 91(1)

130 Restrictions on creditor dealing with consumer goods (1) This section applies if— (a) the bankrupt purchased consumer goods under a hire purchase agreement before adjudication; and (b) the creditor either— (i)

took possession of the goods within 21 days before adjudication, and after adjudication still possesses them; or

(ii) takes possession of the goods after adjudication. (2) The creditor must not sell or dispose of the consumer goods or part with possession of them (except for storage or repair) until 1 month after the date when the creditor serves a postpossession notice on the Assignee (which in this section and section 131 is called the 1-month period). (3) However, subsection (2) does not apply if the Assignee consents in writing to the creditor selling or disposing of or parting with possession of the consumer goods before the expiry of the 1-month period.

Compare: 1967 No 54 s 91(2), (3)

131 Assignee’s powers in relation to hire-purchase consumer goods (1) The Assignee may,— (a) within the 1-month period, exercise the right under section 30 of the Credit (Repossession) Act 1997 to introduce a buyer for consumer goods; or (b) at any time before the creditor sells or agrees to sell consumer goods under section 25 of the Credit (Repossession) Act 1997, settle the bankrupt’s obligations as debtor in accordance with section 31 of that Act. (2) This section applies no matter what the Credit (Repossession) Act 1997 says. Compare: 1967 No 54 s 91(4)

[page 207]

132 Creditor in possession of consumer goods may prove in bankruptcy if Assignee has not exercised powers (1) This section applies if— (a) a creditor has taken possession of consumer goods purchased under a hire purchase agreement, whether before or after the adjudication of the debtor; and (b) the Assignee has not acted under section 131 in relation to the goods. (2) The creditor may prove in the bankruptcy for the amount (which is subject to the limit in section 35 of the Credit (Repossession) Act 1997) that the creditor was entitled to recover from the bankrupt as debtor. (3) If the creditor does prove in the bankruptcy under subsection (2),—

the creditor must submit the following documents with the creditor’s (a) claim form: (i)

the relevant post-possession notice; and

(ii) the statement of account mentioned in section 33 of the Credit (Repossession) Act 1997; and (b) the Assignee has the rights conferred on a debtor by sections 20 to 36 of the Credit (Repossession) Act 1997. Compare: 1967 No 54 s 91(5)

133 Creditor may assign consumer goods to Assignee (1) This section applies if— (a) the bankrupt purchased consumer goods under a hire purchase agreement before adjudication; and (b) at the time of adjudication the creditor either— (i)

has not taken possession of the goods; or

(ii) has taken possession of them and has not sold or disposed of or parted with possession of them. (2) The creditor may assign the consumer goods to the Assignee, and, if the creditor does so, may prove in the bankruptcy for the net balance due to the creditor under the agreement. Compare: 1967 No 54 s 91(6)

Second bankruptcy

134 Status of bankrupt’s property on second bankruptcy (1) Notwithstanding section 102, the rules in subsections (2) to (4) apply if a bankrupt, before discharge, is adjudicated bankrupt for a second time. (2) Property that is acquired by, or has passed to, the bankrupt since the first adjudication, including property acquired or that has passed since the second adjudication, vests in the Assignee in the second bankruptcy. (3) However, the court may, if it thinks it appropriate, order that all or part of

the following assets or their proceeds vest in the Assignee in the first bankruptcy: (a) assets in the second bankruptcy that, in the court’s opinion, were acquired independently of the creditors in the second bankruptcy: (b) assets in the second bankruptcy that devolved upon the bankrupt. [page 208] (4) A surplus in the second bankruptcy is an asset in the estate in the first bankruptcy, and must be paid to the Assignee in the first bankruptcy. Compare: 1967 No 54 s 59(1)(a), (b), (2)

135 Effect of notice to Assignee of application for adjudication (1) This section applies if the Assignee in a bankruptcy receives notice that a creditor has filed an application for a second adjudication. (2) The Assignee must hold property in his or her possession that has been acquired by, or passed to, the bankrupt since the first adjudication until the application for a second adjudication has been dealt with. (3) The Assignee must transfer the property and its proceeds, less any deduction for the Assignee’s costs and expenses, to the Assignee in second bankruptcy if the creditor’s application results in a second adjudication, or if the bankrupt is automatically adjudicated bankrupt on his or her own application. Compare: 1967 No 54 s 59(1)(c)

Persons jointly adjudicated bankrupt

136 Separate accounts In the case of the adjudication of 2 or more persons jointly, the Assignee must keep distinct accounts of— (a) the joint estate; and

(b) the separate estate of each bankrupt. Compare: 1967 No 54 s 82(1)

137 How joint and separate estates must be applied (1) The joint estate must first be applied to the debts due by the bankrupts jointly. (2) The separate estate of each bankrupt must first be applied to the debts of that bankrupt. (3) Any surplus in the joint estate must be credited to the separate estate of each bankrupt in proportion to the right and interest of each bankrupt in the joint estate. (4) Any surplus in the separate estate of a bankrupt must be credited to the joint estate. Compare: 1967 No 54 s 82(1)

Subpart 2—Duties of bankrupt

138 General duty of bankrupt (1) The bankrupt must, to the best of the bankrupt’s ability, assist in the realisation of the bankrupt’s property and the distribution of the proceeds among the creditors. (2) This duty is in addition to any other duty imposed on the bankrupt by this Act or by any other enactment or law. Compare: 1967 No 54 s 60

[page 209]

Duties in relation to property

139 Bankrupt must disclose property acquired before discharge The bankrupt must as soon as practicable after acquisition notify the Assignee of any property that is— (a) acquired by, or passes to, the bankrupt before discharge; and (b) divisible among the creditors. Compare: 1967 No 54 s 60(b)

140 Bankrupt must deliver property to Assignee on demand (1) On demand by the Assignee, the bankrupt must deliver all or any of the bankrupt’s property that is divisible among the creditors, and that is under the bankrupt’s possession or control, to the Assignee or a person authorised by the Assignee to receive it. (2) On demand by the Assignee, the bankrupt must deliver to the Assignee, or a person authorised by the Assignee to receive it, any property that is

acquired by, or passes to, the bankrupt before his or her discharge. Compare: 1967 No 54 s 60(e), (f)

141 Bankrupt must take all steps required in relation to property and distribution of proceeds to creditors (1) The bankrupt must take all the steps (including the steps specified in subsection (2)) in relation to the bankrupt’s property, and the distribution of the proceeds to the creditors, that are— (a) required by the Assignee; or (b) prescribed by rules or regulations made under this Act; or (c) directed to be done by the court by an order made in reference to a particular bankruptcy; or (d) directed to be done by the court on an application by the Assignee or a creditor. (2) The steps referred to in subsection (1) include the execution by the bankrupt of powers of attorney, conveyances, transfers, deeds, assurances, and instruments. Compare: 1967 No 54 s 60(d)

Duties to provide information

142 Bankrupt must give Assignee accounting records and other documents (1) As soon as practicable after adjudication, the bankrupt must— (a) deliver to the Assignee, at the Assignee’s office, relevant documents that are in the bankrupt’s possession or control; and (b) notify the Assignee of relevant documents that are in the possession or control of any other person. (2) In subsection (1), relevant documents means all accounting records, papers, deeds, instruments, and other documents relating to the bankrupt’s estate.

Compare: 1967 No 54 s 61(1)

[page 210]

143 Bankrupt must give Assignee information relating to property The bankrupt must,— (a) as soon as practicable after adjudication, give the Assignee a complete and accurate list of the bankrupt’s property and of the bankrupt’s creditors and debtors, and update the lists as necessary; and (b) give the Assignee any other information relating to the bankrupt’s property that the Assignee requires; and (c) attend before the Assignee when required by the Assignee; and (d) verify any statement by statutory declaration when required by the Assignee. Compare: 1967 No 54 s 60(a)

144 Bankrupt must give Assignee information relating to income and expenditure When the Assignee requires it, the bankrupt must provide the Assignee with details of his or her income and expenditure since adjudication. Compare: 1967 No 54 s 60(c)

145 Bankrupt must notify Assignee of change in personal information The bankrupt must immediately notify the Assignee of any change in the bankrupt’s— (a) address; or (b) employment; or (c) name; or

(d) income. Compare: 1967 No 54 s 60(g)

146 Bankrupt must give Assignee financial information (1) The bankrupt must give the Assignee (or any person employed by the Assignee) the information and details that are necessary to prepare a statement of financial position of the bankrupt’s estate. (2) If required by the Assignee, the bankrupt must, within a reasonable time of adjudication, prepare and deliver to the Assignee full, true, and detailed accounts and statements of financial position that show— (a) details of the bankrupt’s trading and stocktaking; and (b) details of the bankrupt’s profit and losses during any period in the 3 years before the adjudication. (3) For the bankrupt to prepare the accounts and statements of financial position referred to in subsection (2),— (a) the Assignee must give the bankrupt full access to the bankrupt’s books and papers in the Assignee’s possession; and (b) if the Assignee thinks it necessary, the bankrupt must be assisted by an accountant at the estate’s expense. Compare: 1967 No 54 s 61

[page 211]

Subpart 3—Control over bankrupt during bankruptcy

147 Bankrupt may be required to contribute to payment of debts (1) If required by the Assignee, the bankrupt must pay an amount or periodic amounts during the bankruptcy as a contribution towards payment of the bankrupt’s debts. (2) The Assignee may impose conditions in respect of the payments. (3) Before the Assignee may require the bankrupt to make the payment or payments, the Assignee must— (a) have regard to all the circumstances of the bankruptcy and the bankrupt’s conduct, earning power, responsibilities, and prospects; and (b) make reasonable allowance for the maintenance of the bankrupt and his or her relatives and dependants. (4) The court may, on the application of the Assignee, order the bankrupt to pay the amount or amounts required by the Assignee. (5) The court may, on the application of the Assignee, the bankrupt, or any creditor,— (a) vary, suspend, or cancel the bankrupt’s obligations to make the payments under this section: (b) vary, suspend, or discharge any order made under subsection (4): (c) remit any arrears owing by the bankrupt. Compare: 1967 No 54 s 45

148 Onus of proof if bankrupt defaults in making payment If the bankrupt defaults in making a payment required under section 147, the onus is on the bankrupt in any proceedings arising out of the default to show that the default was not wilful. Compare: 1967 No 54 s 46

149 Prohibition of bankrupt entering business (1) An undischarged bankrupt must not, without the consent of the Assignee or the court, either directly or indirectly,— (a) enter into, carry on, or take part in the management or control of any business: (b) be employed by a relative of the bankrupt: (c) be employed by a company, trust, trustee, or incorporated society that is owned, managed, or controlled by a relative of the bankrupt. (2) Nothing in this section restricts section 151 of the Companies Act 1993. Compare: 1967 No 54 s 62

150 Warrant to search for and seize bankrupt’s property (1) The court may issue a search warrant to the Assignee or any other person if there is reason to believe that any relevant property is concealed in a locality. (2) The warrant may authorise the Assignee or other person named in the warrant, together with any assistants that may be necessary, to— (a) enter and search the locality; and (b) seize and take possession of any relevant property; and [page 212] (c) if necessary, use force to enter the locality, whether by breaking open doors or otherwise; and (d) break open any box or receptacle at the locality, by force if necessary. (3) In this section and in section 151,— locality means any building, aircraft, ship, carriage, vehicle, premises, or place relevant property means—

(a) any property of the bankrupt; or (b) any document relating to the bankrupt’s property, conduct, or dealings. Compare: 1967 No 54 s 65(2)

151 Seizure of bankrupt’s property (1) If authorised by a warrant issued by the court, the Assignee or any other person, together with any assistants that may be necessary,— (a) may seize any part of the bankrupt’s property in the custody or possession of the bankrupt or of any other person; and (b) with a view to seizing the bankrupt’s property, may— (i)

break open any building or room of the bankrupt where the bankrupt is believed to be; and

(ii) break open any building, room, or receptacle of the bankrupt where the bankrupt’s property is believed to be; and (iii) seize and take possession of the bankrupt’s property found in the building, room, or receptacle. (2) For the purposes of this section and section 150, if the execution of a warrant takes place without the bankrupt being present, the person executing the warrant must leave in a prominent place at the locality searched a notice that— (a) states the date and time when the warrant was executed; and (b) states the name of the person who executed it. (3) For the purposes of this section and section 150, the person executing the warrant must leave with the bankrupt, or leave in a prominent place at the locality searched if the bankrupt is not present, a list of any property seized during the course of the search. (4) Subsection (3) does not apply if it is impractical to leave a list of property seized or if the bankrupt consents to receiving a list sent in accordance with subsection (5). (5) If subsection (4) applies, the person executing the search must leave with the notice referred to in subsection (2), or with the bankrupt if the bankrupt is present, a notice stating that—

(a) relevant property has been seized in the course of the search; and (b) within 5 working days after the execution of the warrant, a list of the property seized will be delivered or sent to the bankrupt or left in a prominent position at the place searched. (6) If subsection (4) applies, the person executing the warrant must ensure that within 5 working days after the execution of the warrant there is delivered or sent to the bankrupt, or left in a prominent position at the place searched, a notice listing the property seized and identifying the place where the property was seized. Compare: 1967 No 54 s 65(1)

[page 213]

152 Bankrupt must vacate land or buildings if required to do so (1) The Assignee may require the bankrupt and any of his or her relatives to vacate any land or building that is part of the property vested in the Assignee under the bankruptcy. (2) If the Assignee’s demand is not complied with, the Assignee may apply to a District Court for an order for possession of the land or building. Compare: 1967 No 54 s 66

153 Bankrupt’s right to inspect documents (1) The bankrupt may at any reasonable time inspect, and take extracts or copies of,— (a) the bankrupt’s accounting records: (b) the bankrupt’s answers to questions under section 87: (c) the bankrupt’s statement of affairs: (d) all proofs of debt: (e) the minutes of any creditors’ meeting:

(f)

the record of any examination of the bankrupt.

(2) The bankrupt’s right of inspection under subsection (1) is in addition to any rights that the bankrupt has under the Privacy Act 1993. Compare: 1967 No 54 s 131

Restrictions on bankrupt dealing with property

154 No power to recover property or give release or discharge (1) After adjudication, the bankrupt, and any person (other than the Assignee) who claims through or under the bankrupt, has no power to— (a) recover any property that is part of the bankrupt’s estate; or (b) give a release or discharge in relation to that property. (2) Subsection (1) applies subject to the provisions of sections 113 and 114. (3) Subsection (1) applies whether or not the Assignee has intervened. Compare: 1967 No 54 s 44(a)

155 No steps to defeat beneficial interest (1) After adjudication, the bankrupt must not execute a power of appointment, or any other power vested in the bankrupt, if the result is to defeat or destroy any contingent or other estate or interest in any property to which the bankrupt may otherwise be beneficially entitled at any time before his or her discharge. (2) The restriction on the bankrupt in subsection (1) applies— (a) both before and after the bankrupt obtains a discharge; and (b) subject to the provisions of sections 113 and 114. Compare: 1967 No 54 s 44(b)

Bankrupt’s bank accounts

156 Bank must notify Assignee of bankrupt’s account (1) A bank that ascertains or has reason to believe that a customer of the bank is an undischarged bankrupt must,—

[page 214] (a) as soon as possible, notify the Assignee of any account that the customer holds with the bank; and (b) not pay any money out of the account, unless subsection (2) applies. (2) The bank may pay money out of the account if— (a) the bank is authorised by an order of the court or instructed by the Assignee to do so; or (b) the bank has notified the Assignee of the account and has not, within 1 month of notification, received any instructions from the Assignee. (3) At the same time that the bank notifies the Assignee under subsection (1) (a), the bank must as soon as possible notify the customer that it has notified the Assignee. Compare: 1967 No 54 s 49(5)

157 Assignee may require bank to search account records (1) The Assignee may, by written notice, require a bank to search its account records by comparing the names of its customers with the names (including any aliases) of undischarged bankrupts contained in or annexed to the notice. (2) The bank must search its account records within 5 working days after receipt of the notice.

Subpart 4—Provision for bankrupt during bankruptcy Provision for bankrupt

158 Bankrupt may retain certain assets (1) The bankrupt may choose and retain as the bankrupt’s own property certain assets up to a maximum value. (2) In this section, and in section 159, maximum value means the maximum value of the assets specified in subsection (3) that the bankrupt may retain. (3) The assets and their maximum value are— (a) the bankrupt’s necessary tools of trade—the maximum value is fixed in the Assignee’s discretion: (b) necessary household furniture and effects, including clothing, for the bankrupt and his or her relatives and dependants—the maximum value is fixed in the Assignee’s discretion: (c) motor vehicle—$5,000. (4) For the purposes of this section, the value of an asset is the value that the Assignee in his or her discretion places on it. (5) The Governor-General may, by Order in Council, amend subsection (3)(c) by increasing the maximum value, to take account of any rise in the all groups index number of the Consumer Price Index. Compare: 1967 No 54 s 52(1)

159 Bankrupt may retain certain assets with consent of creditors The bankrupt may retain necessary tools of trade and necessary household furniture and effects that are worth more than the maximum value, if the creditors consent by an ordinary resolution. Compare: 1967 No 54 s 52(2)

[page 215]

160 Retention of assets does not affect rights under charge or hire purchase agreement The retention of an asset by the bankrupt under section 158 or 159 does not affect any rights under a valid charge or hire purchase agreement in respect of the asset. Compare: 1967 No 54 s 52(1)

161 Retention provisions do not confer rights to other assets The fact that the net value of the assets that the bankrupt retains is less than the maximum values specified in section 158 does not give the bankrupt rights in relation to other assets in the bankrupt’s estate. Compare: 1967 No 54 s 52(1)

162 Relative or dependant may exercise bankrupt’s right to retain assets If the bankrupt has died, a relative or dependant of the bankrupt, who has been approved by the Assignee or the court for this purpose, may exercise the right to retain assets under section 158 or 159 for the benefit of the bankrupt’s relatives and dependants. Compare: 1967 No 54 s 52(3)

163 Assignee may make allowance to bankrupt The Assignee may make an allowance out of the property of the bankrupt to the bankrupt or any relative or dependant of the bankrupt for the support of the bankrupt and his or her relatives and dependants. Compare: 1967 No 54 s 53(1)

164 Assignee may allow bankrupt to retain money (1) The Assignee may allow the bankrupt to retain, for the immediate maintenance of the bankrupt and his or her relatives and dependants, any

money up to a maximum of $1,000 that the bankrupt has in the bankrupt’s possession or in a bank account at the time of adjudication. (2) The Governor-General may, by Order in Council, amend subsection (1) by increasing the maximum amount that the Assignee may allow the bankrupt to retain, to take account of any rise in the Consumer Price Index. Compare: 1967 No 54 s 53(2), (3)

Subpart 5—Powers of Assignee and court to examine bankrupt and others Examination of persons summoned by Assignee

165 Assignee may summon bankrupt and others to be examined (1) The Assignee may at any time, before or after a bankrupt’s discharge,— (a) summon any of the persons listed in subsection (2) to appear before the Assignee, another Assignee, or a District Court Judge to be examined on oath in relation to the bankrupt’s property, conduct, or dealings; and (b) require that person to produce and surrender to the Assignee or District Court Judge before whom that person appears any document in that [page 216]

person’s possession or control that relates to the bankrupt’s property, conduct, or dealings.

(2) The persons referred to in subsection (1) are— (a) the bankrupt: (b) the bankrupt’s spouse: (c) a person known or suspected to possess any of the bankrupt’s property or any document relating to the bankrupt’s property, conduct, or dealings: (d) a person believed to owe the bankrupt money: (e) a person believed by the Assignee to be able to give information regarding— (i)

the bankrupt; or

(ii) the bankrupt’s property, conduct, or dealings: (f)

a trustee of a trust of which the bankrupt is a settlor or of which the

bankrupt is or has been a trustee. Compare: 1967 No 54 s 68(1), (2)

166 Conduct of examination of person summoned by Assignee (1) The Assignee or District Court Judge before whom a person (A) is summoned to appear under section 165 may examine A on oath. (2) The examination must be recorded in writing, and A must sign the written record if required to do so. (3) If A does not appear at the appointed time and has no reasonable excuse,— (a) the District Court Judge or the court may, on the Assignee’s application, by warrant, have A arrested and brought for examination by the court; and (b) the court may order A to pay all the expenses arising out of A’s arrest and examination before the court, if the court thinks that A’s evidence was necessary for the purposes of the bankrupt’s estate. Compare: 1967 No 54 s 68(3)–(5)

167 Expenses of person summoned by Assignee A person who is summoned by the Assignee for examination— (a) is entitled to be paid the prescribed expenses of attending the examination; and (b) does not default in attending if those expenses have not been paid or tendered to him or her before the examination. Compare: 1967 No 54 s 68(6)

168 Creditor may inspect record of examination A creditor or his or her lawyer may at any reasonable time inspect the record of the examination of a person by a District Court Judge or by the court under section 166.

Report of examination must not be published 169 unless court consents (1) A person must not, without the court’s permission under subsection (2), publish a report of— (a) any examination of a person summoned by the Assignee; or (b) any matter arising in the course of that examination. (2) On the Assignee’s application, the court may permit publication of a report under the conditions that the court imposes. [page 217] (3) A person who contravenes subsection (1) commits an offence and is liable on summary conviction to imprisonment for a term not exceeding 12 months or a fine not exceeding $5,000 or both. Compare: 1967 No 54 s 68(7)

170 Examination provisions also apply when Assignee appointed receiver and manager of debtor’s property Sections 165 to 169 also apply when the Assignee has been appointed a receiver and manager of all or part of a debtor’s property under section 50, and references in sections 165 to 169 to the bankrupt must be read with all necessary modifications as if they were references to the debtor. Compare: 1967 No 54 s 68(8)

171 Assignee may obtain documents In addition to the power contained in section 165(1)(b), the Assignee may, by notice in writing, require the bankrupt, the bankrupt’s spouse, or any other person to deliver to the Assignee any document relating to the bankrupt’s property, conduct, or dealings in that person’s possession or under that person’s control.

Compare: 1967 No 54 s 68A

172 No lien over bankrupt’s documents and other records (1) A person is not entitled as against the Assignee to withhold possession of, or claim a lien over,— (a) a deed or instrument that belongs to the bankrupt; or (b) business records (which include accounting records, accounts, receipts, bills, invoices, or any other documents relating to the bankrupt’s accounts, trade dealings, or business). (2) However, a person (A) may claim as a preferential creditor under section 274(2)(f) if— (a) A has performed services in connection with the bankrupt’s business records or a deed or instrument belonging to the bankrupt; and (b) A has not been paid, or has not been paid in full, for those services; and (c) A would, but for subsection (1), ordinarily have had a lien over the business records, deed, or instrument, as the case may be. (3) The limit to which A may claim as a preferential creditor under section 274(2)(f) is 10% of the total value of the services stated in subsection (2), up to a maximum amount of $2,000. Compare: 1967 No 54 s 73

Bankrupt’s public examination

173 Court must hold public examination if Assignee or creditors require (1) The court must hold a public examination of the bankrupt if, before an absolute order for the bankrupt’s discharge is made, there is filed with the court either a statement by the Assignee, or a copy of a creditors’ ordinary resolution, that the bankrupt should be publicly examined. [page 218]

(2) The copy of the resolution must be certified by the Assignee or the chairperson of the meeting at which it was passed. Compare: 1967 No 54 s 69(1)

174 Notice of examination (1) If a public examination of the bankrupt is required, the Assignee must serve the bankrupt with a notice that states— (a) that the Assignee’s statement or the creditors’ resolution has been filed with the court; and (b) that the bankrupt is required to be publicly examined; and (c) the time and place of the examination. (2) At least 5 working days before the examination, the Assignee must— (a) advertise the examination in the prescribed manner; and (b) send a notice of the examination to each creditor. Compare: 1967 No 54 s 69(1), (2)

175 Time for holding examination The court must hold the public examination of the bankrupt as soon as practicable, but not before 5 working days have elapsed after the Assignee has sent the bankrupt a notice under section 174. Compare: 1967 No 54 s 69(1)

176 Assignee must file report before examination Before the public examination of the bankrupt, the Assignee must file in the court a report on— (a) the bankrupt’s estate; and (b) the bankrupt’s conduct; and (c) all other matters of which the court should be informed. Compare: 1967 No 54 s 69(3)

177 Conduct of examination (1) The bankrupt must attend the examination, and may be examined as to the bankrupt’s conduct, dealings, and property. (2) The bankrupt must be examined on oath and must answer all questions that the court asks the bankrupt, or allows the bankrupt to be asked. (3) The following persons may examine the bankrupt: (a) the Assignee, or counsel for the Assignee: (b) any creditor who has proved a claim, or counsel for that creditor. (4) The bankrupt is not entitled to notice beforehand of who will ask the questions or what the questions will be. Compare: 1967 No 54 s 69(4), (5)

178 Record of examination (1) The examination must be recorded in writing as the court directs. (2) The record of the examination must be— (a) read over to, and signed by, the bankrupt; and (b) available for inspection by any creditor or that creditor’s lawyer at all reasonable times. Compare: 1967 No 54 s 69(6)

[page 219]

179 When examination ends (1) The public examination of a bankrupt ends when the court makes an order that the examination is ended. (2) The court must not make an order that the examination is ended unless it is satisfied that the bankrupt’s conduct, dealings, and property have been sufficiently investigated and that the investigation is finished. Compare: 1967 No 54 s 69(7)

180 Bankrupt’s failure to attend examination If the bankrupt does not appear for the examination at the appointed time and has no reasonable excuse,— (a) a District Court Judge or the court may, on the Assignee’s application, by warrant, cause the bankrupt to be arrested and brought up for examination by the court; and (b) the court may order the bankrupt to pay all the expenses arising out of the arrest and examination before the court, if the court thinks that the bankrupt’s evidence was necessary for the purposes of the bankrupt’s estate. Compare: 1967 No 54 ss 68(4), (5), 69(8)

181 Bankrupt’s expenses in attending examination (1) A bankrupt who attends a public examination is entitled to be paid the prescribed expenses of attending. (2) A bankrupt does not default in attending a public examination if the prescribed expenses of attending have not been paid or tendered to him or her before the examination. Compare: 1967 No 54 ss 68(6), 69(8)

Investigation of company controlled by bankrupt and associate

182 Assignee may examine company documents, personnel, and shareholders (1) If authorised by the court, the assignee or a person appointed by the assignee may exercise the power set out in subsection (2) in relation to a company that is associated with the bankrupt under subpart YB of the Income Tax Act 2007. (2) The Assignee may— (a) examine the documents of the company: (b) examine any past or present director, employee, or shareholder of the company on oath about the company’s affairs.

The examination of a person under subsection (2)(b) must be recorded in (3) writing, and the person examined must sign the written record if required to do so by the Assignee. Compare: 1967 No 54 s 74(4)

[page 220] Section 182(1): substituted, on 1 April 2010, by section 861 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

183 Meaning of associate In section 182, associate means any of the following: (a) the bankrupt’s spouse: (b) a lineal ancestor or descendant of the bankrupt: (c) the spouse of a lineal ancestor or descendant of the bankrupt: (d) a brother or sister of the bankrupt: (e) the spouse of a brother or sister of the bankrupt. Compare: 1967 No 54 s 74(4)

Privilege and representation of persons examined

184 No privilege against self-incrimination (1) A person who is examined or questioned under any power under this Act must answer all questions relating to the bankrupt’s conduct, dealings, and property. (2) A person is not excused from answering a question because the question may incriminate or tend to incriminate that person. Compare: 1967 No 54 s 70(1)

185 Statement made by person examined or questioned not generally admissible in criminal proceedings against that person

(1) A statement made by a person examined or questioned under this Act in response to a question is not admissible in criminal proceedings against that person. (2) However, the statement is admissible if— (a) the person was examined or questioned under oath and is charged with perjury in relation to the statement; or (b) in the case of the bankrupt, the bankrupt is charged with an offence under section 440(1)(b). Compare: 1967 No 54 s 70(2)

186 Representation (1) A person who is examined under this Act may be represented by a lawyer. (2) The person may be questioned by his or her lawyer, and any answers form part of the examination. Compare: 1967 No 54 s 70(3)

Subpart 6—Status of bankrupt’s contracts Bankrupt’s contracts entered into before adjudication

187 Assignee may continue or disclaim bankrupt’s contract If the bankrupt is a party to a contract, the Assignee may— (a) continue the contract, subject to the terms of the contract and all relevant rules of law; or [page 221] (b) if the contract is onerous property for the purposes of section 117, disclaim it under that section. Compare: 1967 No 54 s 76

188 Contract terminated by other contracting party (1) This section applies if a contract to which the bankrupt is a party is terminated on the bankrupt’s adjudication by the other contracting party in accordance with the contract. (2) Whatever the contract may say, the Assignee may recover an amount from the other contracting party that the court thinks is just and equitable in all the circumstances, but the amount must not be greater than the amount set out in subsection (3). (3) The amount that the Assignee may recover must not be greater than C under the formula A – B = C, where— (a) A is the amount payable to the bankrupt under the contract; and (b) B is the total of— (i)

the amount paid to the bankrupt; and

(ii) the cost to complete the contract; and (iii) a reasonable penalty for delay in completion of the contract.

Compare: 1967 No 54 s 77

Transaction with bankrupt in ignorance of adjudication

189 Payment of money or delivery of property is good discharge (1) This section applies if a person (A) pays money or delivers property— (a) to a person who is a bankrupt (B); or (b) to a person who is subsequently adjudicated bankrupt (C); or (c) to the order of B or C; or (d) to an assignee from B or C; or (e) to the order of an assignee from B or C. (2) The payment or delivery is a good discharge to A if— (a) the payment or delivery was made before the adjudication of B or C, as the case may be, was advertised; and (b) A satisfies the court that— (i)

A had no knowledge of the adjudication or that an application for adjudication had been filed; and

(ii) the payment or delivery was made in the ordinary course of business or was otherwise made in good faith. Compare: 1967 No 54 s 48

Joint contractual liability

190 Bankrupt’s co-contractor may sue and be sued If the bankrupt is jointly liable under a contract with another person, that other person may sue and be sued on the contract without the bankrupt being joined as a party to the proceeding. Compare: 1967 No 54 s 130

[page 222]

Lawyers’ costs

191 Lawyers’ costs The Assignee may recover money paid by a bankrupt, whether before or after adjudication, to his or her lawyer for costs in obtaining an order of adjudication, except for prescribed costs and expenses. Compare: 1967 No 54 s 12

Subpart 7—Irregular transactions before adjudication

192 Overview of subpart 7 (1) This subpart applies to the following irregular transactions by the bankrupt before adjudication: (a) an insolvent transaction: (b) an insolvent charge: (c) an insolvent gift: (d) a disposition of property to which subpart 6 of Part 6 (setting aside of dispositions that prejudice creditors) of the Property Law Act 2007 applies: (e) a transaction at undervalue: (f)

a contribution by the bankrupt to the property of another person.

(2) Broadly, the effect of this subpart is that the irregular transactions listed in subsection (1)(a) to (d) may be cancelled on the Assignee’s initiative, and that, in appropriate cases, the Assignee may recover property or money from a party to an irregular transaction with the bankrupt. Section 192(1)(d): substituted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

193 Extension of 2 years and 6 months periods A reference in this subpart to 2 years or to 6 months means 2 years or 6 months (as the case may be) extended as follows: (a) in the case of adjudication on a creditor’s application, extended by the period between the time when the application was served on the bankrupt and the time of adjudication: (b) in the case of adjudication on the bankrupt’s own application, while a creditor’s application is awaiting a hearing, extended by the period between the time when the creditor’s application was served on the bankrupt and the time of adjudication.

Insolvent transactions

194 Insolvent transaction may be cancelled

A transaction by the bankrupt may be cancelled on the Assignee’s initiative if it— (a) is an insolvent transaction; and (b) was made within 2 years immediately before the bankrupt’s adjudication. [page 223]

195 Meaning of insolvent transaction (1) An insolvent transaction is a transaction by the bankrupt that— (a) is entered into at a time when the bankrupt is unable to pay his or her due debts; and (b) enables a creditor to receive more towards satisfaction of a debt by the bankrupt than that person would receive, or would be likely to receive, in the bankruptcy. (2) Transaction, as used in the term insolvent transaction, means any of the following steps by the bankrupt: (a) conveying or transferring the bankrupt’s property: (b) giving a charge over the bankrupt’s property: (c) incurring an obligation: (d) undergoing an execution process: (e) paying money (including money paid in accordance with a judgment or an order of a court): (f)

anything done or omitted to be done for the purpose of entering into the transaction or giving effect to it.

Compare: 1967 No 54 s 56(1), (2)

196 Insolvent transaction presumed For the purposes of section 194, a transaction that is made within 6 months immediately before the bankrupt’s adjudication is presumed, unless the

contrary is proved, to be made at a time when the bankrupt is unable to pay his or her due debts.

197 When series of transactions must be regarded as single transaction Where— (a) a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between the bankrupt and a creditor (including a relationship to which other persons are parties); and (b) in the course of the relationship, the level of the bankrupt’s net indebtedness to the creditor is increased and reduced from time to time as the result of a series of transactions forming part of the relationship; then— (c) section 194 applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and (d) the transaction referred to in paragraph (a) may only be taken to be an insolvent transaction that may be cancelled by the Assignee if the effect of applying section 194 in accordance with paragraph (c) is that the single transaction referred to in paragraph (c) is taken to be an insolvent transaction that may be cancelled by the Assignee.

Insolvent charges

198 Insolvent charge may be cancelled A charge over any property of a bankrupt may be cancelled on the Assignee’s initiative if— [page 224] (a) the charge was given within 2 years immediately before the bankrupt’s adjudication; and (b) immediately after the charge was given, the bankrupt was unable to

pay his or her due debts. Compare: 1967 No 54 s 57(1)

199 Charge for new consideration or charge in substitution not affected (1) A charge may not be cancelled under section 198 if the charge secures money actually advanced or paid, or the actual price or value of property sold or supplied, or any other valuable consideration given in good faith, by the secured creditor to the bankrupt at the time when, or at any time after, the bankrupt gave the charge. (2) A charge may not be cancelled under section 198 if the charge is a substitute for an existing charge that was given by the bankrupt more than 2 years before adjudication, except to the extent that— (a) the amount secured by the substituted charge is greater than the amount that was secured by the existing charge; or (b) the value of the property subject to the substituted charge at the date of substitution was greater than the value of the property subject to the existing charge at that date. Compare: 1967 No 54 s 57(2)(a)

200 Presumption that bankrupt unable to pay due debts A bankrupt who gives a charge within 6 months immediately before adjudication is presumed, unless the contrary is proved, to have been unable to pay his or her due debts immediately after giving the charge.

201 Charge for unpaid purchase price given after sale of property (1) This section applies if the bankrupt, after purchasing property, has within 2 years immediately before adjudication given the seller a charge over the property. (2) Section 198 does not affect the charge to the extent that it secures unpaid

purchase money, whether it is unpaid in relation to the property over which the charge is given or some other property, if the charge was given not more than 15 working days after the date of the sale of the property to the bankrupt. Compare: 1967 No 54 s 57(2)(b)

202 Appropriation of payments by bankrupt to secured creditor (1) This section applies if the bankrupt has made a payment or payments to a secured creditor after the bankrupt has given a charge to which section 199 or 201 applies. (2) The bankrupt’s payment or payments must be credited (as far as is necessary) towards— (a) repayment of the money actually advanced or paid by the secured creditor to the bankrupt when or after the bankrupt gave the charge; or (b) payment of the actual price or value of property sold or supplied by the secured creditor to the bankrupt when or after the bankrupt gave the charge; or [page 225] (c) payment of any other liability of the bankrupt to the secured creditor in respect of any other valuable consideration given in good faith when or after the bankrupt gave the charge. (3) Nothing in this section applies to any payments received by any registered bank within the meaning of the Reserve Bank of New Zealand Act 1989 in good faith in the ordinary course of business and without negligence. Compare: 1967 No 54 s 57(3)

203 Charge agreed before specified period may not be cancelled A charge given by the bankrupt under an agreement to give the charge that

was made before the period of 2 years immediately before adjudication may not be cancelled under section 198. Compare: 1967 No 54 s 57(4)(a)

Insolvent gifts

204 Insolvent gift within 2 years may be cancelled A gift by a bankrupt to another person may be cancelled on the Assignee’s initiative if the bankrupt made the gift within 2 years immediately before adjudication. Section 204: substituted, on 17 November 2009, by section 4 of the Insolvency Amendment Act 2009 (2009 No 52).

205 Insolvent gift within 2 to 5 years may be cancelled if bankrupt unable to pay debts (1) A gift by a bankrupt to another person may be cancelled on the Assignee’s initiative if— (a) the bankrupt made the gift within the period beginning 2 years immediately before adjudication and ending 5 years immediately before adjudication; and (b) the bankrupt was unable to pay his or her debts. (2) A bankrupt is presumed to have been unable to pay his or her debts for the purpose of subsection (1)(b) unless the party claiming under the gift proves that the bankrupt was immediately after the making of the gift, or at any time after that up to his or her adjudication, able to pay his or her debts without the aid of the property that the gift is composed of. Section 205: substituted, on 17 November 2009, by section 4 of the Insolvency Amendment Act 2009 (2009 No 52).

Procedure for cancelling irregular transactions

206 Procedure for cancelling irregular transactions (1) The procedure set out in this section applies to the following irregular transactions: (a) an insolvent transaction:

(b) an insolvent charge: (c) an insolvent gift: [page 226] (d) a disposition of property to which subpart 6 of Part 6 (setting aside of dispositions that prejudice creditors) of the Property Law Act 2007 applies. (2) The Assignee who wishes to cancel an irregular transaction to which this section applies must— (a) file a notice with the court that meets the requirements set out in subsection (3); and (b) serve the notice on— (i)

the other party to the transaction; and

(ii) any other party from whom the Assignee intends to recover. (3) The notice must— (a) be in writing; and (b) state the Assignee’s postal, email, and street addresses; and (c) specify the irregular transaction to be cancelled; and (d) describe the property or state the amount that the Assignee wishes to recover; and (e) state that the person named in the notice may object to the cancellation of the transaction by sending to the Assignee a written notice of objection that is received by the Assignee at his or her postal, email, or street address within 20 working days after the Assignee’s notice has been served on that person; and (f)

state that the written notice of objection must contain the reasons for objecting; and

(g) state that the transaction will be cancelled as against the person named in the notice if that person does not object; and (h) state that if the person named in the notice does object, the Assignee

may apply to the court for the transaction to be cancelled. (4) The irregular transaction is automatically cancelled as against the person on whom the Assignee has served the Assignee’s notice, if that person has not objected by sending to the Assignee a written notice of objection that is received by the Assignee at his or her postal, email, or street address within 20 working days after the Assignee’s notice has been served on that person. (5) The notice of objection must state the reasons for objecting. (6) An irregular transaction that is not automatically cancelled may still be cancelled by the court on the Assignee’s application. Compare: 1967 No 54 s 58(1) Section 206(1)(d): substituted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

207 Court may order retransfer of property or payment of value (1) On the cancellation of an irregular transaction under which property of the bankrupt, or an interest in property of the bankrupt, was transferred the court may make an order for— (a) the retransfer to the Assignee of the property or interest in the property; or (b) payment to the Assignee of a sum of money that the court thinks appropriate, but the sum must not be greater than the value of the property or interest in the property when the transaction was cancelled. [page 227] (2) The court may make any other order for the purpose of giving effect to an order under subsection (1). (3) An order under subsection (1) is in addition to any other rights and remedies available to the Assignee, and this section does not restrict those rights. Compare: 1967 No 54 s 58(2)–(4)

208 Limits on recovery The court must not make an order under section 207 against a person (A) if A proves that when A received the property or interest in the property— (a) A acted in good faith; and (b) a reasonable person in A’s position would not have suspected, and A did not have reasonable grounds for suspecting, that,— (i)

in the case of an insolvent gift, the bankrupt was, or would become, unable to pay his or her debts without the aid of the property that the gift is composed of; or

(ii) in the case of any other irregular transaction referred to in section 206(1), the bankrupt was, or would become, unable to pay his or her due debts; and (c) A gave value for the property or interest in the property or altered A’s position in the reasonably held belief that the transfer of the property or interest in the property to A was valid and would not be cancelled. Compare: 1967 No 54 s 58(6) Section 208(b): substituted, on 17 November 2009, by section 5 of the Insolvency Amendment Act 2009 (2009 No 52).

209 Recovery by appointee The provisions of sections 206 to 208 apply to the recovery of property or its value by an appointee under Part 6 as if each reference to the Assignee were a reference to the appointee acting under Part 6.

210 Land Transfer Act 1952 does not limit sections 206 to 209 The Land Transfer Act 1952 does not limit sections 206 to 209. Compare: 1967 No 54 s 58(7)

Transactions at undervalue

211 Assignee may recover difference in value

Under section 212, the Assignee may recover from a person (X), who is a (1) party to a transaction with the bankrupt, the amount C in the formula A – B = C, where— (a) A is the value that X received from the bankrupt under the transaction; and (b) B is the value (if any) that the bankrupt received from X under the transaction. (2) In this section and in section 212, transaction includes the giving of a guarantee by the bankrupt. Compare: 1993 No 105 s 297(1)

[page 228]

212 When Assignee may recover difference The Assignee may recover the difference in value (that is, C in the formula in section 211(1)) from X if— (a) the bankrupt entered into the transaction with X within 2 years immediately before adjudication; and (b) either— (i)

the bankrupt was unable to pay his or her debts when the bankrupt entered into the transaction; or

(ii) the bankrupt became unable to pay his or her debts as a result of entering into the transaction. Compare: 1993 No 105 s 297(1) Section 212(b)(i): amended, on 17 November 2009, by section 6 of the Insolvency Amendment Act 2009 (2009 No 52). Section 212(b)(ii): amended, on 17 November 2009, by section 6 of the Insolvency Amendment Act 2009 (2009 No 52).

Bankrupt’s contribution to another person’s property

213 Court may order recipient to pay value to Assignee

(1) On the application of the Assignee, the court may order the recipient of a contribution by the bankrupt to the recipient’s property to pay the value of the contribution to the Assignee. (2) The court may make the order if— (a) the bankrupt was not paid an adequate amount in money or money’s worth for the contribution; and (b) the value of the bankrupt’s assets was reduced by the contribution; and (c) the bankrupt made the contribution— (i)

within 2 years immediately before adjudication; or

(ii) within 5 years immediately before adjudication, and the recipient is not able to prove that the bankrupt, either at the time of the contribution or at any later time before adjudication, was able to pay the bankrupt’s debts without the aid of the contribution. (3) For the purposes of this section and section 214, a bankrupt has made a contribution to the recipient’s property if the bankrupt has— (a) erected buildings on, or otherwise improved, land or any other property of the recipient; or (b) bought land or any other property in the recipient’s name; or (c) provided money to buy land or any other property in the recipient’s name or on the recipient’s behalf; or (d) paid instalments for the purchase of, or towards the purchase of, land or any other property in the recipient’s name or on the recipient’s behalf. Compare: 1967 No 54 s 55(1), (2)

214 Court’s powers in relation to bankrupt’s contribution to recipient’s property (1) The court may ascertain the value of the bankrupt’s contribution (including any payments of legal expenses, interest, rates, and other expenses or charges) for the purposes of section 213, and order the recipient to pay it to the Assignee.

[page 229] (2) The court may order the recipient to pay less than the value of the contribution, or refuse to order the recipient to pay anything, if— (a) the recipient acted in good faith and has altered the recipient’s position in the reasonably held belief that the bankrupt’s contribution was valid and that the recipient would not be liable to repay it in full or in part; or (b) in the court’s opinion, it is unfair that the recipient should repay all or part of the contribution. (3) If the court orders that the recipient must repay the bankrupt’s contribution, the court may also (in the same or a subsequent order)— (a) direct the Assignee to sell the whole or part of the relevant property, and to convey or transfer it to the buyer; and (b) make vesting and other orders that are necessary for the sale and conveyance or transfer of the property. Compare: 1967 No 54 s 55(2)(a), (b)

215 How Assignee must use repayment of bankrupt’s contribution to property The Assignee must use the money repaid under section 213 by the recipient of a contribution by the bankrupt to property, or the proceeds of the sale of the property, as the case may be, by taking the following steps in order: (a) first, the Assignee must keep as much of the proceeds as the Assignee needs, when added to the other assets in the bankrupt’s estate, to pay the creditors in full (including interest) under section 274 (Step 1); and (b) secondly, if there is a surplus after the creditors have been paid in full, the Assignee must pay as much of the surplus to the recipient of the property to which the bankrupt has contributed as was repaid under section 213 (Step 2); and (c) thirdly, the Assignee must not pay anything to the bankrupt before the Assignee has taken Step 1 and Step 2. Compare: 1967 No 54 s 55(2)(c)

216 Land Transfer Act 1952 does not limit sections 213 to 215 The Land Transfer Act 1952 does not limit sections 213 to 215. Compare: 1967 No 54 s 55(4)

Subpart 8—Role and powers of Assignee Powers of Assignee

217 Assignee’s general powers (1) The Assignee has the powers— (a) necessary to carry out the functions and duties of the Assignee under this Act; and (b) conferred on the Assignee by this Act. (2) In particular, the Assignee has the powers set out in Schedule 1. Compare: 1967 No 54 s 71

[page 230]

218 Assignee must not sell bankrupt’s property before first creditors’ meeting The Assignee must not sell any of the bankrupt’s property before the first creditors’ meeting, unless— (a) the property is perishable property or is likely to fall rapidly in value; or (b) in the Assignee’s opinion, the sale of the property might be prejudiced by delay; or (c) expenses will be incurred by the delay, and before selling the Assignee consults a creditor or creditors. Compare: 1967 No 54 s 72(4)

219 Title of purchaser from Assignee The title of a purchaser of the bankrupt’s property from the Assignee under a document that is made in the exercise of the Assignee’s power of sale in Schedule 1—

(a) cannot be challenged except on the ground of fraud; and (b) is not affected by an absence of authority to sell, or the improper or irregular exercise of the power of sale. Compare: 1967 No 54 s 72(5)

220 Obligation to bank and power to invest money (1) The Assignee must have a bank account and, as may be prescribed by regulations made under this Act, must pay into that account all money that the Assignee receives in that capacity. (2) The Assignee may invest money that is not immediately required to be paid out in the administration of a particular estate in an investment of a type approved by the Auditor-General, and must credit to that estate the interest or dividends that accrue on the investment. Compare: 1967 No 54 s 81

221 Assignee may assign right to sue under this Act (1) The Assignee may, if the court has first approved it, assign any right to sue that is conferred on the Assignee by this Act. (2) The application for approval may be— (a) made by the Assignee or the person to whom it is proposed to assign the right to sue; and (b) opposed by a person who is a defendant to the Assignee’s action, if already begun, or a proposed defendant.

222 Proceedings by Assignee when bankrupt is partner in business partnership (1) If a member of a business partnership is adjudicated bankrupt, the court may authorise the Assignee to bring a proceeding in the names of the Assignee and the bankrupt’s partner (P). (2) The Assignee must serve notice on P of the application for authority to bring the proceeding, and P may oppose the application. (3) P may apply to the court for a direction that—

(a) P must be paid P’s proper share of the proceeds of the proceeding; or [page 231] (b) P must be indemnified by the Assignee against any costs incurred in the proceeding, on the condition that P does not claim any benefit from the proceeding. (4) Any release by P of the debt or demand to which the proceeding relates is void. Compare: 1967 No 54 s 82(2)

Notice by Assignee

223 Means of giving notice to creditors Any requirement under this Act that the Assignee give notice to a creditor is satisfied,— (a) in the case of a natural person, if the notice is— (i)

delivered to that person; or

(ii) posted to that person’s address or delivered to a box at a document exchange that that person is using at the time; or (iii) sent by facsimile machine to a telephone number used by that person for the transmission of documents by facsimile: (b) in the case of a company, if the notice is sent in accordance with section 388 of the Companies Act 1993: (c) in the case of an overseas company, if the notice is sent in accordance with section 390 of the Companies Act 1993: (d) in the case of a body corporate that is not a company or an overseas company, if the notice is sent in accordance with section 391(3) of the Companies Act 1993.

Assignee’s decisions

224 Assignee’s discretion

The Assignee may use his or her own discretion in the administration of the (1) bankrupt’s property, but must have regard to the resolutions of the creditors at creditors’ meetings. (2) The Assignee or a creditor may apply to the court for directions if the Assignee or creditor believes that a resolution of the creditors— (a) conflicts with this Act or any legal rule; or (b) is unjust or unfair. Compare: 1967 No 54 s 84

225 Assignee may apply for directions by court (1) The Assignee may apply to the court for directions on any question concerning the operation of this Act. (2) An Assignee who acts under a direction of the court discharges his or her duty in relation to the question for which a direction was sought, and it does not matter that subsequently the direction is invalidated, overruled, or set aside or becomes ineffective. (3) However, the Assignee is not protected by subsection (2) if, in obtaining or following the court’s direction, the Assignee was guilty of— (a) fraud; or [page 232] (b) deliberate concealment or misrepresentation. Compare: 1967 No 54 s 85

226 Appeal from Assignee’s decision (1) A person (including the bankrupt or a creditor) whose interests, monetary or otherwise, are detrimentally affected by an act or decision to which this section applies may apply to the court to reverse or modify the act or decision. (2) This section applies to—

(a) an act or decision of the Assignee; or (b) a decision of a District Court Judge in carrying out an examination under section 165. (3) The application must be made— (a) within 15 working days of the act or decision; or (b) within the additional time that the court allows. (4) The court may confirm, reverse, or modify the act or decision. (5) A creditor who is aggrieved by a decision of the Assignee rejecting the creditor’s claim may make an application under section 239. Compare: 1967 No 54 s 86

Assignee’s accounting records

227 Assignee must keep proper accounting records (1) Every Assignee must— (a) keep proper accounting records for each bankruptcy, in the prescribed form; and (b) verify those records by statutory declaration, when required by the court. (2) A creditor or any person who has an interest may inspect the Assignee’s accounting records for a particular bankruptcy. Compare: 1967 No 54 s 132(1), (2)

228 Assignee’s final statement of receipts and payments (1) The Assignee must prepare a final statement of receipts and payments— (a) as soon as practicable after the distribution of the final dividend has been determined; or (b) when the whole of the bankrupt’s property has been realised, if there are insufficient assets to pay all the proofs of debt. (2) The final statement of receipts and payments must—

(a) show in detail the receipts and payments in respect of the bankrupt’s estate; and (b) be able to be inspected without fee by any creditor or other person who has an interest. (3) The Assignee must publish the final statement of receipts and payments in the prescribed manner, and advertise in the prescribed manner that it has been published. Compare: 1967 No 54 s 132(2)–(5)

[page 233]

229 Auditor-General may audit Assignee’s accounts The Auditor-General may, at the Auditor-General’s discretion, audit— (a) the Assignee’s accounting records for any bankruptcy: (b) any statement of accounts and statement of financial position prepared by the Assignee under section 228: (c) any account maintained by the Assignee for the purposes of this Act. Compare: 1967 No 54 s 132A

230 Assignee may return or destroy accounting records After 1 year after the discharge of the bankrupt, the Assignee may dispose of the accounting records deposited with the Assignee for the purposes of the bankruptcy by— (a) delivering them to the bankrupt or the bankrupt’s personal representative, if requested; or (b) destroying or otherwise disposing of them. Compare: 1967 No 54 s 136

Subpart 9—Creditors’ claims Provable debts

231 Meaning of provable debt (1) A provable debt is a debt or liability that a creditor of the bankrupt may prove in the bankruptcy. (2) A creditor’s claim form is the document that a creditor submits to the Assignee for the purpose of proving the debt. (3) A debt is proved when it is admitted by the Assignee.

232 What debts are provable debts (1) A provable debt is a debt or liability that the bankrupt owes— (a) at the time of adjudication; or (b) after adjudication but before discharge, by reason of an obligation incurred by the bankrupt before adjudication. (2) A fine, penalty, sentence of reparation, or other order for the payment of money that has been made following any conviction or order made under section 106 of the Sentencing Act 2002— (a) is not a provable debt; and (b) is not discharged when the bankrupt is discharged from bankruptcy. Compare: 1967 No 54 s 87

Procedure for proving debt

233 Creditor must submit creditor’s claim form (1) A creditor, including a creditor who has a preferential claim, who wishes to claim in the bankruptcy must submit a creditor’s claim form to the Assignee within the specified time. (2) In subsection (1), specified time means the time for submitting the claim form that is specified by the Assignee by notice to the creditor or that is specified by the Assignee by advertisement in the prescribed manner.

[page 234] (3) The claim form must comply with the prescribed formalities. (4) A creditor must submit the claim form in accordance with the prescribed procedure. (5) The creditor must bear the costs of proving the debt, unless the court makes an order as to the creditor’s costs under section 242. (6) The creditor may amend or withdraw the claim form, but an amended form must comply with the formalities prescribed for the original claim form. Compare: 1967 No 54 s 88(1), (2), (3), (5)

Role of Assignee in examining creditor’s claim form

234 Assignee must examine creditor’s claim form (1) The Assignee must examine each creditor’s claim form and the grounds of the debt, unless the Assignee considers it likely that no dividend will be paid to creditors. (2) After examining the claim form, the Assignee must, as soon as practicable, do 1 or more of the following: (a) admit the claim, in whole or in part: (b) reject the claim, in whole or in part: (c) require further evidence in support of the claim. Compare: 1967 No 54 s 89(1)

235 Assignee must give creditor notice of grounds of rejection If the Assignee rejects a creditor’s claim, or part of it, the Assignee must as soon as practicable give the creditor notice of the Assignee’s grounds for rejecting the claim. Compare: 1967 No 54 s 89(3)

236 Assignee’s power to obtain evidence of debt

(1) The Assignee may summon for examination, and examine (on oath or otherwise), any of the following persons: (a) a person who has submitted a creditor’s claim: (b) a person who has made a declaration or statement as part of a creditor’s claim: (c) a person who is capable of giving evidence concerning a creditor’s claim or the debt to which the claim relates. (2) If a person (A) who has been summoned under this section fails to attend, or attends but refuses to be sworn or give evidence, and has no reasonable excuse, the court may— (a) on the Assignee’s application, by warrant have A arrested and brought for examination by the court; and (b) order A to pay all the expenses arising out of A’s arrest and examination, if the court thinks that A’s evidence was necessary for deciding whether the creditor’s claim in question should be admitted or rejected. Compare: 1967 No 54 s 89(2)

[page 235]

237 Notice to Assignee to admit or reject creditor’s claim (1) The bankrupt or any creditor may give the Assignee notice to admit or reject a creditor’s claim. (2) If, after 10 working days after receiving the notice, the Assignee has not made a decision admitting or rejecting the creditor’s claim, on the application of the bankrupt or the creditor the court may— (a) admit or reject the claim; or (b) make any other order that it thinks appropriate. Compare: 1967 No 54 s 89(6)

238 Court may cancel creditor’s claim (1) The court may make an order cancelling an admitted creditor’s claim or reducing the amount claimed, if it considers that the claim was improperly admitted. (2) The court may make the order on the application of the Assignee, the bankrupt, or any creditor. (3) The court must not make an order under subsection (1) unless the creditor who submitted the claim has been served with the application. Compare: 1967 No 54 s 89(5)

239 Court may reverse or modify Assignee’s decision rejecting creditor’s claim (1) A creditor whose claim has been rejected by the Assignee may apply to the court for an order modifying or reversing the Assignee’s decision. (2) The creditor must apply within 15 working days after the creditor receives the Assignee’s notice of rejection of the claim, or within the additional time that the court allows. (3) The court may— (a) reverse or modify the Assignee’s decision in whole or in part; or (b) confirm it. (4) A creditor has no right to prove for a debt or liability that has been rejected by the Assignee, unless the creditor has made an application under this section. Compare: 1967 No 54 s 89(4)

240 Parties to application to court in relation to creditor’s claim (1) This section applies to an application that is made under section 237, 238, or section 239. (2) If the applicant is not the Assignee, the applicant must name and serve the Assignee as a party to the proceeding.

(3) The bankrupt and any creditor may give notice to the court hearing the application, and, on doing so, become parties to the proceeding. Compare: 1967 No 54 s 89(7)

241 Which court may hear application in relation to creditor’s claim (1) If the creditor’s claim is for a sum of not more than $200,000, an application under section 237, 238, or 239 may be made to the District Court. [page 236] (2) In that case, the provisions of the District Courts Act 1947 as to appeals and the transfer of proceedings to the High Court apply as if the application were an action and the amount of the creditor’s claim in dispute were the amount of a claim in the action. (3) If the creditor’s claim is for a sum of more than $200,000, an application under section 237, 238, or 239 may be made to the High Court. (4) In that case, the decision of the High Court may be taken on appeal to the Court of Appeal by— (a) any party to the proceeding, if the High Court gives that party leave to appeal: (b) any aggrieved person. Compare: 1967 No 54 s 89(8), (9)

242 Court may make order as to costs On an application under section 237, 238, or 239, the court hearing the application may, if it thinks it appropriate, order that— (a) any costs of a creditor be added to the creditor’s claim: (b) any costs of any party to the proceeding be paid out of the bankrupt’s estate:

(c) any costs be paid by any party to the proceedings, except the Assignee. Compare: 1967 No 54 s 89(10)

Secured creditors

243 Secured creditor’s options in relation to property subject to charge (1) A secured creditor may— (a) realise property subject to a charge, if entitled to do so (Option 1); or (b) value the property subject to the charge and prove in the bankruptcy as an unsecured creditor for the balance due (if any) after deducting the amount of the valuation (Option 2); or (c) surrender the charge to the Assignee for the general benefit of the creditors and prove in the bankruptcy as an unsecured creditor for the whole debt (Option 3). (2) Despite subsection (1), a secured creditor may exercise Option 1 whether or not the creditor has exercised Option 2. Compare: 1993 No 105 s 305(1), (2)

244 Assignee may require secured creditor to choose option (1) The Assignee may at any time, by notice in writing, require a secured creditor, within 20 working days after receipt of the notice, to— (a) choose one of the options in section 243(1); and (b) if the creditor chooses Option 2 or Option 3, exercise that option within the 20-working day period. (2) A secured creditor who has been served with a notice under subsection (1) and fails to comply— (a) is treated as having surrendered the charge to the Assignee under Option 3 in section 243(1) for the general benefit of the creditors; and [page 237]

(b) may prove as an unsecured creditor for the whole debt. Compare: 1993 No 105 s 305(8), (9)

245 Assignee not required to act in relation to certain property subject to charge The Assignee may, but is not required to, carry out any duty or exercise any power in relation to property that is subject to a charge, except property subject to a charge that has been surrendered under section 243(1)(c) or 244(2)(a). Compare: 1993 No 105 s 254(a)

246 Realisation of property subject to security (1) A secured creditor who realises property subject to a charge may prove as an unsecured creditor for any balance due after deducting the net amount realised. (2) However, subsection (1) does not apply if the Assignee has accepted a valuation and creditor’s claim under section 249. (3) A secured creditor who realises property subject to a charge must account to the Assignee for any surplus remaining after the following amounts have been paid: (a) the amount of the debt: (b) interest payable on the debt up to the time when it is paid: (c) any proper payments to the holder of any other charge over the property. Compare: 1993 No 105 s 305(3)

247 Valuation of charge and proof for balance due (1) This section applies if a secured creditor values the property subject to the charge and seeks to prove as an unsecured creditor for the balance due after deducting the amount of the valuation. (2) The valuation and the claim for the balance must—

(a) be made in the prescribed creditor’s claim form; and (b) contain full particulars of the valuation and the debt; and (c) contain full particulars of the charge, including the date when it was given; and (d) identify any documents that substantiate the debt and the charge. (3) The creditor must produce any document identified under subsection (2)(d) if required by the Assignee. Compare: 1993 No 105 s 305(4), (5)

248 False claim by secured creditor (1) A person commits an offence if that person— (a) makes, or authorises the making of, a claim under section 247(1) that is false or misleading in a material particular knowing that it is false or misleading; or (b) omits, or authorises the omission of, any matter from a claim under section 247(1) knowing that the omission makes the claim false or misleading. [page 238] (2) A person who commits an offence under this section is liable on conviction on indictment to imprisonment for a term not exceeding 5 years or to a fine not exceeding $200,000 or both. Compare: 1993 No 105 s 305(11)

249 Assignee’s powers when secured creditor values property subject to charge and proves for balance (1) If a secured creditor values the property subject to the charge and seeks to prove for the balance due, the Assignee must— (a) accept the valuation and the creditor’s claim; or

(b) reject the valuation and creditor’s claim in whole or in part. (2) If the Assignee rejects the valuation and creditor’s claim, the creditor may submit a revised valuation and creditor’s claim form within 10 working days after receiving notice of the rejection. (3) The Assignee may revoke or amend a decision rejecting a valuation and creditor’s claim, if the Assignee subsequently thinks that the decision was wrong. (4) If the Assignee accepts the valuation and creditor’s claim, the Assignee may, at any time before the creditor realises the property, redeem the charge by paying the amount of the valuation to the creditor. (5) In subsection (4), the Assignee accepts the valuation and creditor’s claim if the Assignee— (a) accepts the original or an amended valuation and creditor’s claim: (b) accepts a valuation and creditor’s claim after amending or revoking a decision to reject a valuation and creditor’s claim. Compare: 1993 No 105 s 305(6), (7)

250 Secured creditor who surrenders charge may withdraw surrender or submit new creditor’s claim (1) This section applies to a secured creditor who has surrendered a charge under Option 3 in section 243(1)(c) or under section 244(2). (2) The creditor may, with the leave of the court or the Assignee and subject to the terms and conditions that the court or the Assignee imposes,— (a) withdraw the surrender and rely on the charge; or (b) submit a new creditor’s claim under section 243(1)(c) or 244(2)(b). (3) Subsection (2) does not apply if the Assignee has already realised the property subject to the charge. Compare: 1993 No 105 s 305(10)

Creditors’ claims subject to uncertainty

Assignee may estimate amount of uncertain 251 creditor’s claim If a creditor’s claim is subject to a contingency or is for damages, or if, for some other reason, the amount of the claim is uncertain, the Assignee may estimate the amount of the claim. Compare: 1967 No 54 s 98; 1993 No 105 s 307(1)

[page 239]

252 Application to court to determine amount of uncertain creditor’s claim The court must determine the amount of an uncertain creditor’s claim on the application of— (a) the Assignee, if the Assignee chooses not to estimate the amount: (b) a creditor, if the Assignee has estimated the amount and the creditor is aggrieved by the estimate. Compare: 1967 No 54 s 99; 1993 No 105 s 307(2)

Creditors’ claims payable after adjudication

253 Creditor’s claim payable 6 months or more after adjudication (1) A creditor’s claim that would, but for the bankruptcy, be payable 6 months or more after the date of adjudication is treated as a claim for the present value of the debt. (2) The present value of the debt is calculated by deducting interest at the rate prescribed under section 87(3) of the Judicature Act 1908 for the period from the date of adjudication to the date when the debt would be payable. Compare: 1967 No 54 s 95; 1993 No 105 s 309

Set-off

254 Mutual credit and set-off (1) If there have been mutual credits, mutual debts, or other mutual dealings between a bankrupt and another person,— (a) an account must be taken of what is due from the one party to the other in respect of those credits, debts, or dealings; and (b) an amount due from one party to the other must be set off against an amount due from the other party; and (c) only the balance of the account may be proved in the bankruptcy, or is payable to the Assignee, as the case may be. (2) However, a person (A) may not claim the benefit of any set-off against an amount due by the bankrupt if, when A gave credit to the bankrupt, A had notice of an available act of bankruptcy by the bankrupt. (3) A creditor of the bankrupt who claims a set-off must declare in that person’s creditor’s claim form that, when the creditor gave the bankrupt credit, the creditor did not have notice of an available act of bankruptcy by the bankrupt. Compare: 1967 No 54 s 93; 1993 No 105 s 310(1)

Set-off under netting agreement

255 Definitions relating to set-off under netting agreement In this section and in sections 256 to 263, unless the context otherwise requires,— Bank means the Reserve Bank of New Zealand bilateral netting agreement means an agreement that provides in respect of 2 transactions between 2 persons to which the agreement applies— [page 240] (a) that on the occurrence of an event specified in the agreement, all or any of those transactions must (or may, at the option of a party) be

terminated and— (i)

an account must be taken of all money due between the parties in respect of the terminated transactions; and

(ii) all obligations in respect of that money must be satisfied by payment of the net amount due from or on behalf of the party having a net debit to or on behalf of the party having a net credit; or (b) that each transaction is to be debited or credited to an account with the effect that the rights and obligations of each party that existed in respect of the relevant account before the transaction are extinguished and replaced by rights and obligations in respect of the net debit due on the relevant account after taking into account that transaction; or (c) that amounts payable by each party to the other party are to be paid or satisfied by payment of the net amount of those obligations by the party having a net credit,— but does not include any bilateral netting agreement that is part of a multilateral netting agreement clearing house means a person that provides clearing or settlement services in respect of financial transactions between parties to a multilateral netting agreement multilateral netting agreement means an agreement that provides for the settlement between more than 2 persons of payment obligations arising under transactions that are subject to the agreement, and that provides, in respect of transactions to which it relates, that debits and credits arising between the parties are to be brought into account so that amounts payable to each party are satisfied by— (a) payment by or on behalf of each party having a net debit to or on behalf of a clearing house (whether as agent or as principal) or a party having a net credit; and (b) receipt by or on behalf of each party having a net credit from or on behalf of a clearing house (whether as agent or as principal) or a party having a net debit netted balance means any amount calculated under a netting agreement as the net debit payable by or on behalf of a party to the agreement to or on behalf

of another party to the agreement in respect of all transactions or any transaction to which the netting agreement applies netting agreement means a bilateral netting agreement or a recognised multilateral netting agreement recognised clearing house means a clearing house declared under section 310K of the Companies Act 1993 to be a recognised clearing house recognised multilateral netting agreement means a multilateral netting agreement that is contained in, or is subject to, the rules of a recognised clearing house. Compare: 1967 No 54 s 93A

256 Application of set-off under netting agreement (1) Sections 255 to 263 apply— [page 241] (a) to a netting agreement— (i)

made in or evidenced by writing; and

(ii) in respect of which the application of sections 255 to 263 has not been expressly excluded; and (iii) whether made before or after the commencement of this section; and (b) to all obligations under a netting agreement (whether those obligations are payable in New Zealand currency or in some other currency). (2) Sections 255 to 263 apply despite— (a) any disposal of rights under a transaction that is subject to a netting agreement in contravention of a prohibition in the netting agreement; or (b) the creation of a charge or other interest in respect of the rights referred to in paragraph (a) in contravention of a prohibition in the netting agreement.

Compare: 1967 No 54 s 93B

257 Calculation of netted balance If a person who is a party to a netting agreement is bankrupt,— (a) any netted balance payable by or to the bankrupt must be calculated in accordance with the netting agreement; and (b) that netted balance constitutes the amount that may be claimed in the bankruptcy or is payable to the bankrupt, as the case may be, in respect of the transactions that are included in the calculation. Compare: 1967 No 54 s 93C

258 Mutuality required for transactions under bilateral netting agreements Sections 255 to 263 apply to transactions that are subject to a bilateral netting agreement only if those transactions constitute mutual credits or mutual debts. Compare: 1967 No 54 s 93D

259 When mutuality required for transactions under recognised multilateral netting agreements (1) Sections 255 to 263 apply to transactions that are subject to a recognised multilateral netting agreement, whether or not those transactions constitute mutual credits or mutual debts. (2) Despite subsection (1), sections 255 to 263 do not apply to transactions that are subject to a recognised multilateral netting agreement if— (a) those transactions do not constitute mutual credits or mutual debts; and (b) a party to any of those transactions is acting as a trustee for another person; and (c) the party acting as trustee is not authorised by the terms of the trust of which the party is a trustee to enter into the transaction. Compare: 1967 No 54 s 93E

260 Application of set-off under section 254 to transaction subject to netting agreements (1) Section 254 does not apply to transactions that are subject to a netting agreement to which sections 255 to 263 apply. [page 242] (2) However, a netted balance is to be treated as an amount to which section 254 applies if the bankrupt and the other party to the netting agreement have mutual credits or mutual debts between them that are not subject to the netting agreement. Compare: 1967 No 54 s 93F

261 Transactions under netting agreement and insolvent transactions (1) Nothing in sections 255 to 263 prevents the operation of section 194 in relation to any transaction to which a netting agreement applies. (2) For the purposes of section 194, the following are obligations incurred: (a) a transaction entered into by a bankrupt under a netting agreement if the effect of the transaction is to reduce any netted balance payable by or to the bankrupt: (b) a netting agreement entered into by a bankrupt to the extent that the effect of entering into the netting agreement is to reduce any amount that was owing by or to the bankrupt at the time the bankrupt entered into the agreement. Compare: 1967 No 54 s 93G

262 Set-off under netting agreement not affected by notice under section 206(2) The filing of a notice under section 206(2) in respect of a transaction that is subject to a netting agreement does not affect the operation of section 257 in respect of the transaction, and that section continues to apply to the transaction until the transaction is cancelled under section 206. Compare: 1967 No 54 s 93H

263 Disclaimer of onerous property and termination of netting agreement not permitted The Assignee must not— (a) disclaim, under section 117 or 125, any property of a bankrupt that relates to a transaction under a netting agreement: (b) terminate, under section 187, a netting agreement or any contract of a bankrupt that constitutes a transaction under a netting agreement. Compare: 1967 No 54 s 93I

Interest

264 Pre-adjudication interest A creditor may claim interest up to the date of adjudication,— (a) in the case of contract debt interest, at the rate specified in the contract that provides for interest on the debt; or (b) in the case of judgment debt interest, at the rate payable on the debt. Compare: 1993 No 105 s 311(1)

[page 243]

265 Post-adjudication interest at prescribed rate if surplus remains

(1) The Assignee must pay interest on all admitted creditors’ claims at the prescribed rate if there are surplus assets left after the Assignee has paid the claims. (2) The Assignee must pay interest from the date of adjudication to the date when each debt is paid. (3) If the surplus is not enough to pay interest in full on all debts, payment of interest must abate rateably among them all.

Example A and B are the only creditors of the bankrupt, C. A’s contract with C provided for interest of 20%, but B’s contract did not provide for interest. C’s bankruptcy commenced on 1 April 2002. At that date—(1) C owed A $1,000 plus $100 contractual debt interest; and (2) C owed B $2,000 but no interest. A can prove in the bankruptcy for $1,100 and B for $2,000. The Assignee pays their claims in full on 1 April 2003, 1 year after the commencement of the bankruptcy. If there are surplus assets after the Assignee has paid the claims of A and B in full, the Assignee must use the surplus to pay interest on both debts for the period from 1 April 2002 to 1 April 2003. If there is enough, and assuming that the prescribed rate is 10%, the Assignee must pay A $110 and B $200 in post-adjudication interest. Assume that the Assignee has a surplus of only $155. In that case A and B share pro rata, so that A is paid $55 in post-adjudication interest, and B is paid $100. Compare: 1993 No 105 s 311(2)

266 Additional post-adjudication interest on contract or judgment debt if surplus remains (1) If there is a surplus after the Assignee has paid post-adjudication interest at the prescribed rate under section 265, the Assignee must pay additional postadjudication interest on admitted proofs for a contract debt or judgment debt, by making up,— (a) in the case of a contract debt, the difference between the prescribed

rate and the rate specified in the contract: (b) in the case of a judgment debt, the difference between the prescribed rate and the rate payable on the debt. (2) The Assignee must pay interest from the date of adjudication to the date when each creditor’s claim is paid. (3) If the surplus is not enough to pay additional post-adjudication interest in full on the creditors’ claims eligible for that interest, payment of interest must abate rateably among them all. Compare: 1967 No 54 s 94; 1993 No 105 s 311(3)

267 Meaning of prescribed rate In sections 265 and 266, prescribed rate means the rate of interest prescribed from time to time under section 87(3) of the Judicature Act 1908. Compare: 1993 No 105 s 311(4)

[page 244]

Miscellaneous provisions relating to creditors’ claims

268 Creditor must deduct trade discounts A creditor must deduct from the creditor’s claim any trade discount that the creditor would have given a debtor if the debtor had not become bankrupt. Compare: 1967 No 54 s 92

269 Proof when charge void If a creditor’s charge is wholly or partly void under the provisions of this or any other Act, the creditor may prove as an unsecured creditor,— (a) if the charge is wholly void, for the whole of the debt; or (b) if the charge is partly void, to the extent that the debt is unsecured. Compare: 1967 No 54 s 96

270 Judgment creditor may prove for costs A person who obtained an order for costs against the bankrupt before adjudication may prove for the amount of the costs when the costs are fixed, even if the amount is fixed only after adjudication. Compare: 1967 No 54 s 100

271 Company may prove for unpaid calls (1) This section applies if the bankrupt, at the time of adjudication, is a shareholder of a company that has not been put into liquidation. (2) The company may prove for— (a) the amount of unpaid calls on the bankrupt made before adjudication in respect of the bankrupt’s shares; and (b) the value of the liability to calls to be made in the period of 1 year after adjudication. (3) The value referred to in subsection (2)(b) must be estimated— (a) as agreed by the Assignee and the company; or (b) if the Assignee and the company cannot agree, as directed by the court. (4) This section does not affect the provisions of sections 103 and 268 of the Companies Act 1993 in the event that the company is put into liquidation. Compare: 1967 No 54 ss 101(1), 102

272 When guarantor for bankrupt may prove (1) This section applies if a person (A)— (a) is, at the time of adjudication, guarantor of, or liable for a debt or liability of, the bankrupt; and (b) discharges the debt or liability, even after adjudication. (2) A has the benefit of the rules in subsections (3) and (4). (3) If the creditor in question has submitted a creditor’s claim form for the debt or liability, A may stand in the creditor’s place in respect of the claim. (4) If the creditor in question has not submitted a creditor’s claim form for the

debt or liability, A may— (a) prove for the payment that A has made as if the payment were a debt, without disturbing dividends already paid to the creditor in the bankruptcy; and [page 245] (b) receive dividends paid subsequently. Compare: 1967 No 54 s 103

Subpart 10—Distribution of assets

273 Priority of payments for distribution of bankrupt’s assets (1) The Assignee must pay, out of the money received by him or her by the realisation of the property of the bankrupt, the preferential claims set out in section 274 to the extent and in the order of priority specified in that section and sections 275 to 279. (2) After paying the preferential claims in accordance with subsection (1), the Assignee must pay any remaining money to the general creditors in accordance with section 280. (3) After paying the general creditors in accordance with subsection (2), the Assignee must pay any remaining money to the bankrupt in accordance with section 281. (4) Any money received by the Assignee by the realisation of the property of the bankrupt that is not able to be paid in accordance with subsections (1) to (3), must be paid to Public Trust in accordance with section 283. (5) Other than as set out in section 275(1)(b) and (3), subsection (1) is subject to— (a) the powers of secured creditors referred to in section 4(c); and (b) any other enactment. Compare: 1993 No 105 ss 312, 313

Preferential claims

274 Priority of payments to preferential creditors (1) The Assignee must first pay, in the order of priority in which they are listed, — (a) the fees and expenses properly incurred by the Assignee in carrying out the duties and exercising the powers of the Assignee, and the remuneration of the Assignee; and (b) the reasonable costs of a creditor in procuring the order of

adjudication, including the reasonable costs incurred between lawyer and client in procuring the order, inclusive of and subsequent to the preparation and filing of the creditor’s application for adjudication; and (c) to any creditor who protects, preserves the value of, or recovers property of the bankrupt for the benefit of the bankrupt’s creditors by the payment of money or the giving of an indemnity,— (i)

the amount received by the Assignee by the realisation of that property, up to the value of that creditor’s unsecured debt; and

(ii) the amount of the costs incurred by that creditor in protecting, preserving the value of, or recovering that property. (2) After paying the claims referred to in subsection (1), the Assignee must next pay, to the extent that they remain unpaid, the following claims: (a) subject to section 276(1), all wages or salary of any employee, whether or not earned wholly or in part by way of commission, and whether [page 246]

payable for time or for piece work, in respect of services provided to the bankrupt during the 4 months before the adjudication: (aa) subject to section 276(1), all untransferred amounts of an employee’s payroll donations by an employer or PAYE intermediary under section 24Q of the Tax Administration Act 1994 during the 4 months before the adjudication:

(b) subject to section 276(1), any holiday pay payable to an employee on the termination of his or her employment before, or because of, the adjudication: (c) subject to section 276(1), any compensation for redundancy owed to an employee that accrues before, or because of, the adjudication: (d) subject to section 276(1), amounts deducted by the bankrupt from the wages or salary of an employee in order to satisfy obligations of the employee (including amounts payable to the Commissioner of Inland Revenue in accordance with section 163(1) of the Child Support Act 1991 and section 167(2) of the Tax Administration Act 1994 as applied

by section 70 of the Student Loan Scheme Act 2011): (e) subject to section 276(1), any reimbursement or payment provided for, or ordered by, the Employment Relations Authority, the Employment Court, or the Court of Appeal under section 123(1)(b) or section 128 of the Employment Relations Act 2000, to the extent that the reimbursement or payment does not relate to any matter set out in section 123(1)(c) of the Employment Relations Act 2000, in respect of wages or other money or remuneration lost during the 4 months before the adjudication: (f)

amounts that are preferential claims under section 172(2) and (3):

(g) all amounts payable to the Commissioner of Inland Revenue in accordance with section 167(2) of the Tax Administration Act 1994 as applied by section 67 of the KiwiSaver Act 2006: (h) all sums that, by any other enactment, are required to be paid in accordance with the priority established by this subsection. (3) After paying the claims referred to in subsection (2), the Assignee must next pay all sums, for which a buyer is a creditor in the bankruptcy under section 11 of the Layby Sales Act 1971,— (a) paid by the buyer to a seller on account of the purchase price of goods; or (b) to which the buyer is or becomes entitled to receive from a seller under section 9 of the Layby Sales Act 1971. (4) After paying the claims referred to in subsection (3), the Assignee must next pay the amount of any costs referred to in section 333(4)(c). (5) After paying the claims referred to in subsection (4), the Assignee must next pay, to the extent that it remains unpaid to the Commissioner of Inland Revenue or to the Collector of Customs, as the case may require, the amount of— (a) tax payable by the bankrupt in the manner required by Part 3 of the Goods and Services Tax Act 1985; and (b) tax deductions made by the bankrupt under the PAYE rules of the Income Tax Act 2007; and (c) non-resident withholding tax deducted by the bankrupt under the

NRWT rules of the Income Tax Act 2007; and [page 247] (d) resident withholding tax deducted by the bankrupt under the RWT rules of the Income Tax Act 2007; and (e) duty payable within the meaning of section 2(1) of the Customs and Excise Act 1996. Compare: 1967 No 54 s 104(1); 1993 No 105 Schedule 7 cls 1–5 Section 274(2)(aa): inserted, on 7 January 2010, by section 863 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section 274(2)(d): amended, on 1 April 2012, by section 223 of the Student Loan Scheme Act 2011 (2011 No 62). Section 274(5)(b): amended, on 1 April 2008, by section ZA 2(1) of the Income Tax Act 2007 (2007 No 97). Section 274(5)(c): amended, on 1 April 2008, by section ZA 2(1) of the Income Tax Act 2007 (2007 No 97). Section 274(5)(d): amended, on 1 April 2008, by section ZA 2(1) of the Income Tax Act 2007 (2007 No 97).

275 Conditions to priority of payments to preferential creditors (1) The claims listed in each of subsections (2), (3), (4), and (5) of section 274 — (a) rank equally among themselves and, subject to any maximum payment level specified in any Act or regulations, must be paid in full, unless the property of the bankrupt is insufficient to meet them, in which case they abate in equal proportions; and (b) in so far as the property of the bankrupt available for payment of those claims is insufficient to meet them,— (i)

have priority over the claims of any person under a security interest to the extent that the security interest— (A) is over all or any part of the bankrupt’s accounts receivable and inventory or all or any part of either of them; and

(B) is not a purchase money security interest that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999; and (C) is not a security interest that has been perfected under the Personal Property Securities Act 1999 at the date of adjudication and that arises from the transfer of an account receivable for which new value is provided by the transferee for the acquisition of that account receivable (whether or not the transfer of the account receivable secures payment or performance of an obligation); and (ii) must be paid accordingly out of any accounts receivable or inventory subject to that security interest (or their proceeds). (2) For the purposes of subsection (1)(b), the terms account receivable, inventory, new value, proceeds, purchase money security interest, and security interest have the same meanings as in the Personal Property Securities Act 1999. (3) To the extent that the claims to which subsection (1) applies are paid out of property referred to in paragraph (b) of that subsection, the amount so paid is an unsecured debt due by the bankrupt to the secured party. Compare: 1993 No 105 Schedule 7 cls 9, 10

[page 248]

276 Provisions concerning preferential payments to employees (1) The total sum to which priority is to be given under any, or all, of paragraphs (a) to (e) of section 274(2) must not, in the case of any one employee, exceed $18,700 or any greater amount that is prescribed under subsection (2) at the date of adjudication. (2) The sum stated in subsection (1) must be adjusted as follows: (a) subject to paragraph (d), an adjustment must be made, by the Governor-General by Order in Council, after the 3-year period starting on 1 July 2006 and ending on 30 June 2009 and after every 3-year

period following that (an adjustment period): (b) subject to paragraph (d), the Order in Council must be made within 3 months of the end of an adjustment period: (c) each adjustment must reflect any overall percentage increase, over the relevant adjustment period, in average weekly earnings (total, private sector), calculated by reference to the last Quarterly Employment Survey published by Statistics New Zealand (or, if that survey ceases to be published, a survey certified by the Government Statistician as an equivalent to that survey) within the relevant adjustment period: (d) if, in an adjustment period, there is no change, or an overall decrease, in the percentage movement in average weekly earnings (total, private sector), as so calculated, no adjustment may be made for that adjustment period: (e) if, in accordance with paragraph (d), no adjustment is made, the next adjustment made for any succeeding adjustment period must reflect any overall percentage increase in average weekly earnings (total, private sector) between the date of the last adjustment and the end of the relevant adjustment period for which the adjustment is to be made: (f)

all adjustments are cumulative and must be rounded to the nearest $20:

(g) any correction to the Quarterly Employment Survey on which an adjustment is based must be disregarded until the adjustment that takes effect in the following adjustment period, which must reflect the corrected information in the calculation of that adjustment and must otherwise be made in accordance with this subsection. (3) The sum stated in subsection (1), or any greater amount prescribed under subsection (2) that applies on the date on which a debtor is adjudicated bankrupt, continues to apply to that bankruptcy regardless of any change to that sum that is prescribed after the date on which the debtor is adjudicated bankrupt. (4) For the purposes of this section and section 274,— (a) remuneration in respect of a period of holiday or of absence from work through sickness or other good cause is to be treated as wages in respect of services rendered to the bankrupt during that period: (b) employee means any person of any age employed by an employer to

do any work for hire or reward under a contract of service (including a homeworker as defined in section 5 of the Employment Relations Act 2000): (c) holiday pay, in relation to a person, means all sums payable to that person by the bankrupt under subpart 1 of Part 2 of the Holidays Act 2003, and includes all sums that by or under any other enactment or any [page 249]

award, agreement, or contract of service are payable to that person by the bankrupt as holiday pay.

Compare: 1967 No 54 s 104(1A), (1B), (3); 1993 No 105 Schedule 7 cls 6, 6A, 12 Section 276(1): $20,340 is the maximum priority amount for the purposes of section 276(1), on 28 September 2012, by clause 3 of the Insolvency (Maximum Priority Amount) Order 2012 (SR 2012/253). Section 276(1): amended, on 30 September 2009, pursuant to clause 3 of the Insolvency (Maximum Priority Amount) Order 2009 (SR 2009/228).

277 Subrogation of persons if payment has been made If a payment has been made to a person (A) on account of any preferential claim set out in section 274 out of money advanced by another person (B) for that purpose, then B has, in the bankruptcy, the same right of priority in respect of the money so advanced as A would have if the payment had not been made. Compare: 1993 No 105 Schedule 7 cl 7

278 Priority given to person who distrains on goods If a landlord or other person has distrained on goods or effects of the bankrupt during the 20 working days before the adjudication, the preferential claims set out in section 274 are a first charge on the goods or effects so distrained, or the proceeds from their sale; but if any money is paid to a claimant under that charge, the landlord or other person has the same rights of priority as that claimant.

Compare: 1993 No 105 Schedule 7 cl 11

279 Creditors to have priority over creditors of joint bankrupt If a person (A) is a partner of a firm and is adjudicated bankrupt, any creditors to whom A is indebted jointly with the other partners of the firm must not receive any money obtained from the realisation of the separate property of A until all the separate creditors have had their claims paid in full. Compare: 1967 No 54 s 106

Payments to general creditors and to bankrupt

280 Payment of remaining money to general creditors (1) After paying preferential claims in accordance with sections 274 to 279, the Assignee must apply the money received by him or her by the realisation of the property of the bankrupt in satisfaction of all other claims. (2) The claims referred to in subsection (1) rank equally among themselves and must be paid in full, unless the money is insufficient to meet them, in which case they abate in equal proportions. (3) If, before the date of adjudication, a creditor agrees to accept a lower priority in respect of a debt than it would otherwise have under this section, nothing in this section prevents the agreement from having effect according to its terms. Compare: 1993 No 105 s 313(1)–(3)

[page 250]

281 Payment of surplus to bankrupt (1) After paying interest under section 265 and the claims referred to in section 280, the Assignee must pay any surplus to the bankrupt. (2) This section is subject to section 215. Compare: 1993 No 105 s 313(4)

Undistributed money paid to Public Trust

282 Definition of undistributed money In sections 283 to 289, undistributed money means any money that— (a) was received by the Assignee by the realisation of the property of the bankrupt; and (b) remains after the Assignee deducts the costs of obtaining his or her release under sections 408 to 410, if applicable; and (c) is required to be paid to any person under sections 274 to 281, but is not able to be distributed for any reason. Compare: 1967 No 54 s 134(1)

283 Undistributed money to be paid to Public Trust The Assignee must pay any undistributed money to Public Trust. Compare: 1967 No 54 s 134(1)

284 Public Trust to hold undistributed money (1) Public Trust must hold any undistributed money paid to it subject to the claim of any person who appears to be entitled to that money. (2) Undistributed money paid to Public Trust is held by Public Trust subject to — (a) this Act; and (b) the Public Trust Act 2001; and (c) any other enactment relating to Public Trust. (3) If there is any inconsistency between the provisions of this Act and any provisions of the Public Trust Act 2001 or any other enactment relating to Public Trust, this Act prevails. Compare: 1967 No 54 s 134(1), (2), (7)

285 Public Trust to pay undistributed money to

bankruptcy surplus account (1) After the expiry of 12 months from the date on which undistributed money is paid to Public Trust, Public Trust must transfer any undistributed money that has not been claimed by a person into a bankruptcy surplus account. (2) Undistributed money transferred into a bankruptcy surplus account— (a) is deemed to be one common and general fund; and (b) may be applied without discrimination in accordance with section 286. Compare: 1967 No 54 s 134(3)

286 Application of undistributed money held in bankruptcy surplus account Undistributed money held in the bankruptcy surplus account may be used as follows: [page 251] (a) for distribution, in relation to the bankruptcy from which the undistributed money came, to any person who remains to be paid as set out in section 282(c); and (b) for the purposes of this Act, to the extent and in the manner allowed by this Act; and (c) subject to section 287, to replace, to the extent of the deficiency, any money misappropriated by an Assignee or any person employed under the provisions of this Act (other than under sections 325 to 360); and (d) subject to section 288, to meet the costs of court proceedings, obtaining legal advice, or employing an accountant or other experts in circumstances where the creditors of a bankrupt are unable to pay those costs, or it would be unfair or inequitable that they should do so. Compare: 1967 No 54 s 134(4)–(6)

287 Requisition of Minister required for payment under section 286(c) Public Trust may pay undistributed money out of the bankruptcy surplus account under section 286(c) only on the requisition of the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act. Compare: 1967 No 54 s 134(5)

288 Approval of Official Assignee required for payment under section 286(d) Public Trust may pay undistributed money out of the bankruptcy surplus account under section 286(d) only with the approval of the Official Assignee and subject to any conditions he or she may impose. Compare: 1967 No 54 s 134(6)

289 Matters concerning bankruptcy surplus account (1) Subject to sections 285 to 288, the investment, realisation, and disposition of undistributed money held in the bankruptcy surplus account, and any profits accruing from that money, are subject to the provisions of the Public Trust Act 2001. (2) Undistributed money may be paid out of the bankruptcy surplus account under section 286(c) or (d) without further appropriation than this Act. (3) Public Trust may make a payment out of the bankruptcy surplus account without being concerned to see or inquire whether Public Trust received any undistributed money or sufficient undistributed money on account of the bankrupt in respect of whom the application for payment relates whenever an application for a payment out of that account is made to Public Trust under section 286— (a) by requisition of the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act; or (b) with the approval of the chief executive of the department of State that, with the authority of the Prime Minister, is for the time being responsible for the administration of this Act; or (c) by an Official Assignee. Compare: 1967 No 54 s 134(7), (8)

[page 252]

Part 4 End of Bankruptcy

Subpart 1—Discharge from bankruptcy Automatic discharge from bankruptcy

290 Automatic discharge 3 years after bankrupt files statement of affairs (1) A bankrupt is automatically discharged from bankruptcy 3 years after the bankrupt files a statement of affairs under section 46 or section 67, but may apply to be discharged earlier. (2) However, a bankrupt is not automatically discharged if— (a) the Assignee or a creditor has objected under section 292 and the objection has not been withdrawn by the end of the 3-year period referred to in subsection (1); or (b) the bankrupt has to be publicly examined under section 173 and has not completed that examination; or (c) the bankrupt is undischarged from an earlier bankruptcy. Compare: 1967 No 54 s 107(1), (2), (6)

291 Effect of automatic discharge The automatic discharge of the bankrupt has the same effect as if the court made an order for the bankrupt’s discharge. Compare: 1967 No 54 s 107(7)

292 Objection to automatic discharge (1) The Assignee or, with the permission of the court, a creditor may object to the bankrupt’s automatic discharge. (2) The objection must be made in the prescribed manner. Compare: 1967 No 54 s 107(3)

293 Objection may be withdrawn (1) An objection to the automatic discharge of the bankrupt may be withdrawn

in the prescribed manner. (2) The bankrupt is automatically discharged on the withdrawal of the objection if— (a) the 3-year period referred to in section 290(1) has elapsed; and (b) there is no other objection to the discharge that has not been withdrawn; and (c) neither section 290(2)(b) nor (c) applies. Compare: 1967 No 54 s 107(4), (5)

Application for discharge from bankruptcy

294 Bankrupt may apply for discharge (1) The bankrupt may at any time apply to the court for an order of discharge from bankruptcy. [page 253] (2) However, if the court has previously refused an application by the bankrupt for a discharge, and has specified the earliest date when the bankrupt may again apply, the bankrupt must not apply before that date. (3) The hearing of the application must be in accordance with section 177. Compare: 1967 No 54 s 108

Examination concerning discharge from bankruptcy

295 When bankrupt must be examined concerning discharge (1) The Assignee must summon the bankrupt to be publicly examined by the court concerning his or her discharge, and the court must conduct the examination, if— (a) the Assignee or a creditor has objected to the bankrupt’s automatic discharge and the objection has not been withdrawn; or (b) the bankrupt is due for automatic discharge but is still undischarged

from an earlier bankruptcy; or (c) the bankrupt has been required to be publicly examined under section 173 and has not completed that examination. (2) The Assignee must summon the bankrupt as soon as practicable after the expiry of the 3-year period referred to in section 290(1). (3) Sections 173 to 181, so far as they are applicable and with the necessary modifications, apply to a public examination under this section. Compare: 1967 No 54 s 109(1), (3)

296 Assignee’s report (1) The Assignee must prepare a report and file it in the court when— (a) the bankrupt has applied under section 294 for a discharge; or (b) the Assignee has summoned the bankrupt to be examined under section 295. (2) The Assignee must report as to— (a) the bankrupt’s affairs; and (b) the causes of the bankruptcy; and (c) the bankrupt’s performance of his or her duties under this Act; and (d) the manner in which the bankrupt has obeyed orders of the court; and (e) the bankrupt’s conduct before and after adjudication; and (f)

any other matter that would assist the court in making a decision as to the bankrupt’s discharge.

Compare: 1967 No 54 s 109(2)

297 When creditor must give notice of opposition to discharge (1) A creditor must give notice to the Assignee and the bankrupt if the creditor intends to oppose the bankrupt’s discharge on a ground that is not mentioned in the Assignee’s report. (2) The notice must—

(a) set out the ground or grounds for opposing the discharge; and (b) be given within the prescribed time. Compare: 1967 No 54 s 109(4)

[page 254]

298 Court may grant or refuse discharge (1) When the court hears an application under section 294 for discharge, or conducts the examination of the bankrupt under section 295, the court may, having regard to all the circumstances of the case,— (a) immediately discharge the bankrupt; or (b) discharge the bankrupt on conditions (which may include a condition that the bankrupt consents to any judgment or order for the payment of any sum of money); or (c) discharge the bankrupt but suspend the order for a period; or (d) discharge the bankrupt, with or without conditions, at a specified future date; or (e) refuse an order of discharge, in which case the court may specify the earliest date when the bankrupt may apply again for discharge. (2) If the court discharges the bankrupt on the condition that the bankrupt consents to any judgment, and the bankrupt does consent, the court may vary the judgment as it thinks appropriate. Compare: 1967 No 54 s 110(1), (3)

299 Court may restrict bankrupt from engaging in business after discharge (1) The court, when it makes an order of discharge or at any earlier time, may prohibit the bankrupt after discharge from doing any or all of the following things without the court’s permission: (a) entering into, carrying on, or taking part in the management or control of any business or class of business:

(b) being a director of any company: (c) directly or indirectly being concerned, or taking part, in the management of any company: (d) being employed by a relative of the bankrupt: (e) being employed by a company, trust, trustee, or incorporated society that is managed or controlled by a relative of the bankrupt. (2) The court may— (a) prohibit the bankrupt for a specified period, or without a time limit: (b) at any time vary or cancel the prohibition. Compare: 1967 No 54 s 111

300 Court may reverse order of discharge (1) The court may, on the application of the Assignee or a creditor, reverse the discharge of a bankrupt at any time before— (a) 2 years after the discharge, in the case of an absolute discharge; or (b) 2 years after the discharge takes effect, in the case of a discharge that is conditional or suspended. (2) When the court reverses a discharge, the court may then, or at any time after, make a new order of discharge, whether absolute, suspended, or conditional. Compare: 1967 No 54 s 112(1), (4)

301 Grounds for reversing discharge (1) The court may reverse a discharge if— [page 255] (a) the bankrupt has been given notice of the application (including the grounds relied on by the applicant); and (b) the court is satisfied that facts have been established that—

(i)

were not known to the court when it made the order of discharge; and

(ii) had the court known of them, would have justified the court in refusing a discharge or discharging the bankrupt on conditions. (2) The court must not reverse a discharge if the facts relied on by the applicant, at the time when the court made an order discharging the bankrupt,— (a) were known to the applicant; or (b) could have been known if the applicant had inquired with reasonable diligence. Compare: 1967 No 54 s 112(1), (2)

302 Effect of reversal of discharge (1) The reversal of a discharge does not prejudice or affect the rights or remedies that any person other than the bankrupt would have had if the discharge had not been reversed. (2) Property that has been acquired by the bankrupt after discharge and that is vested in the bankrupt at the date of the reversal— (a) vests in the Assignee subject to any encumbrances; and (b) must be applied by the Assignee to pay debts that the bankrupt has incurred since the date of discharge. Compare: 1967 No 54 s 112(3)

303 Bankrupt may apply for absolute discharge if conditions of discharge too onerous (1) A bankrupt who cannot comply with any or all of the conditions of his or her discharge may apply to the court for an absolute discharge. (2) The court may discharge the bankrupt absolutely if the court is satisfied that the bankrupt’s inability is due to circumstances for which the bankrupt should not reasonably be held responsible. Compare: 1967 No 54 s 113

304 Debts from which bankrupt is released on discharge (1) On discharge, the bankrupt is released from all debts provable in the bankruptcy except those listed in subsection (2). (2) The bankrupt is not released from the following debts: (a) any debt or liability incurred by fraud or fraudulent breach of trust to which the bankrupt was a party: (b) any debt or liability for which the bankrupt has obtained forbearance through fraud to which the bankrupt was a party: (c) any judgment debt or amount payable under any order for which the bankrupt is liable under section 147 or section 298: (d) any amount payable under a maintenance order under the Family Proceedings Act 1980: (e) any amount payable under the Child Support Act 1991. Compare: 1967 No 54 s 114

[page 256]

305 Discharge conclusive evidence of bankruptcy A discharge is conclusive evidence of the bankruptcy and of the validity of the proceedings in the bankruptcy. Compare: 1967 No 54 s 115

306 Discharge does not release partners and others A discharge does not release any person who, at the date of adjudication, was— (a) a business partner of the bankrupt; or (b) a co-trustee with the bankrupt; or (c) jointly bound or had made any contract with the bankrupt; or

(d) a guarantor or in the nature of a guarantor of the bankrupt. Compare: 1967 No 54 s 116

307 Discharged bankrupt must assist Assignee A discharged bankrupt must assist the Assignee, as required by the court or the Assignee, in the realisation and distribution of the bankrupt’s property that is vested in the Assignee. Compare: 1967 No 54 s 117

308 Information regarding bankrupt’s discharge must be contained in public register maintained under section 62 If the court has refused a bankrupt a discharge or discharged the bankrupt but suspended the discharge, that information must be contained in the public register maintained under section 62. Compare: 1967 No 54 s 118

Subpart 2—Annulment

309 Court may annul adjudication (1) The court may, on the application of the Assignee or any person interested, annul the adjudication if— (a) the court considers that the bankrupt should not have been adjudicated bankrupt; or (b) the court is satisfied that the bankrupt’s debts have been fully paid or satisfied and that the Assignee’s fees and costs incurred in the bankruptcy have been paid; or (c) the court considers that the liability of the bankrupt to pay his or her debts should be revived because there has been a substantial change in the bankrupt’s financial circumstances since the date of adjudication; or (d) the court has approved a composition under subpart 1 of Part 5. (2) In the case of an application on one of the grounds specified in subsection (1)(a) to (c) by an applicant who is not the Assignee,— (a) a copy of the application must be served on the Assignee in the manner and within the time that the court directs; and [page 257] (b) the Assignee may appear on the hearing of the application as if the Assignee were a party to the proceeding. (3) The adjudication is annulled— (a) from the date of adjudication, in the case of an application on the ground specified in subsection (1)(a): (b) from the date of the court’s order of annulment, in the case of an application on one of the grounds specified in subsection (1)(b) to (d). (4) In the case of an application for annulment on the ground that the adjudication should not have been made because of a defect in form or

procedure, the court may, in addition to annulling the adjudication, exercise its powers under section 418 to correct the defect and order that the application for adjudication be reheard as if no adjudication had been made. (5) If the court annuls the adjudication on one of the grounds specified in subsection (1)(a) to (c),— (a) the court may, on the Assignee’s application, fix an amount as reasonable remuneration for the Assignee’s services and order that it be paid, in addition to any costs that may be awarded: (b) that amount must be paid into a Crown Bank Account: (c) the Assignee is not entitled to remuneration under section 406 for those services. Compare: 1967 No 54 s 119

310 When Assignee may annul adjudication (1) The Assignee may annul an adjudication on any of the grounds specified in subsection (2) if the adjudication was made on a debtor’s application. (2) The grounds for annulment by the Assignee are— (a) the Assignee considers that the bankrupt should not have been adjudicated bankrupt; or (b) the Assignee is satisfied that the bankrupt’s debts have been fully paid or satisfied and that the Assignee’s fees and costs incurred in the bankruptcy have been paid; or (c) the Assignee considers that the liability of the bankrupt to pay his or her debts should be revived because there has been a substantial change in the bankrupt’s financial circumstances since the date of adjudication; or (d) the court has approved a composition under subpart 1 of Part 5. (3) The Assignee may annul the adjudication on the application of any person interested or on the Assignee’s own initiative. (4) The adjudication is annulled— (a) from the date of adjudication, in the case of an application on the ground specified in subsection (2)(a):

(b) from the date of the Assignee’s order of annulment, in the case of an application on one of the grounds specified in subsection (2)(b) to (d).

311 Effect of annulment (1) On annulment of the adjudication, all property of the bankrupt vested in the Assignee on bankruptcy and not sold or disposed of by the Assignee revests in the bankrupt without the necessity for any conveyance, transfer, or assignment. [page 258] (2) Any contract, sale, disposition, or payment duly made or anything duly done by the Assignee before the annulment— (a) is not prejudiced or affected as to validity by the annulment; and (b) has effect as if it had been made or done by the bankrupt while no adjudication was in force. Compare: 1967 No 54 s 120

Part 5 Compositions, Proposals, Summary Instalment Orders, and No Asset Procedure

Subpart 1—Composition during bankruptcy

312 Creditors may accept composition by passing preliminary resolution (1) The creditors of a bankrupt may accept a composition in satisfaction of the debts due to them from the bankrupt by passing a special resolution (the preliminary resolution) that contains the terms of the composition. (2) If there is more than 1 class of creditor, the delay of one class in accepting, or the failure of one class to accept, does not prevent any other of the classes from accepting the composition. Compare: 1967 No 54 ss 121(1), 125(3)

313 Confirming resolution (1) The composition is ineffective unless the creditors confirm the composition by passing a special resolution (the confirming resolution). (2) The creditors may confirm in the composition on terms that vary from the terms contained in the preliminary resolution, if the final terms are at least as favourable to the creditors as the terms set out in the preliminary resolution. (3) The notice of the meeting to pass the confirming resolution must— (a) state generally the terms of the proposal for composition; and (b) be accompanied by a report by the Assignee on the proposal. (4) If the proposal for composition provides for the payment in full of all creditors whose respective debts do not exceed a certain amount, that class of creditors must not be counted either in number or value for the purpose of counting the requisite majority of creditors for passing the confirming resolution. Compare: 1967 No 54 s 121(2), (3), (4)

314 Compositions with members of partnership (1) If the members of a partnership have been adjudicated bankrupt, the joint

creditors and each class of separate creditors may make separate compositions. (2) In that case, the majorities of creditors required for passing the confirming resolution are the separate majorities of each class, but otherwise the joint and separate creditors must be counted as one body for voting. Compare: 1967 No 54 s 125(2)

315 Court must approve composition (1) The court must approve the composition if it is to be binding. [page 259] (2) The composition approved by the court binds all the creditors in respect of provable debts due to them by the bankrupt. (3) The court may refuse to approve the composition if it considers that— (a) section 312 or 313 has not been complied with; or (b) the terms of the composition are not reasonable or are not calculated to benefit the general body of creditors; or (c) the bankrupt is guilty of misconduct that justifies the court in refusing, qualifying, or suspending the bankrupt’s discharge; or (d) for any other reason it should not approve the composition. (4) The court must not approve the composition if the composition does not provide for the payment, before any other debts are paid, of those debts that have priority under subpart 10 of Part 3. (5) The court’s approval is conclusive as to the validity of the composition. Compare: 1967 No 54 s 122(3), (4), (5), (7)

316 Procedure for court approval of composition (1) The bankrupt or the Assignee may apply to the court to approve the composition. (2) Notice of the application must be given to each creditor.

(3) Before approving the composition, the court must— (a) receive a report by the Assignee as to the terms of the composition and the bankrupt’s conduct; and (b) hear any objection by or on behalf of a creditor. (4) When it approves the composition, the court may correct any formal or accidental error or omission, but must not alter the substance of the composition. Compare: 1967 No 54 s 122(1), (2), (6)

317 Deed of composition (1) As soon as practicable after the court has approved a composition,— (a) the bankrupt and the Assignee must execute a deed of composition for putting the proposal into effect; and (b) the Assignee must apply to the court for confirmation of the deed. (2) If it is satisfied that the deed conforms with the composition that it has earlier approved, the court must— (a) direct that the deed is entered and filed in the court; and (b) annul the adjudication. (3) The deed must not be entered and filed in the court unless the prescribed commission has been paid to the Assignee. (4) The annulment under subsection (2) does not revest the bankrupt’s property in the bankrupt in accordance with section 311(1). Compare: 1967 No 54 ss 123(1), (2), 125(5)

318 Effect of deed When the court has confirmed the deed and annulled the adjudication,— (a) the deed binds all the creditors in all respects as if they had each executed the deed; and [page 260]

(b) subject to the provisions of the Land Transfer Act 1952, the bankrupt’s property to which the deed relates vests and must be dealt with as provided in the deed. Compare: 1967 No 54 s 123(2)

319 Bankrupt remains liable for unpaid balances of certain debts (1) A bankrupt who makes a composition with his or her creditors remains liable for the unpaid balance of a debt if— (a) the bankrupt, by means of fraud,— (i)

incurred or increased the debt; or

(ii) on or before the date of the composition, obtained forbearance on the debt; and (b) the creditor who has been defrauded has not agreed to the composition. (2) For the purposes of subsection (1)(b) a creditor does not agree to the composition merely by proving the debt and accepting payment of a distribution of the assets in the estate. Compare: 1967 No 54 s 125(4)

320 Deadlines for steps to approve composition and execute deed (1) The deadlines for steps to approve the composition and execute the deed are — (a) the confirming resolution must be passed within 1 month after the preliminary resolution is passed; and (b) the court must approve the composition within 1 month after the confirming resolution is passed; and (c) the bankrupt must execute the deed of composition within 5 working days after the court approves the composition or, if the court allows the bankrupt additional time, within that time. (2) If any of the deadlines is not kept,—

(a) immediately on the expiry of the deadline, the proceedings in the bankruptcy resume as if there had been no confirming resolution; and (b) none of the periods specified in subsection (1) counts in the calculation of a period of time for any purpose of this Act. Compare: 1967 No 54 s 125(1)

321 Procedure following court approval of composition (1) The Registrar of the court must, after entering the deed of composition,— (a) endorse on the deed that it has been entered and filed in the court; and (b) if requested by the Assignee, deliver the deed to the Assignee. (2) The Assignee, as soon as practicable after the deed has been entered,— (a) must take all steps necessary to have any vesting provided for in the deed registered or recorded in the appropriate registry or office, and must then return the deed to the file of the court; and (b) must, subject to the provisions of the deed, give possession to the bankrupt or the trustee under the composition, as the case may be, of— (i)

the bankrupt’s property; or

(ii) so much of the bankrupt’s property as the Assignee possesses and that under the composition revests in the bankrupt or the trustee. Compare: 1967 No 54 s 123(3), (4)

[page 261]

322 Enforcement of composition The court may,— (a) on the application of an aggrieved person, order that any default in payment of any composition approved by the court be remedied: (b) on the application of a person interested, enforce the provisions of any composition approved by the court.

Compare: 1967 No 54 s 124(1), (2)

323 Court’s exclusive jurisdiction (1) After the preliminary resolution has been passed, the court continues to have exclusive jurisdiction in relation to the composition and the deed of composition, and their administration. (2) On an application in relation to the composition, the deed of composition, or their administration, the court may,— (a) for the purpose of summoning and examining the bankrupt and witnesses, direct the proceeding as if it were a proceeding under subpart 5 of Part 3: (b) make the order or orders that it thinks appropriate, including an order as to the costs of the application. Compare: 1967 No 54 s 124(3), (4)

324 Law and practice in bankruptcy applies to deed The court must decide a question arising under the deed of composition according to the law and practice of bankruptcy, if the law and practice of bankruptcy is relevant. Compare: 1967 No 54 s 124(5)

Subpart 2—Proposals

325 Meaning of debt, etc (1) In this subpart, unless the context otherwise requires,— debt means a debt that would be provable in the insolvent’s bankruptcy insolvent means a person who is not a bankrupt, but who is unable to pay his or her debts as they become due. (2) The debt of an insolvent is provable under this subpart. Compare: 1967 No 54 s 139

326 Insolvent may make proposal (1) An insolvent may make a proposal to creditors for the payment or satisfaction of the insolvent’s debts. (2) The proposal may include all or any of the following: (a) an offer to assign all or any of the insolvent’s property to a trustee for the benefit of the creditors: (b) an offer to pay the insolvent’s debts by instalments: (c) an offer to compromise the insolvent’s debts at less than 100 cents in the dollar: [page 262] (d) an offer to pay the insolvent’s debts at some time in the future: (e) any other offer for an arrangement for the satisfaction of the insolvent’s debts. (3) The proposal may include any other conditions for the benefit of the creditors and may be accompanied by a charge or guarantee. Compare: 1967 No 54 s 140(1), (2), (3)

327 Form of proposal (1) The proposal must be— (a) in the prescribed form; and (b) accompanied by a statement of affairs that is in the prescribed form and verified by affidavit. (2) The statement of affairs must set out the following information: (a) the insolvent’s assets, debts, and liabilities: (b) the name, address, and occupation of each of the insolvent’s creditors: (c) the securities (if any) held by each creditor. (3) The proposal must— (a) be signed by the insolvent; and (b) have endorsed on it the name of a person (A) who is willing to act as a trustee for the creditors; and (c) include a statement by A that A is willing to act. Compare: 1967 No 54 s 140(4), (5)

328 Proposal must be filed in court (1) The proposal must be filed in the office of the court nearest to where the insolvent lives. (2) The insolvent may not, while waiting for the decision of the creditors and the court, withdraw the proposal or any charge or guarantee tendered with it, unless the insolvent obtains the permission of the court. (3) The time when the proposal is filed in court is the time when the claims of creditors are determined. (4) If the creditors at a meeting under section 331 do not accept the proposal,— (a) the chairperson of the meeting must return the proposal to the court with his or her signed endorsement “Not accepted by creditors”; and (b) the Registrar must cancel the proposal. Compare: 1967 No 54 s 140(5)–(8)

329 Provisional trustee The trustee named in the proposal becomes the provisional trustee when the proposal is filed. Compare: 1967 No 54 s 141(1)

330 Provisional trustee must call meeting of creditors (1) The provisional trustee must, as soon as practicable after the proposal is filed, call a meeting of creditors by posting to every known creditor at the creditor’s last known address— (a) a notice of the date, time, and place of the meeting: (b) a summary of the insolvent’s assets and liabilities: [page 263] (c) a copy of the proposal and particulars of any charge or guarantee: (d) a creditor’s claim form: (e) a postal vote in the prescribed form. (2) A creditor who has proved a claim in the prescribed manner may vote on the proposal by sending a postal vote that reaches the provisional trustee before or at the meeting. (3) If the provisional trustee receives a postal vote before or at the meeting, the postal vote has effect as if the creditor had been present and voted at the meeting. Compare: 1967 No 54 s 141(2), (3)

331 Procedure at meeting of creditors (1) The provisional trustee is the chairperson of the meeting of creditors, unless the creditors elect their own chairperson. (2) The creditors may— (a) examine the insolvent:

(b) accept the proposal with or without amendments or modification, by passing a resolution that sets out the proposal in its final form: (c) confirm the provisional trustee as trustee, or appoint another person who is willing to act as trustee, in which case that person becomes the trustee. (3) The resolution accepting the proposal must be decided by a majority in number and three-quarters in value of the creditors who— (a) vote; and (b) are personally present or are represented at the meeting by a person specified in section 332 or have voted by postal vote. (4) If the insolvent consents, the creditors may include in the proposal terms for the supervision of the insolvent’s affairs. Compare: 1967 No 54 s 142

332 Who may represent creditors A person who may represent a creditor under section 91 may represent a creditor at a meeting to consider a proposal.

333 Court must approve proposal (1) After the proposal has been accepted by the creditors, the trustee must, as soon as practicable,— (a) apply to the court for approval of the proposal; and (b) send notice of the hearing of the application in the prescribed form to the insolvent and to each known creditor. (2) The court must, before approving a proposal, hear any objection that is made by or on behalf of a creditor. (3) The court may refuse to approve the proposal if it considers that— (a) the provisions of this subpart have not been complied with; or (b) the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors; or (c) for any reason it is not expedient that the proposal be approved.

(4) The court must not approve a proposal if it does not provide for the payment, before any other debts are paid, of— [page 264] (a) those debts that would have priority under this Act if the insolvent was adjudicated bankrupt; and (b) the trustee’s fees and expenses that are properly incurred by the trustee in respect of the proposal; and (c) costs incurred by a person other than the insolvent in organising and conducting a meeting of creditors for the purpose of voting on a proposal. (5) Subsection (4)(a) does not apply to the extent that a creditor waives the priority that the debt of that person would otherwise have had. (6) When it approves the proposal, the court may correct any formal or accidental error or omission, but must not alter the substance of the proposal. Compare: 1967 No 54 s 143(1)–(4), (6); 1993 No 105 s 234(c)

334 Effect of court approval (1) A proposal that is approved by the court is binding on all the creditors whose debts are provable under this subpart and are affected by the terms of the proposal. (2) The court’s approval is conclusive as to the validity of the proposal. Compare: 1967 No 54 s 143(5), (7)

335 Creditor must not take enforcement steps without court’s permission (1) A creditor whose debt is provable under this subpart must not take any of the steps listed in subsection (2) in respect of the debt— (a) after the court has approved the proposal; and

(b) while the proposal remains in force. (2) The steps referred to in subsection (1) are— (a) filing a creditor’s application for the insolvent’s adjudication: (b) proceeding with a creditor’s application for the insolvent’s adjudication that was filed before the proposal was filed: (c) enforcing any civil remedy against the insolvent’s person or property: (d) beginning any legal proceedings in respect of the debt. (3) However, a creditor may take any of the steps listed in subsection (2) with the permission of the court given on the terms that the court thinks appropriate. Compare: 1967 No 54 s 144(1)

336 Duty of insolvent After the court has approved the proposal, the insolvent must do everything that is necessary to put the proposal into effect. Compare: 1967 No 54 s 143(8)

337 Duties of trustee (1) After the court has approved the proposal, the trustee must— (a) take control of the property that is the subject of the proposal; and (b) administer and distribute that property according to the terms of the proposal; and (c) generally give effect to the proposal. [page 265] (2) The trustee may sell the property— (a) according to the terms of the proposal, if it specifies the method of sale; or (b) in accordance with Schedule 1, if the proposal does not specify the

method of sale. Compare: 1967 No 54 s 144(2)

338 Trustee must file 6-monthly summary of receipts and payments (1) The trustee must file with the Registrar a summary of receipts and payments. (2) The trustee must file the summary,— (a) for each 6-month period following court approval of the proposal, within 1 month after the end of the period; and (b) for the period between the end of the last 6-month period and the date when the trustee stops acting as trustee, within 1 month after the trustee has stopped acting. (3) The summary must— (a) be in the prescribed form; and (b) show the trustee’s receipts and payments during the period to which it relates; and (c) show the total amount of the trustee’s receipts and payments for all the preceding 6-month periods after the trustee’s appointment. Compare: 1967 No 54 s 144(3)

339 Cancellation or variation of proposal (1) At any time after it has approved the proposal, the court may, if it is satisfied that 1 or more of the grounds listed in subsection (2) apply,— (a) on the application of the trustee or any creditor, vary or cancel the proposal: (b) if asked to do so by the applicant or any other creditor, adjudicate the insolvent bankrupt. (2) The grounds referred to in subsection (1) are— (a) the insolvent’s statement of affairs accompanying the proposal did not substantially set out the true position or the insolvent gave wrong or

misleading replies at his or her examination, and it was unlikely that the proposal would have been accepted if the insolvent had disclosed the true facts: (b) the insolvent has failed to carry out or comply with the terms of the proposal: (c) the creditors generally will suffer injustice or undue delay if the proposal proceeds: (d) for any other reason the proposal ought to be varied or cancelled. (3) On cancellation of the proposal, unless the court orders otherwise, all property of the insolvent vested in the trustee and not sold or disposed of by the trustee vests, without the necessity for any conveyance, transfer, or assignment,— (a) in the insolvent; or [page 266] (b) if the court cancels the proposal and adjudicates the insolvent bankrupt, in the Assignee. (4) An order cancelling the proposal, or cancelling the proposal and adjudicating the insolvent bankrupt, does not prejudice or affect the validity of any contract, sale, disposition, or payment duly made or anything duly done under the proposal while it was in force. (5) If the insolvent files an application for his or her own adjudication, the proposal is cancelled as if it was cancelled by the court. Compare: 1967 No 54 s 145

Subpart 3—Summary instalment orders

340 Summary instalment order A summary instalment order is an order by the Assignee that the debtor pay his or her debts— (a) in instalments or otherwise; and (b) in full or to the extent that the Assignee considers practicable in the circumstances of the case. Compare: 1967 No 54 s 146(4)

341 Who may apply for order The Assignee may make a summary instalment order on the application of — (a) the debtor; or (b) a creditor, with the debtor’s consent. Compare: 1967 No 54 s 146(1)

342 Form of application (1) An application for a summary instalment order must be in the prescribed form. (2) An application by the debtor— (a) must state— (i)

that the debtor proposes to pay the creditors in full; or

(ii) the amount in the dollar that the debtor proposes to pay; and (b) must state the total amount of the weekly or other instalments that the debtor proposes to pay; and (c) must— (i)

state the name and address of the debtor’s proposed supervisor and annex the written consent of that person to be supervisor; or

(ii) if the debtor considers that a supervisor is not necessary, state the debtor’s reasons; and (d) must contain the following information: (i)

the debtor’s full name and address:

(ii) details of the debtor’s property: (iii) the names and addresses of each creditor: (iv) the amount and nature of each of the creditors’ debts: (v) whether any of the debts are secured and the value of the charge: (vi) whether any of the debts are guaranteed by any person: (vii) the amount of the debtor’s earnings: [page 267] (viii)the name and address of the debtor’s employer, if any: (ix) any other matter that may be prescribed. Compare: 1967 No 54 s 146(2)

343 Assignee may make summary instalment order (1) The Assignee may make a summary instalment order if the Assignee is satisfied that— (a) the debtor’s total unsecured debts (excluding any student loan balance) that would be provable in the debtor’s bankruptcy are not more than $40,000; and (b) the debtor is unable immediately to pay those debts. (2) Before making the order, the Assignee must allow the debtor or a creditor to make representations, if the debtor or creditor wants to do so. (3) A summary instalment order is not invalid if the total amount of the debts proved is more than the amount specified in subsection (1)(a), but in that case— (a) the supervisor appointed under section 345 may refer the matter to the

Assignee; and (b) the Assignee may, if the Assignee thinks appropriate, cancel the order. (4) The amount in subsection (1)(a) may be varied by the Governor-General by Order in Council to take account of increases in the all groups index number of the Consumer Price Index. Compare: 1967 No 54 s 146(4), (13)

344 Additional orders In addition to an order for the payment of the debts in instalments, the Assignee may make orders— (a) regarding the debtor’s future earnings or income: (b) regarding the disposal of goods that the debtor owns or possesses: (c) giving the supervisor appointed under section 345 power to— (i)

direct the debtor’s employer to pay all or part of the debtor’s earnings to the supervisor; and

(ii) supervise payment, out of the debtor’s earnings or income, of the reasonable living expenses of the debtor and his or her relatives and dependants. Compare: 1967 No 54 s 146(8), (9)

345 Appointment of supervisor (1) A summary instalment order must appoint a suitable and willing person to supervise compliance by the debtor with the terms of the order. (2) The Assignee may dispense with the appointment of a supervisor if the Assignee thinks it appropriate, and in that case— (a) the provisions of this subpart apply as if the debtor was the supervisor, except for section 346; and (b) section 346 applies as if the Assignee was the supervisor. (3) The Assignee may, if the Assignee thinks appropriate, require the supervisor to provide a bond to secure the supervisor’s performance of his or her

[page 268]

obligations under the Act, and must specify the amount of the bond and the person to whom it must be given.

Compare: 1967 No 54 s 146(5)–(7)

346 Role of supervisor (1) The supervisor must supervise the debtor’s compliance with the term’s of the summary instalment order and any other orders made under section 344. (2) The supervisor may charge the debtor remuneration for carrying out his or her duties as supervisor at the amount or rates fixed or prescribed under subsection (3). (3) The Governor-General may, by Order in Council, make regulations that fix or prescribe the amount or rates of remuneration chargeable under subsection (2).

347 Assignee may require supervisor or past supervisor to provide documents The Assignee may, by written notice, require the supervisor or a past supervisor to provide the Assignee within a reasonable period with any document relating to the debtor’s property, conduct, or dealings in the supervisor’s or past supervisor’s possession or under his or her control.

348 Termination of appointment for failure to supervise adequately The Assignee may terminate the supervisor’s appointment if the Assignee considers that the supervisor has failed to supervise the debtor’s compliance adequately, and may appoint a replacement supervisor.

349 Period of instalments The payment of instalments under a summary instalment order may be spread over a period of—

(a) up to 3 years; or (b) up to 5 years, if justified by special circumstances. Compare: 1967 No 54 s 146(12)

350 Variation or discharge of order The debtor or any creditor or the supervisor may at any time apply to the Assignee to vary or discharge a summary instalment order, and the Assignee may make an order as the Assignee thinks appropriate. Compare: 1967 No 54 s 146(14)

351 Effect of order All instalments payable under a summary instalment order must be paid in the prescribed manner. Compare: 1967 No 54 s 146(11)

352 Proceedings against debtor (1) In this section, proceeding means any proceeding against the person or property of the debtor in respect of a debt that has been— (a) shown in the debtor’s application for the summary instalment order; or (b) included in the summary instalment order; or (c) notified to the supervisor. [page 269] (2) After the summary instalment order has been made, a person must not begin or continue a proceeding unless— (a) the Assignee gives permission for a creditor to begin or continue the proceeding (in which case the Assignee may impose any conditions that the Assignee thinks appropriate); or (b) the debtor is in default under the order.

In the case of a proceeding in a District Court, unless subsection (2) applies, (3) the court— (a) must halt the proceeding on receiving notice of the order; and (b) may award all or part of the creditor’s costs incurred up to the time of the court’s notification, and may certify accordingly for the purpose of the creditor proving the debt under this subpart. Compare: 1967 No 54 s 148

353 Supervisor must give notice of summary instalment order to creditors The supervisor must send a notice of the summary instalment order to every creditor— (a) known to the supervisor; or (b) whose name is shown on the debtor’s application for the order; or (c) who has proved a debt under section 356. Compare: 1967 No 54 s 147(a)

354 Public register of debtors subject to current summary instalment order (1) The Assignee must maintain a public register of persons who are subject to a current summary instalment order. (2) The register must be maintained in accordance with subpart 5 of Part 7.

355 Meaning of current summary instalment order A summary instalment order is not current if it has been discharged or all the instalments required to be paid under the order have been paid in accordance with the order.

356 Creditor’s claim (1) A creditor who has proved his or her debt to the satisfaction of the supervisor is entitled to be included as a creditor in the administration of the

debtor’s estate under the summary instalment order for the amount of the debt. (2) A creditor may object to the supervisor’s acceptance or rejection of any creditor’s claim by applying to the Assignee. (3) If a creditor objects under subsection (2), the Assignee may give any directions the Assignee thinks appropriate as to the acceptance or rejection of the claim. (4) A person who becomes a creditor of the debtor after the order has been made, and who proves a debt before the supervisor,— (a) may elect to be included in the administration of the debtor’s estate; and (b) in that case, may be paid a dividend under the order only after creditors who became creditors of the debtor before the order was made and who have been included as a creditor in the administration have been paid under the order. Compare: 1967 No 54 s 147(b)–(d)

[page 270]

357 Payment of debtor’s earnings to supervisor (1) This section applies if the supervisor, under a power given by a summary instalment order made by the Assignee, directs the debtor’s employer to pay the debtor’s earnings, or part of them, to the supervisor. (2) The amounts that the employer must pay to the supervisor are recoverable as a debt from the employer, and the supervisor’s receipt is a complete discharge to the employer for the debt. (3) Payment by the employer in contravention of the supervisor’s direction to pay the supervisor discharges the liability of the employer to the supervisor for the amount of the payment only if it is made— (a) with the consent of the supervisor or the Assignee; or (b) to a person who is not the debtor and who has a better legal claim to it than the debtor.

Compare: 1967 No 54 s 146(10)

358 Distribution of money paid by debtor (1) The supervisor must distribute the money paid by the debtor under the summary instalment order in the following order: (a) first, payment of the costs of administration (including the supervisor’s remuneration) in accordance with the prescribed scale: (b) secondly, the Assignee’s costs and fees: (c) thirdly, payment of the debts in accordance with the order: (d) fourthly, payment of any surplus to the debtor. (2) The debtor is discharged from the unsecured debts to which the order relates if the supervisor pays, from the money received under the order, the amounts in subsection (1)(a) to (d) in full. Compare: 1967 No 54 s 149

359 Default by debtor (1) A debtor who defaults in paying any sum due under a summary instalment order is presumed, unless the contrary is proved, to have— (a) been able to pay the sum from the date of the order; and (b) refused or neglected to pay it. (2) If the debtor defaults in making payment in accordance with the order, unless a District Court orders otherwise,— (a) a proceeding that has been halted under section 352 may begin or continue: (b) any period during which a proceeding was halted under section 352 must be added to any period of limitation that applies to the proceeding. (3) The supervisor must notify the Assignee as soon as practicable of a default by the debtor in making payment in accordance with the order. Compare: 1967 No 54 s 150

360 Offence of obtaining credit (1) A person (A) commits an offence if— (a) A is a debtor in respect of whom a summary instalment order has been made; and [page 271] (b) before all creditors have been paid all amounts to which they are entitled under the order, A,— (i)

alone or jointly with another person, obtains for the time being credit of $1,000 or more; or

(ii) incurs liability for the time being to any person of $1,000 or more for the purpose of obtaining credit for another person; or (iii) enters into a hire purchase agreement under which A is liable to pay $1,000 or more. (2) It is a defence if A proves,— (a) in a case to which subsection (1)(b)(i) applies, that before obtaining the credit of $1,000 A informed the person giving the credit that A was affected by a summary instalment order: (b) in a case to which subsection (1)(b)(ii) applies, that before A incurred the liability of $1,000 the person giving the credit was informed that A was affected by a summary instalment order. (3) A person who commits an offence under this section is liable on summary conviction to imprisonment for a term not exceeding 1 year or a fine not exceeding $5,000 or both. (4) No matter what section 14 of the Summary Proceedings Act 1957 says, an information for an offence under this section may be laid at any time within 2 years after the time when the matter of the information arose. Compare: 1967 No 54 s 151

Subpart 4—No asset procedure

361 Introduction to this subpart This subpart sets out a procedure for dealing with a debtor who has no realisable assets.

Entry to no asset procedure

362 Application for entry to no asset procedure (1) A debtor who meets the criteria set out in section 363 may apply to the Assignee for entry to the no asset procedure. (2) A debtor applies for entry to the no asset procedure by completing and filing with the Assignee the following documents: (a) an application in the prescribed form; and (b) a statement in the prescribed form of the debtor’s affairs. (3) The Assignee may reject the debtor’s application if the application or statement of the debtor’s affairs is, in the Assignee’s opinion, incorrect or incomplete.

363 Criteria for entry to no asset procedure (1) The Assignee may admit a debtor to the no asset procedure if the Assignee is satisfied on reasonable grounds that— (a) the debtor has no realisable assets; and (b) the debtor has not previously been admitted to the no asset procedure; and [page 272] (c) the debtor has not previously been adjudicated bankrupt; and (d) the debtor has total debts (excluding any student loan balance) that are not less than $1,000 and not more than $40,000; and

(e) under a prescribed means test, the debtor does not have the means of repaying any amount towards those debts. (2) In this section, realisable assets does not include the assets that a bankrupt is allowed to retain under section 158, but does include any assets (for example, gifted assets) that might be recoverable by the Assignee if the debtor were adjudicated bankrupt on the date of application for entry to the no asset procedure and if the irregular transaction provisions in subpart 7 of Part 3 applied. (3) The amounts in subsection (1)(d) may be varied by the Governor-General by Order in Council to take account of increases in the all groups index number of the Consumer Price Index. Section 363(2): amended, on 17 November 2009, by section 7 of the Insolvency Amendment Act 2009 (2009 No 52).

364 Debtor disqualified from entry to no asset procedure in certain cases The Assignee must not admit a debtor to the no asset procedure if the Assignee is satisfied, on reasonable grounds, that— (a) the debtor has concealed assets with the intention of defrauding his or her creditors, for example, by transferring property to a trust; or (b) the debtor has engaged in conduct that would, if the bankrupt were adjudicated bankrupt, constitute an offence under this Act; or (c) the debtor has incurred a debt or debts knowing that the debtor does not have the means to repay them; or (d) a creditor intends applying for the debtor’s adjudication as a bankrupt and it is likely that the outcome for the creditor if the debtor is adjudicated bankrupt will be materially better than if the debtor is admitted to the no asset procedure.

365 Assignee must notify creditors If a debtor has applied to the Assignee for entry to the no asset procedure, the Assignee must as soon as practicable send a summary of the debtor’s assets and liabilities to each known creditor of the debtor.

366 Restrictions on debtor obtaining credit after application made A debtor who has applied for entry to the no asset procedure must not obtain credit (including hire purchase credit), either alone or jointly with another person, of more than $100 without first informing the credit provider that the debtor has applied for entry to the no asset procedure.

367 When debtor admitted to no asset procedure (1) A debtor is admitted to the no asset procedure when the Assignee sends the debtor a written notice in the prescribed form. (2) The Assignee must as soon as practicable notify creditors and advertise in the prescribed manner that the debtor has been admitted to the no asset procedure. [page 273]

368 Public register of persons admitted to no asset procedure (1) The Assignee must maintain a public register of persons admitted to the no asset procedure and persons discharged from that procedure under section 377. (2) The register must be maintained in accordance with subpart 5 of Part 7. Section 368(1): amended, on 17 November 2009, by section 13(6) of the Insolvency Amendment Act 2009 (2009 No 52).

Effect of entry to no asset procedure

369 Creditors may not enforce debts (1) A creditor (C) of a debtor (D) must not, after D has been admitted to the no asset procedure, begin or continue any step to recover or enforce a debt— (a) that D owes C at the time when D applies for entry to the no asset procedure; and

(b) that would be provable in D’s bankruptcy if D were adjudicated bankrupt. (2) However, subsection (1) does not apply to the following debts, which remain enforceable: (a) any amount payable under a maintenance order under the Family Proceedings Act 1980: (b) any amount payable under the Child Support Act 1991: (c) a student loan balance.

370 Debtor’s duties after entry to no asset procedure (1) The Assignee may require the debtor, and the debtor must comply with any reasonable request, to provide assistance, documents, and information necessary for applying the no asset procedure to the debtor. (2) The debtor must notify the Assignee as soon as practicable of any change in the debtor’s circumstances that would allow the debtor to repay an amount towards the debts referred to in section 369(1). (3) The debtor must not obtain credit (including hire purchase credit), either alone or jointly with another person, of more than $1,000 without first informing the credit provider that the debtor is subject to the no asset procedure.

371 Offence of obtaining credit (1) A person (A) commits an offence if A, while admitted to the no asset procedure,— (a) alone or jointly with another person, obtains for the time being credit of $1,000 or more; or (b) incurs liability for the time being to any person of $1,000 or more for the purpose of obtaining credit for another person; or (c) enters into a hire purchase agreement under which A is liable to pay $1,000 or more. (2) It is a defence if A proves,— (a) in a case to which subsection (1)(a) applies, that before obtaining the

credit of $1,000 A informed the person giving the credit that A was admitted to the no asset procedure: [page 274] (b) in a case to which subsection (1)(b) applies, that before A incurred the liability of $1,000 the person giving the credit was informed that A was admitted to the no asset procedure. (3) A person who commits an offence under this section is liable on summary conviction to imprisonment for a term not exceeding 1 year or a fine not exceeding $5,000 or both. (4) Despite anything that section 14 of the Summary Proceedings Act 1957 says, an information for an offence under this section may be laid at any time within 2 years after the date of the offence. Compare: 1967 No 54 s 151

Termination and discharge

372 Termination A debtor’s participation in the no asset procedure terminates when— (a) the Assignee terminates the debtor’s participation under section 373; or (b) the debtor is discharged under section 377; or (c) the debtor applies for his or her own adjudication; or (d) a creditor who is entitled to do so (for example, because the creditor’s debt is enforceable as a debt specified in section 369(2)) applies for the debtor’s adjudication and the debtor is adjudicated bankrupt.

373 When Assignee may terminate (1) The Assignee may terminate a debtor’s participation in the no asset procedure if— (a) the debtor was wrongly admitted to the no asset procedure, for example, because the debtor concealed assets or misled the Assignee;

or (b) the Assignee is satisfied that the debtor’s financial circumstances have changed, enabling the debtor to repay an amount towards his or her debts. (2) The Assignee terminates a debtor’s participation in the no asset procedure by sending the debtor a written notice in the prescribed form to the debtor’s last known address, and the termination is effective when the notice is sent, whether or not the debtor receives it. (3) The Assignee must as soon as practicable send a written notice of the termination to each creditor of the debtor known to the Assignee.

374 Assignee may apply for preservation order (1) If the Assignee terminates a debtor’s participation in the no asset procedure on the ground that the debtor has concealed assets or misled the Assignee, the court on the application of the Assignee may make an order for the preservation of the debtor’s assets pending an application for the debtor’s adjudication. (2) The court may make an order under subsection (1) on the terms and conditions that it sees fit.

375 Effect of termination Except in the case of termination by discharge under section 377, the debtor’s debts that became unenforceable on the debtor’s entry to the no [page 275] asset procedure become again enforceable on termination of the debtor’s participation in the no asset procedure, and the debtor is liable to pay any penalties and interest that may have accrued. Section 375: amended, on 17 November 2009, by section 8 of the Insolvency Amendment Act 2009 (2009 No 52).

376 Creditor may apply to Assignee for termination

(1) A creditor who objects on a ground set out in subsection (2) to the admission of the debtor to the no asset procedure may apply to the Assignee for termination. (2) The grounds for objection are— (a) the debtor did not meet the criteria for entry to the no asset procedure; or (b) there are reasonable grounds for the Assignee to conclude that the debtor was disqualified under section 364.

377 Time of discharge (1) The debtor is automatically discharged from the no asset procedure 12 months after the date when the debtor was admitted to it. (2) However, a debtor is not automatically discharged if the Assignee— (a) is satisfied that the 12-month period should be extended for the purpose of properly considering whether the debtor’s participation in the no asset procedure should be terminated; and (b) sends a written deferral notice to the debtor’s last known address before the expiry of the 12-month period. (3) The deferral notice must state an alternative date for automatic discharge, which must be no later than 25 working days after the expiry of the 12month period. (4) The deferral notice is effective whether or not the debtor receives it. (5) The Assignee must, as soon as practicable, send a written notice of the deferral to each creditor of the debtor known to the Assignee. (6) The debtor is automatically discharged from the no asset procedure on the date stated in the deferral notice. (7) The Assignee may revoke a deferral notice in the same way in which it was sent, in which case, the debtor is automatically discharged from the no asset procedure on— (a) the expiry of the 12-month period in subsection (1), if the notice is revoked before that date; or (b) in other cases, the date of revocation.

Section 377 heading: substituted, on 17 November 2009, by section 9(1) of the Insolvency Amendment Act 2009 (2009 No 52). Section 377(2): substituted, on 17 November 2009, by section 9(2) of the Insolvency Amendment Act 2009 (2009 No 52). Section 377(3): added, on 17 November 2009, by section 9(2) of the Insolvency Amendment Act 2009 (2009 No 52). Section 377(4): added, on 17 November 2009, by section 9(2) of the Insolvency Amendment Act 2009 (2009 No 52). Section 377(5): added, on 17 November 2009, by section 9(2) of the Insolvency Amendment Act 2009 (2009 No 52).

[page 276] Section 377(6): added, on 17 November 2009, by section 9(2) of the Insolvency Amendment Act 2009 (2009 No 52). Section 377(7): added, on 17 November 2009, by section 9(2) of the Insolvency Amendment Act 2009 (2009 No 52).

377A

Effect of discharge

(1) On discharge under section 377, the debtor’s debts that became unenforceable on the debtor’s entry to the no asset procedure are cancelled, and the debtor is not liable to pay any part of the debts, including any penalties and interest that may have accrued. (2) However, subsection (1) does not apply to— (a) any debt or liability incurred by fraud or fraudulent breach of trust to which the debtor was a party: (b) any debt or liability for which the debtor has obtained forbearance through fraud to which the debtor was a party. (3) The debts and liabilities referred to in subsection (2) become again enforceable on discharge under section 377, and the debtor is liable to pay any penalties and interest that may have accrued. Section 377A: inserted (with effect on 10 March 2009), on 17 November 2009, by section 10(2) of the Insolvency Amendment Act 2009 (2009 No 52).

377B

Discharge does not release partners and others

A discharge under section 377 does not release any person who, at the date of discharge, was— (a) a business partner of the discharged debtor; or (b) a co-trustee with the discharged debtor; or (c) jointly bound or had made any contract with the discharged debtor; or (d) a guarantor or in the nature of a guarantor of the discharged debtor. Section 377B: inserted, on 17 November 2009, by section 11 of the Insolvency Amendment Act 2009 (2009 No 52).

Part 6 Insolvent Deceased Estates

378 Interpretation (1) In this Part, unless the context otherwise requires, — administration, in relation to the will or estate of a deceased person, has the same meaning as in the Administration Act 1969 administrator means an administrator within the meaning of the Administration Act 1969 appointee means an appointee under section 387(2) beneficiary means a person who is beneficially interested in the deceased’s estate estate, in relation to a deceased debtor, means that part of the debtor’s estate that is available for distribution under section 393. (2) This subpart does not affect— (a) any property of a deceased person that does not form part of his or her estate as defined in subsection (1); or (b) the administration of that property. [page 277] (3) The administrator of the property of a deceased person (D) that does not form part of D’s estate as defined in subsection (1) is, and (whether or not there is an administrator) the appointee is not,— (a) D’s executor or administrator for the purposes of section 6 of the Deaths by Accidents Compensation Act 1952: (b) D’s personal representative for the purposes of section 48 of the Trustee Act 1956. Compare: 1967 No 54 s 153

Application and order that estate be administered under this Part

379 Court may order that estate be administered under this Part (1) The court may order that the estate of a deceased debtor be administered under this Part on the application,— (a) under section 380, of the administrator or a person who is applying to the court for a grant of administration: (b) under section 381, of— (i)

a creditor who has produced evidence establishing a debt due to the creditor; or

(ii) a beneficiary. (2) The court may refuse to make the order if it is satisfied that— (a) there is a reasonable probability that the estate will be enough for payment of the deceased’s debts; and (b) the creditors will not be prejudiced by the estate being administered in the normal way.

380 Application by administrator, etc (1) The administrator, or a person who is applying to the court for a grant of administration, may apply to the court for an order that the estate be administered under this Part if the administrator or person applying ascertains that the money in the estate, together with the proceeds of any assets in the estate that can conveniently be converted into money, will not be, or is not likely to be, enough to meet the several claims on the estate. (2) The application may be— (a) joined with an application for a grant of administration in respect of the deceased’s will or of the deceased’s property that does not form part of his or her estate; or (b) made at any time after that grant of administration. (3) An applicant under this section, in addition to the application, must file in the court an account that shows the assets, debts, and liabilities of the deceased, to the extent that the applicant knows what they are.

(4) The account— (a) must be verified by affidavit; and (b) may be amended from time to time; and (c) must be filed— (i)

when the application is filed; or [page 278]

(ii) within the prescribed time after the application is filed; or (iii) within the additional time that the court allows. Compare: 1967 No 54 s 154

381 Application by creditor or beneficiary for order under this Part (1) The following persons may also apply to the court for an order under this Part: (a) a creditor of the deceased’s estate, if the creditor’s debt has reached the threshold for a creditor’s application for adjudication: (b) a beneficiary. (2) A creditor or beneficiary may apply for an order if— (a) the administrator has not applied under this Part, and after being requested in writing to apply, fails to apply within 15 working days after receiving the request; or (b) after 4 months from the date of the debtor’s death, no administrator has been appointed and no application has been filed in the court under section 380. (3) In the case of an application under subsection (2)(a) for an order that the estate be administered under this Part, the court must not make the order before 2 months have expired after the date when the administration was granted, but this restriction does not apply if—

(a) the administrator has consented; or (b) the applicant proves that— (i)

the deceased committed an act of bankruptcy within 3 months before his or her death; or

(ii) the administrator has favoured or is about to favour any creditor; or (c) in the court’s opinion the administrator is not properly administering the estate. (4) The court may allow an application under subsection (2)(b) to be filed before 4 months after the date of the debtor’s death have expired if the court is satisfied that— (a) the deceased committed an act of bankruptcy within 3 months before his or her death; or (b) the estate that should have been available for the deceased’s creditors is reducing. Compare: 1967 No 54 s 155

382 Notice of application by creditor or beneficiary If an application has been filed by a creditor or beneficiary under section 381, the applicant must give notice of the application in the prescribed manner to— (a) the administrator; or (b) if there is no administrator, to the person specified by the court. Compare: 1967 No 54 s 156

383 When Registrar may hear application (1) A Registrar may hear an application for administration of the estate of a deceased person under this Part if— [page 279]

(a) the Registrar has jurisdiction to grant administration of the estate of any deceased person; and (b) the application is joined with an application for a grant of administration in respect of the estate or will of the deceased. (2) A Registrar may hear the application even if a Judge is available to hear it. Compare: 1967 No 54 s 157(2)

384 Costs of application The court, on hearing an application under this Part, may— (a) make the order or refuse the application with or without costs; and (b) in either case, order costs to be paid by one party to another, or out of the estate. Compare: 1967 No 54 s 157(1)

385 Court may order administration by Assignee or Public Trust (1) This section applies if an application has been filed for an order to administer an estate under this Part, and the court thinks that the estate is likely to be better administered by one of the persons mentioned in subsection (2)(b) than by the person who is or may become the administrator. (2) The court may, as part of its original order on the application or by any subsequent order, order that— (a) the administrator (if there is one) must no longer administer the estate; and (b) the Assignee, Public Trust, or some other person, as the court thinks appropriate, must administer the estate. Compare: 1967 No 54 s 158

386 Certificate filed by Public Trust or Māori Trustee has effect as application and order

(1)

Public Trust or the Māori Trustee may file a certificate under this section if Public Trust or the Māori Trustee (as the case may be) is the administrator of, or would be entitled to obtain a grant of administration for, an apparently insolvent estate.

(2) The filing of the certificate in the prescribed form has the effect both of an application and an order that the estate be administered under this Part. (3) The certificate must be filed in the registry of— (a) the court out of which the grant of administration issued; or (b) the court in which Public Trust or the Māori Trustee has filed an election to administer under— (i)

Part 4 of the Public Trust Office Act 1957 or Part 6 of the Public Trust Act 2001, in the case of Public Trust; or

(ii) section 12A or section 12B of the Maori Trustee Act 1953, in the case of the Māori Trustee; or (c) if no grant of administration has been issued or no election to administer has been filed, the court that Public Trust or the Māori Trustee thinks appropriate. (4) An election to administer an estate under this Part may be combined with an election to administer the estate under Part 6 of the Public Trust Act 2001 or section 12A or section 12B of the Maori Trustee Act 1953. [page 280] (5) Powers conferred on Public Trust or the Māori Trustee under this Part are in addition to the powers conferred on either of them by any other enactment or law. Compare: 1967 No 54 s 160 Section 386 heading: amended, on 1 July 2009, by section 30(1) of the Māori Trustee Amendment Act 2009 (2009 No 12). Section 386(1): amended, on 1 July 2009, by section 30(1) of the Māori Trustee Amendment Act 2009 (2009 No 12). Section 386(3)(b): amended, on 1 July 2009, by section 30(1) of the Māori Trustee Amendment Act 2009 (2009 No 12). Section 386(3)(b)(ii): amended, on 1 July 2009, by section 30(1) of the Māori Trustee Amendment Act

2009 (2009 No 12). Section 386(3)(c): amended, on 1 July 2009, by section 30(1) of the Māori Trustee Amendment Act 2009 (2009 No 12). Section 386(5): amended, on 1 July 2009, by section 30(1) of the Māori Trustee Amendment Act 2009 (2009 No 12).

Effect of order that estate be administered under this Part

387 Estate vests in appointee (1) The whole of the estate at the date when the application for the order under this Part was filed vests in the person appointed by the court to administer it (the appointee). (2) The court, in its order that the estate be administered under this Part or in a subsequent order, may appoint as appointee— (a) the administrator; or (b) the Assignee; or (c) Public Trust; or (d) any other person. Compare: 1967 No 54 s 159(1)

388 Appointee must realise, administer, and distribute estate The appointee must, as soon as practicable after the estate vests in the appointee, realise, administer, and distribute the assets in accordance with the law and practice of bankruptcy, subject to any modifications in this Part. Compare: 1967 No 54 s 159(1)

389 Entitlement of surviving spouse to household furniture and effects (1) This section applies if the estate that vests in the appointee includes any of the deceased’s necessary household furniture and effects that would have passed to the deceased’s surviving spouse (S) if the estate had not been insolvent.

(2) S may select and retain as his or her own property so much of the furniture and effects referred to in subsection (1) that the appointee determines. (3) S must make the selection within the time that the appointee allows. (4) S’s selection does not affect any rights under a valid charge or hire purchase agreement in respect of the goods selected. [page 281] (5) The fact that the goods available for selection are subject to a charge or hire purchase agreement does not give S any rights to any other part of the deceased’s property. Compare: 1967 No 54 s 159(2)

390 Appointee may make allowance to surviving spouse (1) The appointee may make an allowance out of the estate to the surviving spouse or to any of the relatives or dependants of the deceased or the surviving spouse for the support of any of them. (2) However, the appointee must first obtain the consent of the creditors, which must be expressed in the form of an ordinary resolution. Compare: 1967 No 54 s 159(4)

Administration of estate under this Part

391 Sections 392 to 398 apply in respect of estate administered under this Part Sections 392 to 398 apply when an order has been made that the estate be administered under this Part. Compare: 1967 No 54 s 162(1)

392 Appointee’s authority, powers, and functions The appointee has, in relation to the estate, the same authority, powers, and

functions as the Assignee has in relation to the property of a bankrupt. Compare: 1967 No 54 s 162(1)

393 Distribution of estate (1) The estate must be distributed in the following order: (a) first, payment of all proper costs, charges, debts, and expenses of the due administration of the estate, whether incurred before or after the order is made: (b) secondly, payment of the deceased’s reasonable funeral expenses: (c) thirdly, payment of the following expenses of the deceased incurred during the 3 months immediately before the deceased’s death: (i)

medical expenses:

(ii) reasonable expenses for hospital care (as defined in section 4(1) of the Health and Disability Services (Safety) Act 2001) provided for the deceased, so far as those expenses are lawfully recoverable: (d) fourthly, payment of other claims and interest in accordance with section 274: (e) all other claims, which rank equally and abate in proportion if there is insufficient to pay them in full. (2) For the purposes of subsection (1)(d), a reference in section 274 to the date of adjudication must be read as a reference to the date of the deceased’s death. Compare: 1967 No 54 s 162(1)(b), (2)

[page 282]

394 Payment of surplus (1) In this section, surplus means the surplus of assets that remains with the appointee after the appointee has paid in full— (a) the debts due by the deceased debtor; and

(b) the costs of the administration under this Part; and (c) any other money that would be payable in a case of bankruptcy. (2) The surplus must be— (a) paid to, or retained by, the administrator of the deceased’s property that does not form part of the deceased’s estate under this Part, if there is one; or (b) if there is no administrator of the deceased’s property that does not form part of the deceased’s estate under this Part, distributed as approved by the court, having regard to the persons who are entitled to it. (3) The court may make an order approving the distribution of the surplus as part of the order that the estate be administered under this Part, or at any time after, and the order may be varied in respect of the surplus that remains in the appointee’s hands at the date of each variation. Compare: 1967 No 54 s 162(1)(c), (3)

395 Creditor’s notice to administrator (1) If a creditor applies for an order that the deceased’s estate be administered under this Part, and the order is made, notice to the deceased’s administrator that the application has been filed is treated as an act of bankruptcy. (2) After receipt of the notice, the administrator does not obtain a discharge for any payment of money or disposition of property by the administrator, unless it is done pursuant to the order. Compare: 1967 No 54 s 162(1)(d)

396 Appointee may act in relation to deceased’s irregular transactions (1) An appointee may take a step that the Assignee could have taken under subpart 7 of Part 3 (for example, the cancellation of an irregular transaction) as if the deceased had been bankrupt at the time of death. (2) However, there are 2 additional restrictions when an appointee takes a step under subpart 7 of Part 3:

the appointee must not issue a notice cancelling a gift or voluntary (a) settlement without first obtaining the permission of the court; and the court must not give permission unless it appears that recovery of the gift or settlement is necessary to pay the debts of the estate in full (including interest); and (b) the court must not make an order under section 213 unless it is satisfied that recovery of the deceased’s contribution to the property of another is necessary to pay the debts of the estate in full (including interest). Compare: 1967 No 54 s 162(1)(e), (f)

397 Appointee may cancel execution The appointee may cancel an execution against the deceased debtor’s estate unless it was completed more than 3 months before the date of the order that the estate be administered under this Part. Compare: 1967 No 54 s 162(1)(g)

[page 283]

398 Administrator’s acts valid before notice Nothing in this Act invalidates any payment made, or any act or thing done, in good faith by the administrator before the administrator had notice of an intention to apply for an order that the estate be administered under this Part. Compare: 1967 No 54 s 163

Part 7 Offences and Miscellaneous Provisions

Subpart 1—The Assignee

399 Appointment of Official Assignee for New Zealand and others (1) Suitable persons must be appointed under the State Sector Act 1988 to the following positions under this Act: (a) the Official Assignee for New Zealand: (b) the Deputy Official Assignee for New Zealand: (c) Official Assignees: (d) as required, Deputy Assignees to help in the administration of estates. (2) Assignees and Deputy Assignees are officers of the court. (3) The Deputy Official Assignee must discharge his or her duties and exercise his or her powers under the control and direction of the Official Assignee for New Zealand. (4) Assignees and Deputy Assignees must discharge their duties under the control and direction of the Official Assignee for New Zealand and the Deputy Official Assignee for New Zealand. (5) Nothing in this section affects section 59 or section 404(3). Compare: 1967 No 54 s 15

400 Assignee may act on behalf of another Assignee An Assignee or Deputy Assignee may act for, or in the place of, another Assignee or Deputy Assignee, and in that capacity has all the authority and powers of the Assignee or Deputy Assignee for whom, or in whose place, he or she acts. Compare: 1967 No 54 s 16

401 Assignee’s use of name, seal, etc (1) An Assignee may sue and be sued in the name of “The Official Assignee in Bankruptcy of the property of [bankrupt’s name inserted]”, and in that

name may do anything that must be done or should be done as part of his or her functions as Assignee. (2) An Assignee may— (a) administer oaths and take statutory declarations; and (b) appear in court and examine the bankrupt in any proceedings. (3) An Assignee must have a seal of office, which the Assignee must keep and use when required in the administration of the estates in the Assignee’s charge. (4) An Assignee may execute all documents by signing the Assignee’s own name over the official name, and need not affix a seal to any document, although he or she may do so. Compare: 1967 No 54 s 17

[page 284]

402 Assignee’s additional rights and remedies The Assignee, in addition to rights and remedies under this Act, has the rights and remedies provided by any other Act or rule of law.

403 Disqualification of Assignee (1) An Assignee (A) is disqualified from acting in a bankrupt estate if A is a creditor of the estate and the creditors resolve that A must not act as Assignee. (2) Subsection (1) does not apply if A is a creditor of the estate only in the capacity of— (a) the Assignee of the property of another bankrupt; or (b) the liquidator of a company; or (c) an appointee under Part 6. Compare: 1967 No 54 s 18(1)

404 Vacation of office by Assignee (1) An Assignee must vacate his or her office if he or she is adjudicated bankrupt. (2) An Assignee is eligible, subject to the provisions of the State Sector Act 1988, to be reappointed an Assignee when discharged from bankruptcy. (3) This section does not affect the question of the employment of an Assignee who is adjudicated bankrupt whilst in any other position in the Public Service. Compare: 1967 No 54 s 18(3)

405 Protection of Assignee An Assignee is not liable in any action or proceeding for any thing the Assignee may have done or omitted to do by reason only that the bankrupt is discharged or the bankruptcy is annulled. Compare: 1967 No 54 s 138

406 Assignee’s remuneration (1) The Assignee may charge remuneration for carrying out his or her duties and exercising his or her powers as Assignee at the amount or rates fixed or prescribed under section 407 or charged according to rates prescribed under that section. (2) Remuneration that has been charged under subsection (1) and paid to the Assignee must be paid into a Crown Bank Account. Compare: 1967 No 54 s 166

407 Rates of Assignee’s remuneration (1) The Governor-General may, by Order in Council, make regulations that fix or prescribe the amount or rates of remuneration chargeable under section 406. (2) The regulations may, for example, prescribe— (a) hourly or other rates:

different rates for work done in the bankruptcy by different classes of (b) persons: (c) rates by reference to the net value of the assets realised by the Assignee together with other amounts as may be specified: (d) rates for the exercise of particular functions or powers: (e) rates by reference to any other criteria that may be specified. Compare: 1967 No 54 s 166A

[page 285]

408 Assignee must apply for order of release (1) After advertising the filing of the final statement of accounts and statement of financial position for the estate of a bankrupt (see section 228), the Assignee must apply to the court for an order releasing the Assignee from the administration of that estate. (2) The Assignee must advertise his or her intention to apply for an order of release, and the time when the application will be heard. (3) The court must hear the application not earlier than 10 working days before, and not later than 20 working days after, the Assignee advertises the application under subsection (2). (4) On hearing the application, the court— (a) must take into account any objection to the Assignee’s release by any creditor or other person interested in the bankruptcy; and (b) if the court refuses the order, may, on the application of any creditor or other person interested in the bankruptcy, make any order it thinks fit to remedy any breach of duty by the Assignee. Compare: 1967 No 54 s 133

409 Effect of order (1) An order of release made under section 408 discharges the Assignee, from the date of the order, from all liability for any act or omission by the

Assignee— (a) in the administration of the bankrupt’s affairs: (b) in relation to the Assignee’s conduct as Assignee of the bankrupt up to the date of the order. (2) The order must not be revoked except if it was obtained by fraud. Compare: 1967 No 54 s 133(5), (6)

410 Subsequent order of release (1) This section applies if the Assignee receives further property of the bankrupt after the date of an order of release. (2) The Assignee must, after realising or otherwise dealing with that property, apply for an order of release in respect of the Assignee’s administration of it. (3) Sections 408 and 409 apply to an application for a subsequent order of release. Compare: 1967 No 54 s 133(7)

Subpart 2—The court

411 Jurisdiction and powers of court (1) A Judge may exercise all the powers and jurisdiction given to the court under this Act. (2) A Judge may hear a proceeding under this Act, or any aspect of it, in Chambers or in open court, except that the following must be heard and dealt with in open court: (a) the public examination of a bankrupt: (b) an application for annulment of a bankruptcy or the discharge of a bankrupt. Compare: 1967 No 54 s 5(1)

[page 286]

412 Court may look at real nature of transaction In considering a transaction, the court may look at its real nature, and it does not matter that the transaction appears to be, or is described by the parties to it as being, something different. Compare: 1967 No 54 s 5(2)

413 When Registrar or District Court Judge may exercise powers and jurisdiction of court (1) A Registrar or a District Court Judge has, with the exception of the powers listed in subsection (2), all the powers and jurisdiction of the court under this Act during— (a) a court vacation; or (b) the illness of a Judge; or (c) any period when there is no Judge at the place where the office of the court is situated.

(2) A Registrar or a District Court Judge does not have the power under subsection (1) to— (a) make an order of discharge or annulment; or (b) commit for contempt of court; or (c) exercise any jurisdiction conferred by subpart 3 of Part 7; or (d) conduct a public examination under subpart 5 of Part 3. (3) A Registrar or a District Court Judge may, if in doubt as to the proper order to be made on an application, refer it to a Judge at the next convenient opportunity, and a Judge may hear and decide the application. (4) A Judge may vary or discharge any decision by a Registrar or District Court Judge, and the decision of the Judge under this subsection can be reviewed, rescinded, or varied by the court under section 414. (5) There is no appeal directly to the Court of Appeal from the decision of a Registrar or a District Court Judge. (6) Nothing in this section affects the specific powers of a District Court Judge under this Act, for example, in section 165. Compare: 1967 No 54 s 6

414 Rehearings and appeals (1) The court may review, rescind, or vary any decision of the court or a Judge under this Act. (2) An aggrieved person may appeal to the Court of Appeal from a decision of the court or a Judge under this Act. Compare: 1967 No 54 s 8

415 Proceedings not halted pending appeal A notice of appeal does not halt proceedings under the decision under appeal unless the court or the Court of Appeal makes an order halting the proceedings. Compare: 1967 No 54 s 9(1)

[page 287]

416 Suspension of adjudication pending appeal (1) If an appeal has been filed against an order of adjudication, the bankrupt or any other interested person may apply to the court or the Court of Appeal for an order suspending the adjudication until the appeal is decided. (2) The court or Court of Appeal may suspend the adjudication on the conditions that it thinks appropriate, including conditions as to anything done or decided, or that ought to have been done or decided, by any person in the period between the adjudication and the order suspending adjudication. (3) The court or the Court of Appeal may at any time make an order as it thinks appropriate as to anything done or decided, or that ought to have been done or decided, by any person in the period between the adjudication and the date when the appeal is decided if— (a) the adjudication has been suspended and the appeal fails; or (b) the adjudication has not been suspended and the appeal succeeds. Compare: 1967 No 54 s 9(2)–(4)

417 Court may extend time (1) The court may extend any time limit imposed by this Act, or by rules or regulations made under this Act, for doing any act or thing. (2) The court may extend the time limit— (a) before or after the time limit has expired: (b) on the conditions it thinks appropriate. Compare: 1967 No 54 s 10

418 Defects in proceedings (1) A proceeding under this Act must not be invalidated or set aside for a defect (which includes misdescription, misnomer, or omission) in a step that must be taken as part of, or in connection with, the proceeding, unless a person is

prejudiced by the defect. (2) The court may order the defect to be corrected, and may order the proceeding to continue, on the conditions that the court thinks appropriate in the interests of everyone who has an interest in the proceeding. Compare: 1967 No 54 s 11

Subpart 3—Offences by bankrupt Indictable offences

419 Offences in relation to debts (1) A bankrupt (B) commits an offence if B did not, when contracting a debt, expect to be able to pay the debt when it fell due for payment, as well as pay all B’s other debts (including future and contingent debts). (2) A bankrupt (B) commits an offence if B has materially contributed to, or increased the extent of, B’s insolvency by gambling or by rash and hazardous speculations or by unjustifiable spending or by extravagance in living. (3) For the purposes of subsection (1), B is rebuttably presumed to have committed the offence if B, when contracting the debt, had no reasonable ground for [page 288]

expecting that B would be able to pay the debt when it fell due for payment as well as pay all B’s other debts (including future and contingent debts).

Compare: 1967 No 54 s 126(1)(a), (c)

420 Offences in relation to property (1) A bankrupt (B) commits an offence if B— (a) conceals or removes any part of B’s property— (i)

within 2 months immediately before any unsatisfied judgment or order for payment of money is obtained against B; or

(ii) at any time after an unsatisfied judgment or order for payment of money is obtained against B; or (b) with intent to defraud B’s creditors or any of them, makes, or causes to be made, any gift, delivery, or transfer of, or charge over, B’s property. (2) A bankrupt (B) commits an offence if, after an application for B’s

adjudication has been filed, or within 2 years immediately before the application is filed, B— (a) conceals any part of B’s property to the value of $500 or more; or (b) conceals any debt due to B or due from B; or (c) fraudulently removes any part of B’s property to the value of $500 or more. Compare: 1967 No 54 s 126(1)(b), (g)

421 Offence in relation to written statement to creditor, etc A bankrupt (B) commits an offence if, within 3 years immediately before B’s adjudication,— (a) B makes or produces any written statement to a person who— (i)

is at the time B’s creditor; or

(ii) becomes B’s creditor as a result of the statement being made or produced to that person; and (b) the statement is not a true and fair statement of B’s affairs. Compare: 1967 No 54 s 126(1)(e)

422 Offence in relation to documents, etc A bankrupt (B) commits an offence if, after an application for B’s adjudication has been filed, or within 2 years immediately before the application is filed, B— (a) conceals, destroys, mutilates, or falsifies, or is a party to the concealment, destruction, mutilation, or falsification of, any document affecting, or relating to, B’s property, conduct, or dealings; or (b) makes, or is a party to the making of, any false entry in any document affecting, or relating to, B’s property, conduct, or dealings; or (c) fraudulently parts with, alters, or makes any omission in, or is a party to fraudulently parting with, altering, or making any omission in, any document affecting, or relating to, B’s property, conduct, or dealings;

or (d) prevents the production of any document affecting, or relating to, B’s property, conduct, or dealings to any person to whom B has an obligation under this Act to produce it. Compare: 1967 No 54 s 126(1)(f)(i)–(iv)

[page 289]

423 Offence in relation to fictitious losses or expenses A bankrupt (B) commits an offence if, after an application for B’s adjudication has been filed, or within 12 months immediately before the application is filed, B attempts to account for any part of B’s property by fictitious losses or expenses. Compare: 1967 No 54 s 126(1)(h)

424 Offences in relation to credit, etc (1) A bankrupt (B) commits an offence if, within 3 years before an application for B’s adjudication has been filed or at any time after the application is filed,— (a) B obtains property on credit and has not paid for the property; and (b) B obtains the property on credit— (i)

by a false representation or other fraud; or

(ii) by a false statement of financial position or other false statement of B’s affairs; or (iii) under the false pretence of carrying on business and dealing in the ordinary course of trade. (2) A bankrupt (B) commits an offence if, within 3 years before an application for B’s adjudication has been filed or at any time after the application is filed, B pawns, mortgages, pledges, or disposes of, otherwise than in the ordinary course of trade, any property that B has obtained and has not paid for.

Compare: 1967 No 54 s 126(1)(i)

425 Offences in relation to obtaining consent of creditors A bankrupt (B) commits an offence if B makes a false representation for, or is guilty of any other fraud for, the purpose of obtaining the consent of any 1 or more of B’s creditors to any agreement with reference to B’s affairs or B’s bankruptcy. Compare: 1967 No 54 s 126(1)(j)

426 Offence in relation to leaving New Zealand A bankrupt (B) commits an offence if, after an application for B’s adjudication has been filed or within 12 months immediately before the application is filed, B— (a) leaves New Zealand (either temporarily or permanently) and takes with him or her any part of any property to the value of $1,000 or more that ought, by law, to be divided among B’s creditors; or (b) attempts to leave New Zealand (either temporarily or permanently), taking with him or her any part of that property; or (c) prepares to leave New Zealand (either temporarily or permanently), taking with him or her any part of that property. Compare: 1967 No 54 s 126(1)(k)

427 Defence of absence of intent (1) A bankrupt (B) does not commit an offence under section 420(1)(a) if B proves that at the material time he or she had no intent to defraud any of B’s creditors. [page 290] (2) A bankrupt (B) does not commit an offence under any of the following provisions if B proves that at the material time B had no intent to defraud:

(a) section 420(2)(a) or (b): (b) section 424(1): (c) section 424(2): (d) section 426. (3) A bankrupt (B) does not commit an offence under section 421 if B proves that at the material time B had no intention to deceive. (4) A bankrupt (B) does not commit an offence under section 422(a), (b), or (d) if B proves that at the material time B had no intent to conceal the state of his or her affairs or to defeat the law.

428 Penalties for indictable offences by bankrupt A bankrupt who commits an offence under any of sections 419 to 426 is liable on conviction on indictment to imprisonment for a term not exceeding 3 years or to a fine not exceeding $10,000 or both.

Offences in relation to record of transactions

429 Failure to keep and preserve proper record of transactions (1) A bankrupt (B) commits an offence if, for any period during the 3 years immediately before B’s adjudication,— (a) B might reasonably be expected, because of B’s occupation or transactions for the period, to keep a record of those transactions; and (b) B failed to keep and preserve a proper record of the transactions. (2) Despite anything that the Summary Proceedings Act 1957 says, an information for an offence under this section may be laid against a bankrupt at any time within 2 years after the date of his or her adjudication. Compare: 1967 No 54 s 127(1)

430 Failure to keep proper records with intent to conceal A bankrupt (B) commits an offence if, with intent to conceal the true state

of his or her affairs, B has failed to keep and preserve a proper record of B’s transactions. Compare: 1967 No 54 s 127(2)

431 Penalties for offences relating to records (1) A person who commits an offence under section 429 is liable on summary conviction to imprisonment for a term not exceeding 12 months or to a fine not exceeding $5,000 or both. (2) A person who commits an offence under section 430 is liable on conviction on indictment to imprisonment for a term not exceeding 3 years or to a fine not exceeding $10,000 or both.

432 When bankrupt deemed not to have kept or preserved proper record (1) For the purposes of sections 429 and 430, a bankrupt (B) is deemed not to have kept a proper record of his or her transactions if, being engaged in any trade or business, B has not kept the necessary books and accounts. [page 291] (2) In subsection (1), necessary books and accounts means the books and accounts that are necessary to explain B’s transactions and financial position in B’s trade or business, and includes— (a) a book or books containing entries from day to day in sufficient detail of all cash received and cash paid; and (b) if B’s trade or business has involved dealing in goods,— (i)

a record of all goods sold and purchased; and

(ii) detailed stock sheets of annual and other stock takings showing the quantity and the valuation made of each item of stock on hand; and (c) if B’s trade or business has involved B’s services, details of those services.

(3) For the purposes of sections 429 and 430, B is deemed not to have preserved a proper record of his or her transactions if B has not preserved— (a) the records listed in subsection (2), if applicable: (b) a record of all goods purchased in the course of B’s business, with the original invoices: (c) a daily record of all goods sold on credit. Compare: 1967 No 54 s 127(3), (4)

Summary offences

433 Summary offences (1) A bankrupt (B) commits an offence if B— (a) fails without reasonable excuse to do any of the things required of B by section 67 or 87 or subpart 2 of Part 3 or subpart 5 of Part 3 or to comply with any of the provisions of section 299 or 307; or (b) refuses or neglects to answer fully and truthfully all proper questions put to B at any examination held under this Act; or (c) wilfully misleads the Assignee in any statement made to him or her in the course of the administration of B’s affairs, whether orally or in writing or in any answer to any question put to B; or (d) after becoming aware that any person has filed a false proof in the bankruptcy, failed to disclose that fact immediately to the Assignee; or (e) has within 2 years before B’s adjudication, at a time when B was unable to pay B’s debts as they became due, given, with intent to defraud B’s creditors, any undue preference to any of B’s creditors; or (f)

while a bankrupt and without having first obtained the consent of the Assignee,— (i)

leaves, or attempts to leave, New Zealand, temporarily or permanently; or

(ii) makes preparations for leaving New Zealand, temporarily or permanently; or (g) before B obtains a final order or discharge, or before a suspended order of discharge takes effect under this Act,—

(i)

alone, or jointly with another person, obtains credit of $1,000 or more; or

(ii) incurs liability to any person of $1,000 or more for the purpose of obtaining credit for another person. [page 292] (2) Despite anything that section 14 of the Summary Proceedings Act 1957 says, an information for any of the offences in subsection (1) may be laid against a bankrupt at any time within 2 years after the date of the offence. Compare: 1967 No 54 s 128(1), (2)

434 Defences to summary offences of obtaining credit (1) A bankrupt (B) does not commit an offence under section 433(1)(g)(i) if B proves that, before obtaining the credit of $1,000 or more, B informed the person giving the credit that B was an undischarged bankrupt. (2) A bankrupt (B) does not commit an offence under section 433(1)(g)(ii) if B proves that, before incurring the liability of $1,000 or more, the person giving the credit was informed that the person incurring the liability was an undischarged bankrupt. Compare: 1967 No 54 s 128(1)(g)

435 Penalty for summary offences by bankrupt A person who commits an offence under section 433(1) is liable on summary conviction to imprisonment for a term not exceeding 12 months or a fine not exceeding $5,000 or both. Compare: 1967 No 54 s 128(1)

Offences in relation to management of companies

436 Offence by bankrupt in relation to management of companies (1) A bankrupt commits an offence if he or she—

(a) acts as a director of a company; or (b) fails without reasonable excuse to comply with section 149. (2) Despite anything that section 14 of the Summary Proceedings Act 1957 says, an information in respect of an offence under subsection (1) may be laid at any time within 2 years after the date of the offence. Compare: 1967 No 54 s 128A

437 Penalties for offence in relation to management of companies A person who commits an offence under section 436 is liable,— (a) on conviction on indictment, to imprisonment for a term not exceeding 2 years: (b) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding $5,000 or both.

Assignee’s discretion to prosecute

438 Assignee may prosecute if reasonable grounds certified by Crown Solicitor (1) If the Assignee has reason to suspect that a person (X) has committed an offence under this Act, the Assignee may refer the case to the appropriate Crown Solicitor. [page 293] (2) The Assignee may lay an information against X if the Crown Solicitor certifies that there are reasonable grounds for prosecuting X. Compare: 1967 No 54 s 129

439 Assignee has immunity for prosecution if certificate given by Crown Solicitor

No action may be taken against the Assignee for malicious prosecution in relation to a prosecution under this Act if the Crown Solicitor certified that there were reasonable grounds for bringing the prosecution. Compare: 1967 No 54 s 129(2)

Subpart 4—Miscellaneous provisions

440 False or misleading statements or refusal to answer questions (1) A person commits an offence if he or she— (a) makes a statement to any Assignee or person concerned in the administration of this Act, knowing that the statement is false in a material particular; or (b) wilfully misleads, or attempts to mislead, any Assignee or person concerned in the administration of this Act; or (c) without reasonable excuse, fails or refuses to answer any question put to him or her by the Assignee. (2) A person who commits an offence under this section is liable on summary conviction to imprisonment for a term not exceeding 12 months or to a fine not exceeding $5,000 or both. Compare: 1967 No 54 s 164

441 Regulations (1) The Governor-General may, by Order in Council, make regulations for all or any of the following purposes: (a) prescribing fees to be paid under this Act or regulations made under this Act: (b) prescribing the procedure for lodging a debtor’s application for adjudication with the Assignee: (c) prescribing how and when the debts and claims of creditors must be made and proved, and when a debt or claim may be allowed or disallowed: (d) providing for the public examination of bankrupts: (e) prescribing the expenses that may be paid to a bankrupt, or any other person, who is required to attend any examination by the Assignee: (f)

prescribing the steps an undischarged bankrupt must take to obtain the

Assignee’s consent to leaving New Zealand and the circumstances in which, and the conditions on which, the Assignee may consent: (g) prescribing the steps an undischarged bankrupt must take to obtain the Assignee’s consent for the purposes of section 149 (which concerns the prohibition of a bankrupt entering business) and the circumstances in which, and the conditions on which, the Assignee may consent: (h) prescribing the accounts that must be kept by the Assignee, the audit of those accounts, and the fees payable for the audit: (i)

prescribing the manner of publication of the Assignee’s final statement of receipts and payments: [page 294]

(j)

prescribing the manner of advertising under this Act:

(k) providing for the appointment, retirement, removal, discharge, and control of trustees under subpart 2 of Part 5, and for the accounts that must be kept by them, and for the audit of those accounts: (l)

providing for any matters contemplated by subpart 3 of Part 5, necessary for its administration, or necessary for giving it full effect:

(m) prescribing the scale of fees of the court and the Court of Appeal for proceedings under this Act: (n) prescribing the form of— (i)

a statement of affairs that is filed under section 46, 67, or 362:

(ii) an application that is made under section 49, 342, or 362: (iii) a notice under section 367 or 373: (o) prescribing the steps that must be taken by the bankrupt under section 141 in relation to the bankrupt’s property and the distribution of the proceeds to the creditors: (p) regulating the payment by the Assignee of money into the Assignee’s bank account under section 220(1): (q) prescribing the time for giving a notice of opposition under section 297:

(r)

prescribing how instalments under a summary instalment order must be paid:

(s) providing for the conduct of creditors’ meetings under subparts 1 and 2 of Part 5: (t)

prescribing the criteria for the means test under section 363(1)(e):

(u) prescribing reasons for refusal by the Assignee under section 447(2) of access to a public register: (v) prescribing any further information or documents that must be held under a public register under section 449(1): (w) regulating the search of public registers (see section 452): (x) prescribing any further search criteria under section 453(1): (y) providing for any other matters contemplated by this Act, necessary for its administration, or necessary for giving it full effect. (2) In subsection (1)(n), prescribing the form includes specifying the content, means of communication, or any other requirement of a statement of affairs, application, or notice without necessarily specifying the use of a particular form. Compare: 1967 No 54 s 14

442 Rules (1) Rules may be made from time to time under the Judicature Act 1908— (a) relating to the procedure of the court under this Act: (b) relating to appeals to the Court of Appeal under this Act: (c) to give effect to this Act. (2) Matters that may be dealt with by the rules include the following: (a) how proceedings are started and transferred from one registry of the court to another: (b) where proceedings may be started: (c) the forms to be used in proceedings: (d) the service of documents filed or issued in proceedings:

(e) the amendment of defects and errors in proceedings: [page 295] (f)

how evidence may be given:

(g) how the identity of persons who are parties to, or involved in, proceedings must be proved: (h) how witnesses are summoned and documents are discovered: (i)

the right of creditors and other persons to appear in proceedings, and the procedure to be followed in the absence of creditors or other persons:

(j)

the notices that must be given in connection with proceedings, and who must give them and to whom:

(k) the manner of advertising: (l)

the consolidation of proceedings:

(m) the substitution of parties to proceedings: (n) authorising the continuation of proceedings after the death of the debtor in question: (o) authorising proceedings to be begun against 1 or more partners of a business partnership without including the others, and providing for the disclosure of the other partners: (p) the scale of costs of lawyers and others in proceedings: (q) the award of costs and when security for costs must be given: (r)

the execution of processes and the enforcement of orders under this Act:

(s) the time limit for appealing to the Court of Appeal and how the appeal must be brought: (t)

matters necessary for the administration of this Act or necessary for giving it full effect.

Compare: 1967 No 54 s 13

443 Repeal and revocation (1) The Insolvency Act 1967 is repealed. (2) The Insolvency Regulations 1970, the Insolvency (Priorities) Order 1988, and the Summary Instalment Orders (District Court) Rules 1970 are revoked.

444 Transitional provisions (1) In this section,— 1967 Act means the Insolvency Act 1967 as if it had not been repealed by this Act, and any rules or regulations made under that Act commencement means the commencement of Parts 1 to 7 of this Act past event means any of the following that has occurred before commencement: (a) issuing a bankruptcy notice: (b) filing a petition for adjudication: (c) filing an application for a summary instalment order: (d) the making of a proposal: (e) the making of a compromise: (f)

filing an application for an order for the administration of an insolvent deceased estate.

(2) The 1967 Act continues to apply, to the exclusion of this Act, to any past event and to any step or proceeding preceding, following, or relating to that past event, even if it is a step or proceeding that is taken after commencement. (3) For the avoidance of doubt, nothing in subpart 7 of Part 3 permits the cancellation of an irregular transaction that was completed before this section [page 296]

came into force, if that transaction could not have been cancelled if this

section had not come into force.

445 Consequential amendments to other enactments The enactments specified in Schedule 2 are amended in the manner indicated in that schedule.

445A

Act subject to application of Cape Town Convention and Aircraft Protocol

(1) Part 3 and all other provisions of this Act are subject to section 106 of the Civil Aviation Act 1990 (which provides for the primacy of the provisions of the Cape Town Convention and the Aircraft Protocol) and the rest of Part 12 of the Civil Aviation Act 1990 (which implements the Cape Town Convention and the Aircraft Protocol). (2) In this section,— Aircraft Protocol has the same meaning as in section 104(1) of the Civil Aviation Act 1990 Cape Town Convention has the same meaning as in section 104(1) of the Civil Aviation Act 1990. Section 445A: inserted, on 1 November 2010, by section 14(1) of the Civil Aviation (Cape Town Convention and Other Matters) Amendment Act 2010 (2010 No 42).

Subpart 5—Public registers

446 Subpart applies to public register maintained under section 62, 354 or 368 This subpart applies to a public register maintained under section 62 or 354 or 368.

447 When public register must be accessible (1) A public register must be available for access and searching by members of the public during business hours on a working day. (2) However, the Assignee may refuse access to a public register or suspend the operation of a public register, in whole or in part,— (a) if the Assignee considers that it is not practical to provide access to the register; or (b) for any other reason that is prescribed by regulations made under this Act.

448 Purposes of public registers (1) A public register maintained under section 62 has— (a) the purpose of providing information about bankrupts and discharged bankrupts; and (b) the further purposes set out in subsection (4). (2) A public register maintained under section 354 has— (a) the purpose of providing information about persons subject to a current summary instalment order; and (b) the further purposes set out in subsection (4). [page 297] (3) A public register maintained under section 368 has— (a) the purpose of providing information about persons currently admitted

to the no asset procedure and persons discharged from that procedure under section 377; and (b) the further purposes set out in subsection (4). (4) The further purposes of the public registers are to— (a) facilitate the compliance, audit, and other supporting and administrative functions of the Assignee, Ministry, the courts, or any other person under this Act or any other enactment; and (b) facilitate the enforcement functions and the exercise of the powers of the Assignee, Ministry, the courts, or any other person under this Act or any other enactment; and (c) provide statistical information and information for research purposes in relation to bankruptcy, summary instalment orders, and the no asset procedure. Section 448(3)(a): amended, on 17 November 2009, by section 12 of the Insolvency Amendment Act 2009 (2009 No 52).

449 General information that must be held in public registers (1) The public registers must contain the following information in respect of a person (P) who is or has been bankrupt, or who is subject to a current summary instalment order, or who is currently admitted to the no asset procedure, or who has been discharged from that procedure under section 377: (a) P’s full name: (b) whether P is currently bankrupt, or has been discharged from bankruptcy, or is subject to a current summary instalment order, or is currently admitted to the no asset procedure, or has been discharged from the no asset procedure under section 377, as the case may be: (c) the bankruptcy, summary instalment order, or no asset procedure number, as the case may be: (d) P’s address as contained in P’s statement of affairs, or application for adjudication, or application for a summary instalment order, or application for admission to the no asset procedure or, if P has notified

the Assignee of a change of address, that address, or in the case of adjudication on a creditor’s application, P’s address contained in that application: (e) P’s occupation and current employment status, if known: (f)

in the case of an adjudication by the court, which court, and the time and date of the adjudication:

(g) in the case of an automatic adjudication, a statement that P was automatically adjudicated bankrupt under section 47, and the time and date of the adjudication: (h) if P is admitted to the no asset procedure, the date of admission: (ha) if P is discharged from the no asset procedure under section 377, the date when P was so discharged: (i)

if P is a discharged bankrupt, the date, type, and conditions (if any) of discharge:

(j)

if the bankruptcy was annulled under section 309(1)(b) or (c) or section 310(2)(b) or (c), under which of those provisions it was annulled: [page 298]

(k) if the court has refused to discharge P from bankruptcy, that information: (l)

if the court has suspended P’s discharge from bankruptcy, that information:

(m) the place of the office of the Assignee dealing with P’s bankruptcy or admission to the no asset procedure and that office’s contact number for enquiries: (n) in the case of a person subject to a current summary instalment order, the full name and business postal address of the supervisor: (o) any other prescribed information or documents. (2) Subject to sections 447(2) and 451(1), the information listed in subsection (1) must be available to any member of the public.

(3) A public register must not contain any information in relation to a person whose bankruptcy was annulled under section 309(1)(a) or 310(2)(a), and the bankruptcy that was so annulled does not count for the purposes of section 449A. (4) All information relating to a person who has been adjudicated bankrupt and discharged from bankruptcy must be removed from the public register maintained under section 62— (a) 4 years after the date of discharge; but (b) in the case of a conditional discharge, 4 years after the discharge becomes unconditional. (4A) All information relating to a person who has been admitted to the no asset procedure must be removed from the public register maintained under section 368— (a) 4 years after the date of discharge under section 377; or (b) as soon as practicable after a termination under section 372(a), (c), or (d). (5) All information relating to a person who has been adjudicated bankrupt but whose bankruptcy has been annulled under section 309(1)(b) or (c) or section 310(2)(b) or (c) must be removed 7 years after the date of adjudication from the public register maintained under section 62. Section 449(1): amended, on 17 November 2009, by section 13(1) of the Insolvency Amendment Act 2009 (2009 No 52). Section 449(1)(b): amended, on 17 November 2009, by section 13(2) of the Insolvency Amendment Act 2009 (2009 No 52). Section 449(1)(ha): inserted, on 17 November 2009, by section 13(3) of the Insolvency Amendment Act 2009 (2009 No 52). Section 449(3): amended, on 17 November 2009, by section 13(4) of the Insolvency Amendment Act 2009 (2009 No 52). Section 449(4A): inserted, on 17 November 2009, by section 13(5) of the Insolvency Amendment Act 2009 (2009 No 52).

449A

Information kept indefinitely on public register after multiple insolvency events

(1) This section applies in the case of a person who— (a) is or has been bankrupt on 2 or more occasions; or

(b) is or has been both bankrupt and discharged from the no asset procedure under section 377. [page 299] (2) Information about the person must not be removed from the public register under this Act and, in particular, section 449(4), (4A), and (5) do not apply to the person. (3) The Assignee must ensure that the public register contains all of the information required by this Act about the person and each insolvency event. (4) Bankruptcies under the Insolvency Act 1967 count for the purposes of subsections (1) and (3), but bankruptcies under the Bankruptcy Act 1908 do not count for either purpose. Section 449A: inserted, on 17 November 2009, by section 14 of the Insolvency Amendment Act 2009 (2009 No 52).

450 Restricted information that may be held in public register maintained under section 62 (1) The public register maintained under section 62 may contain any or all of the documents set out in section 100 in respect of a person (B) who is or has been bankrupt. (2) A member of the public must not have access to the documents contained in the public register under subsection (1) in respect of B unless that person is entitled to inspect those documents under section 100.

451 When Assignee may omit, remove, restrict access to, or amend, information contained in public registers (1) The Assignee may omit, remove, or restrict access to information contained in a public register in respect of a person (P) if the Assignee considers, in his or her discretion, that the disclosure of the information via the public register would be prejudicial to P’s safety or the safety of P’s family. (2) The Assignee may amend the information contained in a public register in order to update the information or correct any error in, or omission from, the information. (3) The Assignee may refuse to provide access to any information in a public register if, in the Assignee’s opinion, it is impractical to provide the volume of information requested.

452 Search of public registers A person may only search the public registers in accordance with this Act or regulations made under this Act.

453 Search criteria (1) The public registers may be searched only by reference to the following criteria:

the bankruptcy number, summary instalment order, or no asset (a) procedure number: (b) the name, or any part of the name of a person: (c) the name of a court: (d) insolvency status: (e) the date of adjudication, summary instalment order, admission to the no asset procedure, or discharge, by reference to a range of dates: (f)

any combination of the criteria in paragraphs (a) to (e):

(g) any other prescribed criteria. [page 300] (2) In subsection (1)(d), insolvency status means that a person (P)— (a) is currently bankrupt; or (b) is subject to a current summary instalment order; or (c) is currently admitted to the no asset procedure; or (d) is a discharged bankrupt; or (da) is discharged from the no asset procedure under section 377; or (e) is a discharged bankrupt subject to conditions of discharge; or (f)

was adjudicated bankrupt but the adjudication was annulled under section 309(1)(b) or section 310(2)(b); or

(g) was adjudicated bankrupt but the adjudication was annulled under section 309(1)(c) or section 310(2)(c); or (h) is subject to section 449A (which relates to permanent retention of information on the register after multiple insolvency events). Section 453(2)(da): inserted, on 17 November 2009, by section 15(1) of the Insolvency Amendment Act 2009 (2009 No 52). Section 453(2)(g): amended, on 17 November 2009, by section 15(2) of the Insolvency Amendment Act 2009 (2009 No 52). Section 453(2)(h): added, on 17 November 2009, by section 15(2) of the Insolvency Amendment Act 2009 (2009 No 52).

454 Search purposes The public registers may be searched— (a) by any individual, or by any person with the consent of that individual, for the purpose of searching for information about that individual: (b) by any person for the purpose of ascertaining whether another person is bankrupt, is a discharged bankrupt, is subject to a current summary instalment order, is currently admitted to the no asset procedure, or is discharged from that procedure under section 377: (c) by any person for any purpose related to the bankruptcy of a person, the making of a current summary instalment order in respect of a person, or the admission of a person to the no asset procedure: (d) by any person for any of the purposes set out in section 448(4)(a) or (b): (e) by any person for the purpose of ascertaining whether section 449A applies to another person. Section 454(b): amended, on 17 November 2009, by section 16(1) of the Insolvency Amendment Act 2009 (2009 No 52). Section 454(e): added, on 17 November 2009, by section 16(2) of the Insolvency Amendment Act 2009 (2009 No 52).

455 Information contained in public registers may be used for statistical or research purposes Nothing in this subpart prevents the use of information contained in the public registers for statistical or research purposes if the information— (a) does not identify any person; and (b) is not published in any form that could reasonably be expected to identify any person. [page 301]

456 When search breaches information privacy

principle A person who searches a public register for a purpose that is not a purpose set out in section 454 must be treated, for the purposes of Part 8 of the Privacy Act 1993, as if that person has breached an information privacy principle under section 66(1)(a)(i) of that Act.

457 Crown and Assignee not liable for act or omission The Crown and the Assignee cannot be sued for any act or omission in relation to the maintenance of a public register under this subpart done or omitted to be done in good faith and with reasonable care.

[page 302]

Schedule 1 s 217(2)

Assignee’s general powers The Assignee has the power to— (a) hold property: (b) begin, continue, discontinue, and defend legal proceedings relating to the property of the bankrupt: (c) with the leave of the court, continue in the Assignee’s name legal proceedings begun by the bankrupt before adjudication: (d) refer a dispute to arbitration: (e) compromise debts, claims, and liabilities, present or future, actual or contingent, or ascertained or not, subsisting or believed to subsist between the bankrupt and any person, on whatever terms are agreed: (f)

make a compromise or an arrangement with creditors, or persons claiming to be creditors, in respect of debts provable in the bankruptcy:

(g) accept as consideration for the sale of any of the bankrupt’s property money to be paid in the future, on terms (including terms as to security) that the Assignee thinks appropriate: (h) make a compromise or an arrangement in respect of a claim that arises out of, or is incidental to, the bankrupt’s property, whether it is a claim by the Assignee, or a claim by a person against the Assignee: (i)

carry on the bankrupt’s business, if it is necessary or advantageous in order to dispose of it, and for that purpose may employ and pay any person, including the bankrupt:

(j)

use money in the bankrupt’s estate for the repair, maintenance, upkeep, or renovation of the bankrupt’s property, whether or not the work is necessary to salvage the property:

(k) borrow money: (l)

mortgage any of the bankrupt’s property:

(m) employ any person to do anything that must be done in the course of the administration of the bankruptcy, including the receipt and payment of money: (n) prove and draw a dividend in respect of any debt due to the bankrupt: (o) if any of the bankrupt’s property cannot be readily or advantageously sold because of its peculiar nature or other special circumstances, divide it in its existing form among the creditors according to its estimated value: (p) give receipts and sign discharges and releases for any money that the Assignee receives, so that the person who pays the money is effectively discharged from any responsibility for how the money is used: (q) execute a power of attorney, deed, or any other document for the purpose of carrying into effect the provisions of this Act: (r)

exercise, in relation to the bankrupt’s property, any power conferred on a trustee under the Trustee Act 1956 or by the court under that Act; and for the purposes of those powers the Assignee is a trustee of the bankrupt’s property:

(s) exercise any authority or power or do any act in relation to the bankrupt’s property that the bankrupt could have exercised or done if he or she was not bankrupt: [page 303] (t)

in respect of any particular estate or estates,— (i)

appoint an agent to act for the Assignee:

(ii) delegate to that agent any or all of the powers conferred by this schedule: (iii) revoke the agent’s appointment: (iv) set the agent’s remuneration, which must be paid out of the estate:

(u) exercise, on the terms the Assignee thinks appropriate, the following powers in relation to the sale of the bankrupt’s property: (i)

sell the whole or a part of the bankrupt’s property by public auction or public tender:

(ii) buy in at an auction of the bankrupt’s property: (iii) rescind or vary a contract for the sale of the bankrupt’s property: (v) surrender any shares of the bankrupt in a building society in accordance with the rules of the society: (w) sell the following property of the bankrupt by private contract: (i)

perishable property or property that is likely to fall rapidly in value:

(ii) property that is unsold after being offered for sale by public auction or public tender: (iii) property that the Assignee considers unnecessary or inadvisable to sell by public auction or public tender because of its nature, situation, value, or other special circumstance: (iv) property authorised by a resolution of creditors to be sold by private contract, but in that case the Assignee must sell the property in accordance with the authority given by the creditors: (v) company securities, New Zealand Government securities, and local authority securities, if sold on a securities market operated by a registered exchange registered under the Securities Markets Act 1988. Compare: 1967 No 54 s 71

[page 304]

Schedule 2 s 445

Consequential amendments to other enactments Omitted

[page 305]

Companies Act 1993 1993 No 105 (Excerpts) Contents Part 1 Preliminary … 2 …

126 127 128 129 130 131 132 133 134 135

Interpretation Part 8 Directors and their Powers and Duties Meaning of director Meaning of board Powers of management Management of company Major transactions Delegation of powers Directors’ duties Duty of directors to act in good faith and in best interests of company Exercise of powers in relation to employees Powers to be exercised for proper purpose Directors to comply with Act and constitution Reckless trading

136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 …

Duty in relation to obligations Director’s duty of care Use of information and advice Transactions involving self-interest Meaning of interested Disclosure of interest Avoidance of transactions Effect on third parties Application of sections 140 and 141 in certain cases Interested director may vote Use of company information Meaning of relevant interest Relevant interests to be disregarded in certain cases Disclosure of share dealing by directors Restrictions on share dealing by directors Appointment and removal of directors Number of directors Qualifications of directors Director’s consent required Appointment of first and subsequent directors Court may appoint directors Appointment of directors to be voted on individually Removal of directors Director ceasing to hold office Validity of director’s acts Notice of change of directors Miscellaneous provisions relating to directors Proceedings of board Remuneration and other benefits Indemnity and insurance

[page 306] Part 14 Compromises with Creditors 227 Interpretation 228 Compromise proposal 229 Notice of proposed compromise 230 Effect of compromise 231 Variation of compromise 232 Powers of court 233 Effect of compromise in liquidation of company 234 Costs of compromise Part 15 Approval of Arrangements, Amalgamations, and Compromises by Court 235 Interpretation 236 Approval of arrangements, amalgamations, and compromises 237 Court may make additional orders 238 Parts 13 and 14 not affected 239 Application of section 233 Part 15A Voluntary Administration Subpart 1—Preliminary 239A Objects of this Part 239B Interpretation of some key terms 239C Interpretation of other terms 239D When administration begins 239E When administration ends 239EA Voluntary administration of licensed insurers Subpart 2—Appointment of administrator 239F Who may be appointed administrator 239G Administrator must consent in writing

239H 239I 239J 239K 239L 239M 239N 239O 239P 239Q 239R 239S 239T

239U 239V 239W 239X 239Y 239Z 239AA 239AB 239AC 239AD 239AE

Who may appoint administrator Appointment by company Appointment by liquidator or interim liquidator Appointment by secured creditor Appointment by court Appointment must not be revoked Appointment of 2 or more administrators Remuneration of administrator Subpart 3—Resignation and removal of administrator When office of administrator is vacant Administrator may resign Removal of administrator Appointor may appoint new administrator to fill vacancy Creditors must consider appointment of replacement administrator Subpart 4—Effect of appointment of administrator Outline of administrator’s role Administrator’s powers Administrator is company’s agent Effect on directors Effect on employees Effect on dealing with company property Company officer’s liability for compensation for void transaction or dealing Effect on transfer of shares Effect on liquidation Effect on receivership Subpart 5—Administrator’s investigation of company’s affairs Administrator must investigate company’s affairs and consider possible courses of action

[page 307] 239AF 239AG 239AH 239AI

Directors’ statement of company’s position Administrator’s right to documents, etc Administrator may lodge report with Registrar Administrator must report misconduct Subpart 6—Creditors’ meetings generally 239AJ Administrator must call creditors’ meetings 239AK Conduct of creditors’ meetings 239AL Joint meetings of creditors of related companies in administration 239AM Power of court where outcome of voting at creditors’ meeting determined by related entity Subpart 7—First creditors’ meeting to appoint creditors’ committee 239AN Administrator must call first creditors’ meeting 239AO Notice of first and subsequent creditors’ meetings 239AP Administrator must table interests statement 239AQ Functions of creditors’ committee 239AR Membership of creditors’ committee Subpart 8—Watershed meeting 239AS What watershed meeting is 239AT Administrator must convene watershed meeting 239AU Notice of watershed meeting 239AV When watershed meeting must be held 239AW Directors must attend watershed meeting 239AX Disclosure of voting arrangements 239AY Court may order that pooled property owners are separate class 239AZ Adjournment of watershed meeting 239ABA What creditors may decide at watershed meeting 239ABB What happens if proposed deed not fully approved at watershed meeting

Subpart 9—Protection of company’s property during administration 239ABC Charge unenforceable 239ABD Owner or lessor must not recover property used by company 239ABE Proceeding must not be begun or continued 239ABF Administrator not liable in damages for refusing consent 239ABG Enforcement process halted 239ABH Duties of court officer in relation to company’s property 239ABI Lis pendens taken to exist 239ABJ Administration not to trigger enforcement of guarantee of liability of director or relative Subpart 10—Rights of secured creditor, owner, or lessor 239ABK Meaning of terms used in this subpart 239ABL If secured creditor acts before or during decision period 239ABM If enforcement of charges begins before administration 239ABN Charge over perishable property 239ABO Court may limit powers of secured creditor, etc, in relation to property subject to charge 239ABP Giving notice under security agreement 239ABQ If recovery of property begins before administration 239ABR Recovering perishable property 239ABS Court may limit powers of receiver, etc, in relation to property used by company 239ABT Giving notice under agreement about property Subpart 11—Interface with liquidation 239ABU When liquidator may be appointed to company in administration 239ABV Court may adjourn application for liquidation 239ABW Court must not appoint interim liquidator if administration in creditors’ interests 239ABX Effect of appointment of liquidator 239ABY Former administrator is default liquidator 239ABZ Person in control of company must lodge revised report with

Registrar 239ACA 239ACB 239ACC 239ACD 239ACE

Act of administrator in good faith must not be set aside in liquidation Voidable transactions Subpart 12—Deed administrator Who is deed administrator Who may be appointed deed administrator Deed administrator must consent in writing [page 308]

239ACF Appointment of deed administrator must not be revoked 239ACG Appointment of 2 or more deed administrators 239ACH When office of deed administrator vacant 239ACI Deed administrator may resign 239ACJ Removal of deed administrator 239ACK Remuneration of deed administrator 239ACL Deed administrator may sell shares in company Subpart 13—Execution and effect of deed of company arrangement 239ACM When this subpart applies 239ACN Preparation and contents of deed 239ACO Execution of deed 239ACP Procedure if deed not fully approved at watershed meeting 239ACQ Creditor must not act inconsistently with deed, etc, before execution 239ACR Company’s failure to execute deed 239ACS Who is bound by deed 239ACT Extent to which deed binds creditors 239ACU Person bound by deed must not take steps to liquidate, etc 239ACV Court may restrain creditors and others from enforcing charge

or recovering property 239ACW Effect of deed on company’s debts 239ACX Court may rule on validity of deed Subpart 14—Administrator’s duty to file accounts 239ACY Administrator includes deed administrator 239ACZ Administrator must file accounts Subpart 15—Variation and termination of deed 239ADA Creditors may vary deed 239ADB Court may cancel creditors’ variation 239ADC Termination of deed 239ADD Termination by court 239ADE Termination by creditors 239ADF Creditors’ meeting to consider proposed variation or termination of deed Subpart 16—Administrator’s liability and indemnity for debts of administration 239ADG Administrator not liable for company’s debts except as provided in this subpart and in section 239Y 239ADH Administrator liable for general debts 239ADI Administrator’s liability for rent 239ADJ Administrator not liable for rental if non-use notice in force 239ADK Court may exempt administrator from liability for rent 239ADL Administrator’s indemnity 239ADM Administrator’s right of indemnity has priority over other debts 239ADN Lien to secure indemnity Subpart 17—Powers of court 239ADO Court’s general power 239ADP Orders to protect creditors during administration 239ADQ Court may rule on validity of administrator’s appointment 239ADR Administrator may seek directions 239ADS Court may supervise administrator or deed administrator 239ADT Court may order administrator or deed administrator to remedy

239ADU 239ADV 239ADW 239ADX 239ADY 239ADZ 239AEA 239AEB 239AEC 239AED

default Court’s power when office of administrator or deed administrator vacant, etc Prohibition order Subpart 18—Notices about steps taken under this Part Administrator must give notice of appointment Secured creditor who appoints administrator must give notice to company Deed administrator must give notice of execution of deed of company arrangement Deed administrator must give notice of failure to execute deed of company arrangement Deed administrator must give notice of termination by creditors of deed of company arrangement Company must disclose fact of administration Notice of change of name Effect of contravention of this subpart [page 309]

239AEE 239AEF 239AEG 239AEH 239AEI 239AEJ 239AEK 239AEL

Subpart 19—Miscellaneous Effect of things done during administration of company Interruption of time for doing act Subpart 20—Set-off and netting agreements Mutual credit and set-off Application of set-off under netting agreement Calculation of netted balance Mutuality required for transactions under bilateral netting agreements When mutuality required for transactions under recognised multilateral netting agreements Application of set-off under section 239AEG to transactions

subject to netting agreements 239AEM Transactions under netting agreement and effect on certain sections 239AEN Rights under netting agreement not affected by commencement of administration 239AEO Effect of declaration of person as recognised clearing house under section 310K 239AEP Transactions under recognised multilateral netting agreement not affected by variation or revocation of declaration under section 310K Subpart 21—Single administration of related companies in administration 239AEQ Interpretation of terms for purposes of this subpart 239AER Court may order single administration for related companies in administration 239AES Notice that application filed must be given to administrators and creditors 239AET Guidelines for single administration order 239AEU Court may order that related company in administration be added to existing pool 239AEV Creditors’ meetings in single administration of pool companies 239AEW Pool companies may execute single deed of company administration Part 16 Liquidations The process of liquidation 240 Interpretation 240A Liquidation of licensed insurers 241 Commencement of liquidation 241AA Restriction on appointment of liquidator by shareholders or board after application filed for court appointment 241A Commencement of liquidation to be recorded 242 Liquidators to act jointly unless otherwise stated 243 Liquidator to summon meeting of creditors

244 245 245A 246 247 248 249 250 251 252 253 254 255 256 257 258 258A 258B 259 260 260A 261 262

Liquidator to summon meeting of creditors in other cases Liquidator may dispense with meetings of creditors Power of court where outcome of voting at meeting of creditors determined by related entity Interim liquidator Power to stay or restrain certain proceedings against company Effect of commencement of liquidation Completion of liquidation Court may terminate liquidation Provisions relating to prior execution process Restriction on rights of creditors to complete execution, distraint, or attachment Duties of officer in execution process Duties, rights, and powers of liquidators Principal duty of liquidator Liquidator not required to act in certain cases Other duties of liquidator Duties in relation to accounts Duties in relation to final report and accounts Duty to have regard to views of creditors and shareholders Duty to report suspected offences Registrar may supply report to FMA Documents to state company in liquidation Powers of liquidator Liquidator may assign right to sue under this Act Power to obtain documents and information Documents in possession of receiver [page 310]

263 264 265 266 267 268 269 270 271 271A 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287

Restriction on enforcement of lien over documents Delivery of document creating charge over property Examination by liquidator Powers of court Self-incrimination Power of liquidator to enforce liability of shareholders and former shareholders Power to disclaim onerous property Liquidator may be required to elect whether to disclaim onerous property Pooling of assets of related companies Notice that application filed must be given to administrators and creditors Guidelines for orders Certain conduct prohibited Duty to identify and deliver property Refusal to supply essential services prohibited Remuneration of liquidators Rates of remuneration Expenses and remuneration payable out of assets of company Liquidator ceases to hold office on completion of liquidation Qualifications and supervision of liquidators Qualifications of liquidators Validity of acts of liquidators Consent to appointment Vacancies in office of liquidator Court supervision of liquidation Meaning of failure to comply Orders to enforce liquidator’s duties Company unable to pay its debts Meaning of inability to pay debts

288 289

Evidence and other matters Statutory demand

290 291

Court may set aside statutory demand Additional powers of court on application to set aside statutory demand Voidable transactions Insolvent transaction voidable Voidable charges Procedure for setting aside transactions and charges Other orders Additional provisions relating to setting aside transactions and charges Recovery in other cases Transactions at undervalue Transactions for inadequate or excessive consideration with directors and certain other persons Court may set aside certain securities and charges Liability if proper accounting records not kept Power of court to require persons to repay money or return property Creditors’ claims Application of bankruptcy rules to liquidation of insolvent companies Admissible claims Claims by unsecured creditors Rights and duties of secured creditors Ascertainment of amount of claim Claim not of an ascertained amount Fines and penalties Claims relating to debts payable after commencement of liquidation Mutual credit and set-off

292 293 294 295 296

297 298 299 300 301

302 303 304 305 306 307 308 309 310

310A 310B

Definitions relating to set-off under netting agreement Application of set-off under netting agreement

310C 310D

Calculation of netted balance Mutuality required for transactions under bilateral netting agreements When mutuality required for transactions under recognised multilateral netting agreements

310E

[page 311] 310F 310G 310H 310I 310J 310K 310L 310M 310N 310O

311 312

Application of set-off under section 310 to transactions subject to netting agreements Transactions under netting agreement and effect on certain sections Rights under netting agreement not affected by commencement of liquidation Set-off under netting agreement not affected by notice under section 294 Court may set aside bilateral netting agreement between company and related person Certain persons may be declared to be recognised clearing houses Matters that Bank must or may have regard to when making, varying, or revoking declaration under section 310K Bank may impose conditions in declaration under section 310K Bank to notify recognised clearing house about Bank’s intention to revoke or vary declaration under section 310K Transactions under recognised multilateral netting agreement not affected by variation or revocation of declaration under section 310K Interest on claims Preferential claims

313 314 315 316 316A 316B … 342 …

373 374 375 376 377 378 379 380 381 382 383 384 385 385A

Claims of other creditors and distribution of surplus assets Liquidation committees Meetings of creditors or shareholders Liquidation committees Liquidation Surplus Account Establishment of Liquidation Surplus Account Transitional provisions Transitional provision in relation to voidable transactions Transitional provision in relation to Liquidation Surplus Account under section 290 of Companies Act 1955 Liquidation of overseas company Part 21 Offences and Penalties Penalty for failure to comply with Act Penalties that may be imposed on directors in cases of failure by board or company to comply with Act Proceedings for offences Defences False statements Fraudulent use or destruction of property Falsification of records Carrying on business fraudulently Improper use of “Limited” Persons prohibited from managing companies Court may disqualify directors Liability for contravening sections 382 and 383 Registrar or FMA may prohibit persons from managing companies Appeals from FMA’s exercise of power under section 385

386 386A 386B 386C 386D 386E 386F

Liability for contravening section 385 Director of failed company must not be director, etc, of phoenix company with same or substantially similar name Definitions for purpose of phoenix company provisions Liability for debts of phoenix company Exception for person named in successor company notice Exception for temporary period while application for exemption is made Exception in relation to non-dormant phoenix company known by pre-liquidation name of failed company for at least 12 months before liquidation

… Schedule 5 Proceedings at meetings of creditors Schedule 6 Powers of liquidators [page 312] Schedule 7 Preferential claims Schedule 8 Proceedings at meetings of liquidation committees

Part 1 Preliminary

2

Interpretation

(1) In this Act, unless the context otherwise requires,— accounting period, in relation to a company, means a year ending on a balance date of the company and, if as a result of the date of the registration of the company or a change of the balance date of the company, the period ending on that date is longer or shorter than a year, that longer or shorter period is an accounting period address for service in relation to a company, means the company’s address for service adopted in accordance with section 192 annual meeting means a meeting required to be held by section 120 annual report— (a) means a report prepared under section 208; and (b) does not include a concise annual report balance date has the meaning set out in section 7 of the Financial Reporting Act 1993 board and board of directors have the meanings set out in section 127 charge includes a right or interest in relation to property owned by a company, by virtue of which a creditor of the company is entitled to claim payment in priority to creditors entitled to be paid under section 313; but does not include a charge under a charging order issued by a court in favour of a judgment creditor class has the meaning set out in section 116 company means— (a) a company registered under Part 2: (b) a company reregistered under this Act in accordance with the Companies Reregistration Act 1993 concise annual report, in relation to a company and an accounting period, means a report on the affairs of the company during that period that is

prepared in accordance with the requirements prescribed in regulations made under this Act constitution means a document referred to in section 29 court means the High Court of New Zealand designated settlement system has the meaning set out in section 156M of the Reserve Bank of New Zealand Act 1989 director has the meaning set out in section 126 distribution, in relation to a distribution by a company to a shareholder, means — (a) the direct or indirect transfer of money or property, other than the company’s own shares, to or for the benefit of the shareholder; or (b) the incurring of a debt to or for the benefit of the shareholder— [page 313]

in relation to shares held by that shareholder, and whether by means of a purchase of property, the redemption or other acquisition of shares, a distribution of indebtedness, or by some other means

dividend has the meaning set out in section 53 document means a document in any form; and includes— (a) any writing on any material; and (b) information recorded or stored by means of a tape recorder, computer, or other device; and material subsequently derived from information so recorded or stored; and (c) a book, graph, or drawing; and (d) a photograph, film, negative, tape, or other device in which 1 or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced entitled person, in relation to a company, means— (a) a shareholder; and (b) a person upon whom the constitution confers any of the rights and

powers of a shareholder exempt company has the meaning set out in section 6A of the Financial Reporting Act 1993 existing company means a body corporate registered or deemed to be registered under Part 2 or Part 10 of the Companies Act 1955, or under the Companies Act 1933, the Companies Act 1908, the Companies Act 1903, the Companies Act 1882, or the Joint Stock Companies Act 1860 financial markets participant has the same meaning as in section 4 of the Financial Markets Authority Act 2011 financial statements has the meaning set out in section 8 of the Financial Reporting Act 1993 FMA means the Financial Markets Authority established under Part 2 of the Financial Markets Authority Act 2011 group financial statements has the meaning set out in section 9 of the Financial Reporting Act 1993 group of companies has the meaning set out in section 2 of the Financial Reporting Act 1993 holding company has the meaning set out in section 5 interest group has the meaning set out in section 116 interested, in relation to a director, has the meaning set out in section 139 interests register means the register kept under section 189(1)(c) licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2010 major transaction has the meaning set out in section 129(2) New Zealand register means the register of companies incorporated in New Zealand kept pursuant to section 360(1)(a) ordinary resolution has the meaning set out in section 105(2) overseas company means a body corporate that is incorporated outside New Zealand overseas register means the register of bodies corporate that are incorporated outside New Zealand kept pursuant to section 360(1)(b)

[page 314] personal representative, in relation to an individual, means the executor, administrator or trustee of the estate of that individual pre-emptive rights means the rights conferred on shareholders under section 45 prescribed form means a form prescribed by regulations made under this Act that contains, or has attached to it, such information or documents as those regulations may require property means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise receiver has the same meaning as in section 2(1) of the Receiverships Act 1993 records means the documents required to be kept by a company under section 189(1) redeemable has the meaning set out in section 68 registered office has the meaning set out in section 186 Registrar means the Registrar of Companies appointed in accordance with section 357(1) related company has the meaning set out in subsection (3) relative, in relation to any person, means— (a) any parent, child, brother, or sister of that person; or (b) any spouse, civil union partner, or de facto partner of that person; or (ba) any parent, child, brother, or sister of a spouse, civil union partner, or de facto partner of that person; or (c) a nominee or trustee for any of those persons relevant interest has the meaning set out in section 146 secured creditor, in relation to a company, means a person entitled to a charge on or over property owned by that company securities has the same meaning as in the Securities Act 1978 share has the meaning set out in section 35

share register means the share register required to be kept under section 87 shareholder has the meaning set out in section 96 solvency test has the meaning set out in section 4 special meeting means a meeting called in accordance with section 121 special resolution means a resolution approved by a majority of 75% or, if a higher majority is required by the constitution, that higher majority, of the votes of those shareholders entitled to vote and voting on the question spouse, in relation to a person (A), includes a person with whom A has a de facto relationship (whether that person is of the same or a different sex) and a civil union partner subsidiary has the meaning set out in section 5 surplus assets means the assets of a company remaining after the payment of creditors’ claims and available for distribution in accordance with section 313 prior to its removal from the New Zealand register working day means a day of the week other than— (a) Saturday, Sunday, Good Friday, Easter Monday, Anzac Day, the Sovereign’s birthday, Labour Day, and Waitangi Day; and [page 315] (b) a day in the period commencing with 25 December in any year and ending with 2 January in the following year; and (c) if 1 January in any year falls on a Friday, the following Monday; and (d) if 1 January in any year falls on a Saturday or a Sunday, the following Monday and Tuesday. (2) Where,— (a) in relation to a company or an overseas company, any document is required to be delivered or any thing is required to be done to a District Registrar or an Assistant Registrar in whose office the records relating to the company or overseas company are kept within a period specified by this Act; and

(b) the last day of that period falls on the day of the anniversary of the province in which that office is situated,— the document may be delivered or that thing may be done to that District Registrar or Assistant Registrar on the next working day. (3) In this Act, a company is related to another company if—and related company has a corresponding meaning. Set as a new line align with (e) (a) the other company is its holding company or subsidiary; or (b) more than half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, is held by the other company and companies related to that other company (whether directly or indirectly, but other than in a fiduciary capacity); or (c) more than half of the issued shares, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, of each of them is held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or (d) the businesses of the companies have been so carried on that the separate business of each company, or a substantial part of it, is not readily identifiable; or (e) there is another company to which both companies are related;— and related company has a corresponding meaning (4) For the purposes of subsection (3), a company within the meaning of section 2 of the Companies Act 1955 is related to another company if, were it a company within the meaning of subsection (1) of this section, it would be related to that other company. (5) A reference in this Act to an address means,— (a) in relation to an individual, the full address of the place where that person usually lives: (b) in relation to a body corporate, its registered office or, if it does not have a registered office, its principal place of business. Section 2(1) annual report: inserted, on 18 June 2007, by section 4(3) of the Companies Amendment Act (No 2) 2006 (2006 No 62).

Section 2(1) concise annual report: inserted, on 18 June 2007, by section 4(3) of the Companies Amendment Act (No 2) 2006 (2006 No 62). Section 2(1) designated settlement system: inserted, on 24 November 2009, by section 16 of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53). Section 2(1) exempt company: substituted, on 22 November 2006, by section 4(1) of the Companies Amendment Act (No 2) 2006 (2006 No 62).

[page 316] Section 2(1) financial markets participant: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 2(1) FMA: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 2(1) licensed insurer: inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111). Section 2(1) receiver: inserted, on 1 November 2007, by section 4(1) of the Companies Amendment Act 2006 (2006 No 56). Section 2(1) relative paragraph (a): substituted, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3). Section 2(1) relative paragraph (b): substituted, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3). Section 2(1) relative paragraph (ba): inserted, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3). Section 2(1) spouse: substituted, on 1 November 2007, by section 4(2) of the Companies Amendment Act 2006 (2006 No 56). Section 2(3)(b): amended, on 15 April 2004, by section 3 of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Part 8 Directors and Their Powers and Duties

126 Meaning of director (1) In this Act, director, in relation to a company, includes— (a) a person occupying the position of director of the company by whatever name called; and (b) for the purposes of sections 131 to 141, 145 to 149, 298, 299, 301, 383, 385, 386A to 386F, and clause 3(4)(b) of Schedule 7,— (i)

a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; and

(ii) a person in accordance with whose directions or instructions the board of the company may be required or is accustomed to act; and (iii) a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board; and (c) for the purposes of sections 131 to 149, 298, 299, 301, 383, 385, 386A to 386F, and clause 3(4)(b) of Schedule 7, a person to whom a power or duty of the board has been directly delegated by the board with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board; and (d) for the purposes of sections 145 to 149, and clause 3(4)(b) of Schedule 7, a person in accordance with whose directions or instructions a person referred to in paragraphs (a) to (c) may be required or is accustomed to act in respect of his or her duties and powers as a director. (1A) In this Act, director, in relation to a company, does not include a receiver. (2) If the constitution of a company confers a power on shareholders which would otherwise fall to be exercised by the board, any shareholder who

exercises that [page 317]

power or who takes part in deciding whether to exercise that power is deemed, in relation to the exercise of the power or any consideration concerning its exercise, to be a director for the purposes of sections 131 to 138.

(3) If the constitution of a company requires a director or the board to exercise or refrain from exercising a power in accordance with a decision or direction of shareholders, any shareholder who takes part in— (a) the making of any decision that the power should or should not be exercised; or (b) the making of any decision whether to give a direction,— as the case may be, is deemed, in relation to making any such decision, to be a director for the purposes of sections 131 to 138. (4) Paragraphs (b) to (d) of subsection (1) do not include a person to the extent that the person acts only in a professional capacity. Section 126(1)(b): amended, on 1 November 2007, by section 36(1) of the Companies Amendment Act 2006 (2006 No 56). Section 126(1)(b): amended, on 29 May 2004, by section 3(1) of the Companies Amendment Act 2004 (2004 No 10). Section 126(1)(b): amended, on 3 May 2001, by section 9 of the Companies Act 1993 Amendment Act 2001 (2001 No 18). Section 126(1)(c): amended, on 1 November 2007, by section 36(2) of the Companies Amendment Act 2006 (2006 No 56). Section 126(1)(c): amended, on 29 May 2004, by section 3(2) of the Companies Amendment Act 2004 (2004 No 10). Section 126(1)(c): amended, on 3 May 2001, by section 9 of the Companies Act 1993 Amendment Act 2001 (2001 No 18). Section 126(1)(d): amended, on 1 November 2007, by section 36(3) of the Companies Amendment Act 2006 (2006 No 56). Section 126(1)(d): amended, on 29 May 2004, by section 3(3) of the Companies Amendment Act 2004 (2004 No 10). Section 126(1A): inserted, on 1 July 1994, by section 16 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

127 Meaning of board In this Act, the terms board and board of directors, in relation to a company, mean— (a) directors of the company who number not less than the required quorum acting together as a board of directors; or (b) if the company has only 1 director, that director.

Powers of management

128 Management of company (1) The business and affairs of a company must be managed by, or under the direction or supervision of, the board of the company. (2) The board of a company has all the powers necessary for managing, and for directing and supervising the management of, the business and affairs of the company. (3) Subsections (1) and (2) are subject to any modifications, exceptions, or limitations contained in this Act or in the company’s constitution. [page 318]

129 Major transactions (1) A company must not enter into a major transaction unless the transaction is — (a) approved by special resolution; or (b) contingent on approval by special resolution. (2) In this section,— assets includes property of any kind, whether tangible or intangible major transaction, in relation to a company, means: (a) the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than half the value of the company’s assets before the acquisition; or

(b) the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than half the value of the company’s assets before the disposition; or (c) a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities, including contingent liabilities, the value of which is more than half the value of the company’s assets before the transaction. (2A) Nothing in paragraph (b) or paragraph (c) of the definition of the term major transaction in subsection (2) applies by reason only of the company giving, or entering into an agreement to give, a charge secured over assets of the company the value of which is more than half the value of the company’s assets for the purpose of securing the repayment of money or the performance of an obligation. (2B) In assessing the value of any contingent liability for the purposes of paragraph (c) of the definition of major transaction in subsection (2), the directors— (a) must have regard to all circumstances that the directors know, or ought to know, affect, or may affect, the value of the contingent liability; and (b) may rely on estimates of the contingent liability that are reasonable in the circumstances; and (c) may take account of— (i)

the likelihood of the contingency occurring; and

(ii) any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability. (3) Nothing in this section applies to a major transaction entered into by a receiver appointed pursuant to an instrument creating a charge over all or substantially all of the property of a company. Section 129(2) major transaction: substituted, on 1 July 1994, by section 17(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 129(2) major transaction paragraph (c): amended, on 15 April 2004, by section 8(1) of the Companies Amendment Act (No 2) 2004 (2004 No 24). Section 129(2A): inserted, on 1 July 1994, by section 17(2) of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 129(2A): amended, on 3 May 2001, by section 10 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 129(2A): amended, on 30 June 1997, by section 10 of the Companies Act 1993 Amendment Act 1997 (1997 No 27). Section 129(2B): inserted, on 15 April 2004, by section 8(2) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

[page 319]

130 Delegation of powers (1) Subject to any restrictions in the constitution of the company, the board of a company may delegate to a committee of directors, a director or employee of the company, or any other person, any 1 or more of its powers other than its powers under any of the sections of this Act set out in Schedule 2. (2) A board that delegates a power under subsection (1) is responsible for the exercise of the power by the delegate as if the power had been exercised by the board, unless the board— (a) believed on reasonable grounds at all times before the exercise of the power that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Act and the company’s constitution; and (b) has monitored, by means of reasonable methods properly used, the exercise of the power by the delegate.

Directors’ duties

131 Duty of directors to act in good faith and in best interests of company (1) Subject to this section, a director of a company, when exercising powers or performing duties, must act in good faith and in what the director believes to be the best interests of the company. (2) A director of a company that is a wholly-owned subsidiary may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company, act in a manner which he or she believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.

(3)

A director of a company that is a subsidiary (but not a whollyowned subsidiary) may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company and with the prior agreement of the shareholders (other than its holding company), act in a manner which he or she believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.

(4) A director of a company that is carrying out a joint venture between the shareholders may, when exercising powers or performing duties as a director in connection with the carrying out of the joint venture, if expressly permitted to do so by the constitution of the company, act in a manner which he or she believes is in the best interests of a shareholder or shareholders, even though it may not be in the best interests of the company. Section 131(4): amended, on 30 June 1997, by section 11 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

132 Exercise of powers in relation to employees (1) Nothing in section 131 limits the power of a director to make provision for the benefit of employees of the company in connection with the company ceasing to carry on the whole or part of its business. (2) In subsection (1),— company includes a subsidiary of a company [page 320] employees includes former employees and the dependants of employees or former employees; but does not include an employee or former employee who is or was a director of the company.

133 Powers to be exercised for proper purpose A director must exercise a power for a proper purpose.

134 Directors to comply with Act and constitution A director of a company must not act, or agree to the company acting, in a manner that contravenes this Act or the constitution of the company.

135 Reckless trading A director of a company must not— (a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or (b) cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

136 Duty in relation to obligations A director of a company must not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

137 Director’s duty of care A director of a company, when exercising powers or performing duties as a director, must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account, but without limitation,— (a) the nature of the company; and (b) the nature of the decision; and (c) the position of the director and the nature of the responsibilities undertaken by him or her.

138 Use of information and advice (1) Subject to subsection (2), a director of a company, when exercising powers

or performing duties as a director, may rely on reports, statements, and financial data and other information prepared or supplied, and on professional or expert advice given, by any of the following persons: (a) an employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned: (b) a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person’s professional or expert competence: (c) any other director or committee of directors upon which the director did not serve in relation to matters within the director’s or committee’s designated authority. (2) Subsection (1) applies to a director only if the director— (a) acts in good faith; and (b) makes proper inquiry where the need for inquiry is indicated by the circumstances; and (c) has no knowledge that such reliance is unwarranted. [page 321]

Transactions involving self-interest

139 Meaning of interested (1) Subject to subsection (2), for the purposes of this Act, a director of a company is interested in a transaction to which the company is a party if, and only if, the director— (a) is a party to, or will or may derive a material financial benefit from, the transaction; or (b) has a material financial interest in another party to the transaction; or (c) is a director, officer, or trustee of another party to, or person who will or may derive a material financial benefit from, the transaction, not being a party or person that is—

(i)

the company’s holding company being a holding company of which the company is a whollyowned subsidiary; or

(ii) a wholly-owned subsidiary of the company; or (iii) a wholly-owned subsidiary of a holding company of which the company is also a wholly-owned subsidiary; or (d) is the parent, child, spouse, civil union partner, or de facto partner of another party to, or person who will or may derive a material financial benefit from, the transaction; or (e) is otherwise directly or indirectly materially interested in the transaction. (2) For the purposes of this Act, a director of a company is not interested in a transaction to which the company is a party if the transaction comprises only the giving by the company of security to a third party which has no connection with the director, at the request of the third party, in respect of a debt or obligation of the company for which the director or another person has personally assumed responsibility in whole or in part under a guarantee, indemnity, or by the deposit of a security. Section 139(1)(d): amended, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3).

140 Disclosure of interest (1) A director of a company must, forthwith after becoming aware of the fact that he or she is interested in a transaction or proposed transaction with the company, cause to be entered in the interests register, and, if the company has more than 1 director, disclose to the board of the company— (a) if the monetary value of the director’s interest is able to be quantified, the nature and monetary value of that interest; or (b) if the monetary value of the director’s interest cannot be quantified, the nature and extent of that interest. (1A) A director of a company is not required to comply with subsection (1) if— (a) the transaction or proposed transaction is between the director and the company; and (b) the transaction or proposed transaction is or is to be entered into in the

ordinary course of the company’s business and on usual terms and conditions. (2) For the purposes of subsection (1), a general notice entered in the interests register and, if the company has more than 1 director, disclosed to the board to the effect that a director is a shareholder, director, officer or trustee of [page 322]

another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, is a sufficient disclosure of interest in relation to that transaction.

(3) A failure by a director to comply with subsection (1) does not affect the validity of a transaction entered into by the company or the director. (4) Every director who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(2). Compare: 1955 No 63 s 199 Section 140(1A): inserted, on 30 June 1997, by section 12 of the Companies Act 1993 Amendment Act 1997 (1997 No 27). Section 140(2): amended, on 3 May 2001, by section 11 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

141 Avoidance of transactions (1) A transaction entered into by the company in which a director of the company is interested may be avoided by the company at any time before the expiration of 3 months after the transaction is disclosed to all the shareholders (whether by means of the company’s annual report or otherwise). (2) A transaction cannot be avoided if the company receives fair value under it. (3) For the purposes of subsection (2), the question whether a company receives fair value under a transaction is to be determined on the basis of the information known to the company and to the interested director at the time the transaction is entered into. (4) If a transaction is entered into by the company in the ordinary course of its

business and on usual terms and conditions, the company is presumed to receive fair value under the transaction. (5) For the purposes of this section,— (a) a person seeking to uphold a transaction and who knew or ought to have known of the director’s interest at the time the transaction was entered into has the onus of establishing fair value; and (b) in any other case, the company has the onus of establishing that it did not receive fair value. (6) A transaction in which a director is interested can only be avoided on the ground of the director’s interest in accordance with this section or the company’s constitution.

142 Effect on third parties The avoidance of a transaction under section 141 does not affect the title or interest of a person in or to property which that person has acquired if the property was acquired— (a) from a person other than the company; and (b) for valuable consideration; and (c) without knowledge of the circumstances of the transaction under which the person referred to in paragraph (a) acquired the property from the company.

143 Application of sections 140 and 141 in certain cases Nothing in section 140 and section 141 applies in relation to— [page 323] (a) remuneration or any other benefit given to a director in accordance with section 161; or (b) an indemnity given or insurance provided in accordance with section

162.

144 Interested director may vote Subject to the constitution of the company, a director of a company who is interested in a transaction entered into, or to be entered into, by the company, may— (a) vote on a matter relating to the transaction; and (b) attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purpose of a quorum; and (c) sign a document relating to the transaction on behalf of the company; and (d) do any other thing in his or her capacity as a director in relation to the transaction— as if the director were not interested in the transaction.

145 Use of company information (1) A director of a company who has information in his or her capacity as a director or employee of the company, being information that would not otherwise be available to him or her, must not disclose that information to any person, or make use of or act on the information, except— (a) for the purposes of the company; or (b) as required by law; or (c) in accordance with subsection (2) or subsection (3); or (d) in complying with section 140. (2) A director of a company may, unless prohibited by the board, disclose information to— (a) a person whose interests the director represents; or (b) a person in accordance with whose directions or instructions the director may be required or is accustomed to act in relation to the director’s powers and duties and, if the director discloses the

information, the name of the person to whom it is disclosed must be entered in the interests register. (3) A director of a company may disclose, make use of, or act on the information if— (a) particulars of the disclosure, use, or the act in question are entered in the interests register; and (b) the director is first authorised to do so by the board; and (c) the disclosure, use, or act in question will not, or will not be likely to, prejudice the company.

146 Meaning of relevant interest (1) For the purposes of section 148, a director of a company has a relevant interest in a share issued by a company (whether or not the director is registered in the share register as the holder of it) if the director— (a) is a beneficial owner of the share; or (b) has the power to exercise any right to vote attached to the share; or (c) has the power to control the exercise of any right to vote attached to the share; or [page 324] (d) has the power to acquire or dispose of the share; or (e) has the power to control the acquisition or disposition of the share by another person; or (f)

under, or by virtue of, any trust, agreement, arrangement or understanding relating to the share (whether or not that person is a party to it)— (i)

may at any time have the power to exercise any right to vote attached to the share; or

(ii) may at any time have the power to control the exercise of any right to vote attached to the share; or

(iii) may at any time have the power to acquire or dispose of, the share; or (iv) may at any time have the power to control the acquisition or disposition of the share by another person. (2) Where a person would, if that person were a director of the company, have a relevant interest in a share by virtue of subsection (1) and— (a) that person or its directors are accustomed or under an obligation, whether legally enforceable or not, to act in accordance with the directions, instructions, or wishes of a director of the company in relation to— (i)

the exercise of the right to vote attached to the share; or

(ii) the control of the exercise of any right to vote attached to the share; or (iii) the acquisition or disposition of the share; or (iv) the exercise of the power to control the acquisition or disposition of the share by another person; or (b) a director of the company has the power to exercise the right to vote attached to 20% or more of the shares of that person; or (c) a director of the company has the power to control the exercise of the right to vote attached to 20% or more of the shares of that person; or (d) a director of the company has the power to acquire or dispose of 20% or more of the shares of that person; or (e) a director of the company has the power to control the acquisition or disposition of 20% or more of the shares of that person,— that director has a relevant interest in the share. (3) A person who has, or may have, a power referred to in any of paragraphs (b) to (f) of subsection (1), has a relevant interest in a share regardless of whether the power— (a) is expressed or implied: (b) is direct or indirect: (c) is legally enforceable or not:

(d) is related to a particular share or not: (e) is subject to restraint or restriction or is capable of being made subject to restraint or restriction: (f)

is exercisable presently or in the future:

(g) is exercisable only on the fulfilment of a condition: (h) is exercisable alone or jointly with another person or persons. (4) A power referred to in subsection (1) exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons. (5) A reference to a power includes a reference to a power that arises from, or is capable of being exercised as the result of, a breach of any trust, agreement, [page 325]

arrangement, or understanding, or any of them, whether or not it is legally enforceable.

Section 146(2): amended, on 30 June 1997, by section 13 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

147 Relevant interests to be disregarded in certain cases (1) For the purposes of section 148, no account shall be taken of a relevant interest of a person in a share if— (a) the ordinary business of the person who has the relevant interest consists of, or includes, the lending of money or the provision of financial services, or both, and that person has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of that person; or (b) that person has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in the ordinary course of business of a sharebroker and

that person is a person authorised to undertake trading activities on a stock exchange; or (c) that person has the relevant interest solely by reason of being appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the company and the instrument of that person’s appointment is produced before the start of the meeting in accordance with clause 6(4) of Schedule 1 or by a time specified in the company’s constitution, as the case may be; or (d) that person— (i)

is a trustee corporation or a nominee company; and

(ii) has the relevant interest by reason only of acting for another person in the ordinary course of business of that trustee corporation or nominee company; or (e) the person has the relevant interest by reason only that the person is a bare trustee of a trust to which the share is subject. (2) For the purposes of subsection (1)(e), a trustee may be a bare trustee notwithstanding that he or she is entitled as a trustee to be remunerated out of the income or property of the trust. Section 147(1)(b): amended, on 1 December 2002, by section 30 of the Securities Markets Amendment Act 2002 (2002 No 44).

148 Disclosure of share dealing by directors (1) A director of a company that has become registered under this Act in accordance with the Companies Reregistration Act 1993 and who has a relevant interest in any shares issued by the company must, forthwith after the reregistration of the company,— (a) disclose to the board the number and class of shares in which the relevant interest is held and the nature of the relevant interest; and (b) ensure that the particulars disclosed to the board under paragraph (a) are entered in the interests register. (2) A director of a company who acquires or disposes of a relevant interest in shares issued by the company must, forthwith after the acquisition or disposition,—

[page 326] (a) disclose to the board— (i)

the number and class of shares in which the relevant interest has been acquired or the number and class of shares in which the relevant interest was disposed of, as the case may be; and

(ii) the nature of the relevant interest; and (iii) the consideration paid or received; and (iv) the date of the acquisition or disposition; and (b) ensure that the particulars disclosed to the board under paragraph (a) are entered in the interests register.

149 Restrictions on share dealing by directors (1) If a director of a company has information in his or her capacity as a director or employee of the company or a related company, being information that would not otherwise be available to him or her, but which is information material to an assessment of the value of shares or other securities issued by the company or a related company, the director may acquire or dispose of those shares or securities only if,— (a) in the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or securities; or (b) in the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or securities. (2) For the purposes of subsection (1), the fair value of shares or securities is to be determined on the basis of all information known to the director or publicly available at the time. (3) Subsection (1) does not apply in relation to a share or security that is acquired or disposed of by a director only as a nominee for the company or a related company. (4) Where a director acquires shares or securities in contravention of subsection (1)(a), the director is liable to the person from whom the shares or securities were acquired for the amount by which the fair value of the shares or

securities exceeds the amount paid by the director. (5) Where a director disposes of shares or securities in contravention of subsection (1)(b), the director is liable to the person to whom the shares or securities were disposed of for the amount by which the consideration received by the director exceeds the fair value of the shares or securities. (6) Nothing in this section applies in relation to a company to which Part 1 of the Securities Markets Act 1988 applies. Section 149(6): amended, on 1 December 2002, by section 30 of the Securities Markets Amendment Act 2002 (2002 No 44).

Appointment and removal of directors

150 Number of directors A company must have at least 1 director.

151 Qualifications of directors (1) A natural person who is not disqualified by subsection (2) may be appointed as a director of a company. [page 327] (2) The following persons are disqualified from being appointed or holding office as a director of a company: (a) a person who is under 18 years of age: (b) a person who is an undischarged bankrupt: (ba) a person who would, but for the repeal of section 188A or section 189 or section 189A of the Companies Act 1955, be prohibited from being a director or promoter of, or being concerned or taking part in the management of, a company within the meaning of that Act: (c) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 199K or section 199L of the Companies Act 1955 or who would be so prohibited but for the repeal of that Act:

(d) a person who is prohibited from being an officer or promoter of or being concerned or taking part in the management of a company under section 199N of the Companies Act 1955 or who would be so prohibited but for the repeal of that Act: (e) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 382 or section 383 or section 385: (ea) a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Securities Act 1978 or the Securities Markets Act 1988 or the Takeovers Act 1993: (eb) a person who is prohibited from 1 or more of the following under an order made, or a notice given, under a law of a prescribed country, State, or territory outside New Zealand: (i)

being a director of an overseas company:

(ii) being a promoter of an overseas company: (iii) being concerned or taking part in the management of an overseas company: (f)

a person who is subject to a property order made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988:

(g) in relation to any particular company, a person who does not comply with any qualifications for directors contained in the constitution of that company. (3) A person that is not a natural person cannot be a director of a company. (4) A person who is disqualified from being a director but who acts as a director is a director for the purposes of a provision of this Act that imposes a duty or an obligation on a director of a company. Section 151(2)(ba): inserted, on 1 July 1994, by section 18 of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 151(2)(ea): inserted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46). Section 151(2)(eb): inserted, on 18 June 2007, by section 5(1) of the Companies Amendment Act (No 2) 2006 (2006 No 62).

[page 328]

152 Director’s consent required A person must not be appointed a director of a company unless he or she has consented in writing to be a director and certified that he or she is not disqualified from being appointed or holding office as a director of a company. Section 152: amended, on 1 July 1994, by section 19 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

153 Appointment of first and subsequent directors (1) A person named as a director in an application for registration or in an amalgamation proposal holds office as a director from the date of registration or the date the amalgamation proposal is effective, as the case may be, until that person ceases to hold office as a director in accordance with this Act. (2) All subsequent directors of a company must, unless the constitution of the company otherwise provides, be appointed by ordinary resolution.

154 Court may appoint directors (1) If— (a) there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and (b) it is not possible or practicable to appoint directors in accordance with the company’s constitution,— a shareholder or creditor of the company may apply to the court to appoint 1 or more persons as directors of the company, and the court may make an appointment if it considers that it is in the interests of the company to do so. (2) An appointment may be made on such terms and conditions as the court thinks fit.

155 Appointment of directors to be voted on

individually (1) Subject to the constitution of the company, the shareholders of a company may vote on a resolution to appoint a director of the company only if— (a) the resolution is for the appointment of 1 director; or (b) the resolution is a single resolution for the appointment of 2 or more persons as directors of the company and a separate resolution that it be so voted on has first been passed without a vote being cast against it. (2) A resolution moved in contravention of subsection (1) is void even though the moving of it was not objected to at the time. (3) Subsection (2) does not limit the operation of section 158. (4) No provision for the automatic reappointment of retiring directors in default of another appointment applies on the passing of a resolution in contravention of subsection (1). (5) Nothing in this section prevents the election of 2 or more directors by ballot or poll.

156 Removal of directors (1) Subject to the constitution of a company, a director of the company may be removed from office by ordinary resolution passed at a meeting called for the purpose or for purposes that include the removal of the director. (2) The notice of meeting must state that the purpose or a purpose of the meeting is the removal of the director. [page 329]

157 Director ceasing to hold office (1) The office of director of a company is vacated if the person holding that office— (a) resigns in accordance with subsection (2); or (b) is removed from office in accordance with this Act or the constitution

of the company; or (c) becomes disqualified from being a director pursuant to section 151; or (d) dies; or (e) otherwise vacates office in accordance with the constitution of the company. (2) A director of a company may resign office by signing a written notice of resignation and delivering it to the address for service of the company. The notice is effective when it is received at that address or at a later time specified in the notice. (3) Notwithstanding the vacation of office, a person who held office as a director remains liable under the provisions of this Act that impose liabilities on directors in relation to acts and omissions and decisions made while that person was a director.

158 Validity of director’s acts The acts of a person as a director are valid even though— (a) the person’s appointment was defective; or (b) the person is not qualified for appointment.

159 Notice of change of directors (1) The board of a company must ensure that notice in the prescribed form of— (a) a change in the directors of a company, whether as the result of a director ceasing to hold office or the appointment of a new director, or both; or (b) a change in the name or the residential address of a director of a company— is delivered to the Registrar for registration. (2) A notice under subsection (1) must— (a) specify the date of the change; and (b) include the full name and residential address of every person who is a director of the company from the date of the notice; and

(c) in the case of the appointment of a new director, have attached the form of consent and certificate required pursuant to section 152; and (d) be delivered to the Registrar within 20 working days of— (i)

the change occurring, in the case of the appointment or resignation of a director; or

(ii) the company first becoming aware of the change, in the case of the death of a director or a change in the name or residential address of a director. (3) If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2). [page 330]

Miscellaneous provisions relating to directors

160 Proceedings of board Subject to the constitution of a company, the provisions set out in Schedule 3 govern the proceedings of the board of a company.

161 Remuneration and other benefits (1) The board of a company may, subject to any restrictions contained in the constitution of the company, authorise— (a) the payment of remuneration or the provision of other benefits by the company to a director for services as a director or in any other capacity: (b) the payment by the company to a director or former director of compensation for loss of office: (c) the making of loans by the company to a director: (d) the giving of guarantees by the company for debts incurred by a director:

the entering into of a contract to do any of the things set out in (e) paragraphs (a), (b), (c), and (d),— if the board is satisfied that to do so is fair to the company. (2) The board must ensure that forthwith after authorising the making of the payment or the provision of the benefit or the making of the loan or the giving of the guarantee or the entering into of the contract, as the case may be, particulars of the payment or benefit or loan or guarantee or contract are entered in the interests register. (3) The payment of remuneration or the giving of any other benefit to a director in accordance with a contract authorised under subsection (1) need not be separately authorised under that subsection. (4) Directors who vote in favour of authorising a payment, benefit, loan, guarantee, or contract under subsection (1) must sign a certificate stating that, in their opinion, the making of the payment or the provision of the benefit, or the making of the loan, or the giving of the guarantee, or the entering into of the contract is fair to the company, and the grounds for that opinion. (5) Where a payment is made or other benefit provided or a guarantee is given to which subsection (1) applies and either— (a) the provisions of subsections (1) and (4) have not been complied with; or (b) reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),— the director or former director to whom the payment is made or the benefit is provided, or in respect of whom the guarantee is given, as the case may be, is personally liable to the company for the amount of the payment, or the monetary value of the benefit, or any amount paid by the company under the guarantee, except to the extent to which he or she proves that the payment or benefit or guarantee was fair to the company at the time it was made, provided, or given. (6) Where a loan is made to which subsection (1) applies and either— (a) the provisions of subsections (1) and (4) have not been complied with; or (b) reasonable grounds did not exist for the opinion set out in the

certificate given under subsection (4),— [page 331]

the loan becomes immediately repayable to the company by the director, notwithstanding the terms of any agreement relating to the giving of the loan, except to the extent to which he or she proves that the loan was fair to the company at the time it was given.

162 Indemnity and insurance (1) Except as provided in this section, a company must not indemnify, or directly or indirectly effect insurance for, a director or employee of the company or a related company in respect of— (a) liability for any act or omission in his or her capacity as a director or employee; or (b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability. (2) An indemnity given in breach of this section is void. (3) A company may, if expressly authorised by its constitution, indemnify a director or employee of the company or a related company for any costs incurred by him or her in any proceeding— (a) that relates to liability for any act or omission in his or her capacity as a director or employee; and (b) in which judgment is given in his or her favour, or in which he or she is acquitted, or which is discontinued. (4) A company may, if expressly authorised by its constitution, indemnify a director or employee of the company or a related company in respect of— (a) liability to any person other than the company or a related company for any act or omission in his or her capacity as a director or employee; or (b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability,— not being criminal liability or liability in respect of a breach, in the case of a

director, of the duty specified in section 131 or, in the case of an employee, of any fiduciary duty owed to the company or related company. (5) A company may, if expressly authorised by its constitution and with the prior approval of the board, effect insurance for a director or employee of the company or a related company in respect of— (a) liability, not being criminal liability, for any act or omission in his or her capacity as a director or employee; or (b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability; or (c) costs incurred by that director or employee in defending any criminal proceedings— (i)

that have been brought against the director or employee in relation to any act or omission in his or her capacity as a director or employee; and

(ii) in which he or she is acquitted. (6) The directors who vote in favour of authorising the effecting of insurance under subsection (5) must sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the company. (7) The board of a company must ensure that particulars of any indemnity given to, or insurance effected for, any director or employee of the company or a related company are forthwith entered in the interests register. [page 332] (8) Where insurance is effected for a director or employee of a company or a related company and— (a) the provisions of either subsection (5) or subsection (6) have not been complied with; or (b) reasonable grounds did not exist for the opinion set out in the certificate given under subsection (6),— the director or employee is personally liable to the company for the cost of effecting the insurance except to the extent that he or she proves that it was

fair to the company at the time the insurance was effected. (9) In this section,— director includes a former director effect insurance includes pay, whether directly or indirectly, the costs of the insurance employee includes a former employee indemnify includes relieve or excuse from liability, whether before or after the liability arises; and indemnity has a corresponding meaning. Section 162(5)(c): substituted, on 3 June 1998, by section 5 of the Companies Amendment Act 1998 (1998 No 31).

Part 14 Compromises with Creditors

227 Interpretation In this Part, unless the context otherwise requires,— company includes an overseas company registered under Part 18 compromise means a compromise between a company and its creditors, including a compromise— (a) cancelling all or part of a debt of the company; or (b) varying the rights of its creditors or the terms of a debt; or (c) relating to an alteration of a company’s constitution that affects the likelihood of the company being able to pay a debt creditor includes— (a) a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and (b) a secured creditor proponent means a person referred to in section 228 who proposed a compromise in accordance with this Part. Section 227 company: inserted, on 1 November 2007, by section 5 of the Companies Amendment Act 2006 (2006 No 56). Section 227 creditor: substituted, on 1 July 1994, by section 28 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

228 Compromise proposal (1) Any of the following persons may propose a compromise under this Part if that person has reason to believe that a company is or will be unable to pay its debts within the meaning of section 287— (a) the board of directors of the company: [page 333]

(b) a receiver appointed in relation to the whole or substantially the whole of the assets and undertaking of the company: (c) a liquidator of the company: (d) with the leave of the court, any creditor or shareholder of the company. (2) Where the court grants leave to a creditor or shareholder under subsection (1)(d), the court may make an order directing the company to supply to the creditor or shareholder, within such time as may be specified, a list of the names and addresses of the company’s creditors showing the amounts owed to each of them or such other information as may be specified to enable the creditor or shareholder to propose a compromise.

229 Notice of proposed compromise (1) The proponent must compile, in relation to each class of creditors of the company, a list of creditors known to the proponent who would be affected by the proposed compromise, setting out— (a) the amount owing or estimated to be owing to each of them; and (b) the number of votes which each of them is entitled to cast on a resolution approving the compromise. (2) The proponent must give to each known creditor, the company, any receiver or liquidator, and deliver to the Registrar for registration,— (a) notice in accordance with Schedule 5 of the intention to hold a meeting of creditors, or any 2 or more classes of creditors, for the purpose of voting on the resolution; and (b) a statement— (i)

containing the name and address of the proponent and the capacity in which the proponent is acting; and

(ii) containing the address and telephone number to which inquiries may be directed during normal business hours; and (iii) setting out the terms of the proposed compromise and the reasons for it; and (iv) setting out the reasonably foreseeable consequences for creditors of the company of the compromise being approved; and

(v) setting out the extent of any interest of a director in the proposed compromise; and (vi) explaining that the proposed compromise and any amendment to it proposed at a meeting of creditors or any classes of creditors will be binding on all creditors, or on all creditors of that class, if approved in accordance with section 230; and (vii) containing details of any procedure proposed as part of the proposed compromise for varying the compromise following its approval; and (c) a copy of the list or lists of creditors referred to in subsection (1).

230 Effect of compromise (1) A compromise, including any amendment proposed at the meeting, is approved by creditors, or a class of creditors, if, at a meeting of creditors or that class of creditors conducted in accordance with Schedule 5, the compromise, including any amendment, is adopted in accordance with clause 5 of that schedule. [page 334] (2) A compromise, including any amendment, approved by creditors or a class of creditors of a company in accordance with this Part is binding on the company and on— (a) all creditors; or (b) if there is more than 1 class of creditors, on all creditors of that class— to whom notice of the proposal was given under section 229. (3) If a resolution proposing a compromise, including any amendment, is put to the vote of more than 1 class of creditors, it is to be presumed, unless the contrary is expressly stated in the resolution, that the approval of the compromise, including any amendment, by each class is conditional on the approval of the compromise, including any amendment, by every other class voting on the resolution. (4) The proponent must give written notice of the result of the voting to each

known creditor, the company, any receiver or liquidator, and the Registrar.

231 Variation of compromise (1) A compromise approved under section 230 may be varied either— (a) in accordance with any procedure for variation incorporated in the compromise as approved; or (b) by the approval of a variation of the compromise in accordance with this Part which, for that purpose, shall apply with such modifications as may be necessary as if any proposed variation were a proposed compromise. (2) The provisions of this Part shall apply to any compromise that is varied in accordance with this section.

232 Powers of court (1) On the application of the proponent or the company, the court may— (a) give directions in relation to a procedural requirement imposed by this Part, or waive or vary any such requirement, if satisfied that it would be just to do so; or (b) order that, during a period specified in the order, beginning not earlier than the date on which notice was given of the proposed compromise and ending not later than 10 working days after the date on which notice was given of the result of the voting on it,— (i)

proceedings in relation to a debt owing by the company be stayed; or

(ii) a creditor refrain from taking any other measure to enforce payment of a debt owing by the company. (2) Nothing in subsection (1)(b) affects the right of a secured creditor during that period to take possession of, realise, or otherwise deal with, property of the company over which that creditor has a charge. (3) If the court is satisfied, on the application of a creditor of a company who was entitled to vote on a compromise that— (a) insufficient notice of the meeting or of the matter required to be

notified under section 229 was given to that creditor; or (b) there was some other material irregularity in obtaining approval of the compromise; or [page 335] (c) in the case of a creditor who voted against the compromise, the compromise is unfairly prejudicial to that creditor, or to the class of creditors to which that creditor belongs,— the court may order that the creditor is not bound by the compromise or make such other order as it thinks fit. (4) An application under subsection (3) must be made not later than 10 working days after the date on which notice of the result of the voting was given to the creditor.

233 Effect of compromise in liquidation of company (1) Where a compromise is approved under section 230, the court may, on the application of— (a) the company; or (b) a receiver appointed in relation to property of the company; or (c) with the leave of the court, any creditor or shareholder of the company, — make such order as the court thinks fit with respect to the extent, if any, to which the compromise will, if the company is put into liquidation, continue in effect and be binding on the liquidator of the company. (2) Where a compromise is approved under section 230 and the company is subsequently put into liquidation, the court may, on the application of— (a) the liquidator; or (b) a receiver appointed in relation to property of the company; or (c) with the leave of the court, any creditor or shareholder of the company, —

make such order as the court thinks fit with respect to the extent, if any, to which the compromise will continue in effect and be binding on the liquidator of the company.

234 Costs of compromise Unless the court orders otherwise, the costs incurred in organising and conducting a meeting of creditors for the purpose of voting on a proposed compromise— (a) must be met by the company; or (b) if incurred by a receiver or a liquidator, are a cost of the receivership or liquidation; or (c) if incurred by any other person, are a debt due to that person by the company and, if the company is put into liquidation, are payable in the order of priority specified in Schedule 7.

Part 15 Approval of Arrangements, Amalgamations, and Compromises by Court

235 Interpretation In this Part, unless the context otherwise requires,— arrangement includes a reorganisation of the share capital of a company by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both those methods [page 336] company means— (a) a company within the meaning of section 2: (b) an overseas company that is registered on the overseas register: (c) an association that may be put into liquidation under section 17A of the Judicature Act 1908 creditor includes— (a) a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and (b) a secured creditor. Section 235 creditor: substituted, on 1 July 1994, by section 29 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

236 Approval of arrangements, amalgamations, and compromises (1) Notwithstanding the provisions of this Act or the constitution of a company, the court may, on the application of a company or any shareholder or

creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify and any such order may be made on such terms and conditions as the court thinks fit. (2) Before making an order under subsection (1), the court may, on the application of the company or any shareholder or creditor or other person who appears to the court to be interested, or of its own motion, make any 1 or more of the following orders: (a) an order that notice of the application, together with such information relating to it as the court thinks fit, be given in such form and in such manner and to such persons or classes of persons as the court may specify: (b) an order directing the holding of a meeting or meetings of shareholders or any class of shareholders or creditors or any class of creditors of a company to consider and, if thought fit, to approve, in such manner as the court may specify, the proposed arrangement or amalgamation or compromise and, for that purpose, may determine the shareholders or creditors that constitute a class of shareholders or creditors of a company: (c) an order requiring that a report on the proposed arrangement or amalgamation or compromise be prepared for the court by a person specified by the court and, if the court thinks fit, be supplied to the shareholders or any class of shareholders or creditors or any class of creditors of a company or to any other person who appears to the court to be interested: (d) an order as to the payment of the costs incurred in the preparation of any such report: (e) an order specifying the persons who shall be entitled to appear and be heard on the application to approve the arrangement or amalgamation or compromise. (2A) If the arrangement or amalgamation or compromise involves a transfer or amalgamation that requires the written approval of the Reserve Bank of New Zealand under section 44 of the Insurance (Prudential Supervision) [page 337]



Act 2010, the court may not make an order under this section unless that approval has been given.

(3) An order made under this section has effect on and from the date specified in the order. (4) Within 10 working days of an order being made by the court, the board of the company must ensure that a copy of the order is delivered to the Registrar for registration. (5) If the board of a company fails to comply with subsection (4), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2). Section 236(2A): inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

237 Court may make additional orders (1) Without limiting section 236, the court may, for the purpose of giving effect to any arrangement or amalgamation or compromise approved under that section, either by the order approving the arrangement or amalgamation or compromise, or by any subsequent order, provide for, and prescribe terms and conditions relating to,— (a) the transfer or vesting of real or personal property, assets, rights, powers, interests, liabilities, contracts, and engagements: (b) the issue of shares, securities, or policies of any kind: (c) the continuation of legal proceedings: (d) the liquidation of any company: (e) the provisions to be made for persons who voted against the arrangement or amalgamation or compromise at any meeting called in accordance with any order made under subsection (2)(b) of that section or who appeared before the court in opposition to the application to approve the arrangement or amalgamation or compromise: (f)

such other matters that are necessary or desirable to give effect to the arrangement or amalgamation or compromise.

(2) Within 10 working days of an order being made by the court, the board of the company must ensure that a copy of the order is delivered to the

Registrar for registration. (3) If the board of a company fails to comply with subsection (2), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

238 Parts 13 and 14 not affected The court may— (a) approve an amalgamation under section 236 even though the amalgamation could be effected under Part 13: (b) approve a compromise under section 236 even though the compromise could be approved under Part 14.

239 Application of section 233 The provisions of section 233 shall apply with such modifications as may be necessary in relation to any compromise approved under section 236. [page 338]

Part 15A Voluntary Administration Part 15A: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 1—Preliminary Subpart 1: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239A

Objects of this Part

The objects of this Part are to provide for the business, property, and affairs of an insolvent company, or a company that may in the future become insolvent, to be administered in a way that— (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence, results in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company. Compare: Corporations Act 2001 s 435A (Aust) Section 239A: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239B

Interpretation of some key terms

The following are some key terms used in this Part and their meanings: administrator means the person who is appointed the administrator of the company in administration deed administrator, who may or may not be the same person as the administrator, is the person who is appointed the administrator of the deed of company arrangement deed of company arrangement means the deed that is executed by the company and its creditors providing for payments towards the creditors’ debts watershed meeting means the creditors’ meeting called by the administrator to decide the future of the company and, in particular, whether the company and the deed administrator should execute a deed of company arrangement. Section 239B: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239C

Interpretation of other terms

In this Part, unless the context otherwise requires,— company includes an overseas company convening period has the meaning given to it in section 239AT(2) creditor includes— (a) a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and (b) a secured creditor [page 339] enforcement process, in relation to property, means— (a) execution against that property; or (b) any other enforcement process in relation to that property that involves a court or a sheriff insolvent means, in relation to a company, that the company is unable to pay its debts sheriff includes a person charged with the execution of a writ or other enforcement process. Section 239C: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239D

When administration begins

The administration of a company begins when an administrator is appointed under this Part. Compare: Corporations Act 2001 s 435C(1) (Aust) Section 239D: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239E

When administration ends

(1) The administration of a company ends when— (a) a deed of company arrangement is executed by both the company and the deed administrator; or (b) the company’s creditors resolve that the administration should end; or (c) the company’s creditors appoint a liquidator by a resolution passed at the watershed meeting. (2) However, the administration of a company may also end in the following instances: (a) if the court orders that the administration end, for example because the court is satisfied that the company is solvent, the administration ends on the date specified in the order or, if no date is specified, when the order is made; or (b) if the convening period expires without the watershed meeting having been convened or without an application having been made to extend the convening period, the administration ends at the end of that period; or (c) if an application has been made to extend the convening period, which has expired after the application was made, the administration ends when the application is refused or otherwise disposed of without the convening period being extended; or (d) if the watershed meeting ends without a resolution that the company execute a deed of company arrangement, the administration ends at the end of that meeting; or (e) if the company fails to execute a proposed deed of company arrangement within the time allowed by section 239ACO or 239ACP, the administration ends when that time expires; or (f)

if the court appoints a liquidator or an interim liquidator, the administration ends at the time when the order is made.

Compare: Corporations Act 2001 s 435C(2), (3) (Aust) Section 239E: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 340]

239EA Voluntary administration of licensed insurers If a company is a licensed insurer, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Prudential Supervision) Act 2010. Section 239EA: inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

Subpart 2—Appointment of administrator Subpart 2: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239F

Who may be appointed administrator

(1) A natural person who is not disqualified under subsection (2) may be appointed an administrator of a company. (2) Unless the court orders otherwise, a person is disqualified from appointment as an administrator if that person— (a) is disqualified under section 280(1) from being appointed or acting as a liquidator of the company; or (b) is prohibited from being an administrator by an order made under section 239ADV. Section 239F: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239G

Administrator must consent in writing

A person must not be appointed the administrator of a company unless that person has consented in writing and has not withdrawn the consent at the time of appointment. Compare: Corporations Act 2001 s 448A (Aust) Section 239G: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239H

Who may appoint administrator

(1) An administrator may be appointed to a company by— (a) the company (see section 239I); or (b) if the company is in liquidation, the liquidator (see section 239J); or (c) if an interim liquidator has been appointed, the interim liquidator (see section 239J); or (d) a secured creditor holding a charge over the whole, or substantially the whole, of the company’s property (see section 239K); or

(e) the court (see section 239L). (2) If the company is already in administration, an administrator may be appointed only by— (a) the court; or (b) the creditors, as a replacement administrator for an administrator that the creditors have removed; or (c) the appointor of the first administrator, if that administrator has died, resigned, or become disqualified. Compare: Corporations Act 2001 s 436D (Aust)

[page 341] Section 239H: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239I

Appointment by company

(1) A company may appoint an administrator if the board of the company has resolved that,— (a) in the opinion of the directors voting for the resolution, the company is insolvent or may become insolvent; and (b) an administrator of the company should be appointed. (2) The appointment must be in writing and must state the date of the appointment. (3) The company must not appoint an administrator if the company is already in liquidation. (4) If an application has been filed for the appointment of a liquidator of the company by the court under section 241(2)(c), the company may only appoint an administrator if the administrator is appointed within 10 working days after service on the company of the application. (5) Subsection (4) does not apply once the application has been finally disposed of. Compare: Corporations Act 2001 s 436A (Aust)

Section 239I: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239J

Appointment by liquidator or interim liquidator

(1) The liquidator or interim liquidator of a company may appoint an administrator if he or she thinks that the company is insolvent or is likely to become insolvent. (2) The appointment must be in writing and must state the date of the appointment. (3) The liquidator or interim liquidator may appoint himself or herself administrator if he or she first obtains— (a) the permission of the court; or (b) in the case of a liquidator but not an interim liquidator, the approval of the company’s creditors in the form of a resolution passed at a meeting of the creditors. (4) A liquidator or interim liquidator must not appoint as administrator a person who is the liquidator’s or interim liquidator’s business or professional partner, employer, or employee, unless the appointment has been approved by the company’s creditors in the form of a resolution passed at a creditors’ meeting. (5) An administrator who is appointed to a company already in liquidation may apply to the court for an order under section 250 terminating the liquidation. Compare: Corporations Act 2001 s 436B (Aust) Section 239J: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239K

Appointment by secured creditor

(1) A person who holds a charge over the whole, or substantially the whole, of a company’s property may appoint an administrator if the charge has become, and is still, enforceable. (2) The appointment must be in writing and must state the date of the appointment.

[page 342] (3) A secured creditor must not appoint an administrator if the company is already in liquidation. Compare: Corporations Act 2001 s 436C (Aust) Section 239K: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239L

Appointment by court

(1) The court may appoint an administrator on the application of a creditor, the liquidator (if the company is in liquidation), the FMA (if the company is a financial markets participant), or the Registrar. (2) The court may appoint an administrator if— (a) the court is satisfied that the company is or may become insolvent and that an administration is likely to result in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company; or (b) it is just and equitable to do so. (3) In the case of a licensed insurer, the court may appoint an administrator on the application of the Reserve Bank of New Zealand or a person referred to in subsection (1) if— (a) subsection (2)(a) or (b) apply; or (b) the insurer is failing to maintain a solvency margin (within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010). Section 239L: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239L(1): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 239L(3): added, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

239M

Appointment must not be revoked

(1) The appointment of an administrator must not be revoked.

(2) This does not apply to removal by the court or by the creditors. Compare: Corporations Act 2001 s 449A (Aust) Section 239M: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239N

Appointment of 2 or more administrators

(1) Two or more persons may be appointed administrators in any case where this Act provides for the appointment of an administrator. (2) If 2 or more persons are appointed administrators of a company,— (a) an administrator’s function or power may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order, instrument, or resolution appointing them provides otherwise; and (b) a reference in this Act to an administrator or the administrator refers to whichever 1 or more of the administrators the case requires. Compare: Corporations Act 2001 s 451A (Aust) Section 239N: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 343]

239O

Remuneration of administrator

(1) The administrator is entitled to charge reasonable remuneration for carrying out his or her duties and exercising his or her powers as administrator. (2) The court may, on the application of the administrator, a director or officer of the company, a creditor, or a shareholder, review or fix the administrator’s remuneration at a level that is reasonable in the circumstances. (3) A creditor or shareholder may make an application under subsection (2) only with the leave of the court. Compare: 1993 No 105 ss 276(1), 284(1)(e) Section 239O: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 3—Resignation and removal of administrator Subpart 3: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239P

When office of administrator is vacant

The office of administrator is vacant if the administrator— (a) resigns; or (b) dies; or (c) becomes disqualified from appointment as an administrator (see section 239F(2)); or (d) is removed by the court. Compare: Corporations Act 2001 s 449C(1) (Aust) Section 239P: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239Q

Administrator may resign

(1) The administrator may resign by giving written notice to the company and to his or her appointor. (2) The administrator must— (a) give written notice of the resignation to as many of the company’s creditors as practicable; and (b) advertise the resignation in accordance with section 3(1)(b). Compare: Corporations Act 2001 s 449C(1)(c) (Aust) Section 239Q: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239R

Removal of administrator

(1) The administrator may be removed— (a) by the court, on the application of a creditor, the liquidator (if the company is in liquidation), the FMA (if the company is a financial markets participant), or the Registrar; or

(b) by a resolution of creditors passed at the first creditors’ meeting; or (c) by a resolution of creditors at a meeting convened under section 239T(1) to consider whether to remove a replacement administrator. (2) The creditors may not remove the administrator by a resolution passed at a creditors’ meeting unless— [page 344] (a) the same resolution also appoints as administrator another person who is not disqualified; and (b) the person named in the resolution as the new administrator has, before the resolution is considered, tabled at the meeting— (i)

a signed, written consent to act as administrator; and

(ii) an interests statement. Compare: Corporations Act 2001 ss 436E(4), 449B (Aust) Section 239R: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239R(1)(a): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

239S

Appointor may appoint new administrator to fill vacancy

(1) The appointor of an administrator may appoint a replacement to fill the vacancy that occurs if the administrator— (a) resigns; or (b) dies; or (c) becomes disqualified. (2) The appointment of a replacement administrator by a company must be made by a resolution of the board of the company. Compare: Corporations Act 2001 s 449C (Aust) Section 239S: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239T

Creditors must consider appointment of replacement administrator

(1) A replacement administrator, unless appointed by the court or by the creditors under section 239R(1)(b), must convene a meeting of the creditors at which the creditors may vote to remove the replacement administrator and appoint another person in his or her place. (2) The meeting must be held not more than 5 working days after the date on which the replacement administrator is appointed. (3) The replacement administrator must convene the meeting by— (a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and (b) advertising the meeting in accordance with section 3(1)(b). (4) The replacement administrator must take the steps in subsection (3) not less than 2 working days before the meeting. Compare: Corporations Act 2001 s 449C(4), (5) (Aust) Section 239T: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 4—Effect of appointment of administrator Subpart 4: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239U

Outline of administrator’s role

While a company is in administration, the administrator— (a) has control of the company’s business, property, and affairs; and [page 345] (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not in administration. Compare: Corporations Act 2001 s 437A(1) (Aust) Section 239U: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239V

Administrator’s powers

(1) The administrator has the powers— (a) to carry out the functions and duties of an administrator under this Act; and (b) conferred on an administrator under this Act. (2) An administrator’s powers include the powers to— (a) begin, continue, discontinue, and defend legal proceedings; and (b) carry on, to the extent necessary for the administration of the company, the business of the company; and

(c) appoint an agent to do anything that the administrator has power to do. Compare: 1993 No 105 s 260(1) Section 239V: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239W

Administrator is company’s agent

The administrator of a company, when performing a function or exercising a power in that capacity, is the company’s agent. Compare: Corporations Act 2001 s 437B (Aust) Section 239W: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239X

Effect on directors

(1) The appointment of an administrator does not remove the directors of the company from office. (2) However, a director of a company that is in administration must not exercise or perform, or purport to exercise or perform, a function or power as a director of the company except— (a) with the prior, written approval of the administrator; or (b) as expressly permitted by this Part. Compare: Corporations Act 2001 s 437C (Aust) Section 239X: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239Y

Effect on employees

(1) The appointment of an administrator does not automatically terminate an employment agreement to which the company is a party. [page 346] (2) The administrator is not personally liable for any obligation of the company under an employment agreement to which the company is a party, unless—

(a) the administrator expressly adopts the agreement in writing; or (b) subsection (3) applies. (3) The administrator is personally liable for payment of wages or salary that, during the administration of the company, accrue under a contract of employment with the company that was entered into before the administrator’s appointment, unless the administrator has lawfully given notice of the termination of the contract within 14 days of appointment. (4) The court may, on the administrator’s application, extend the period of 14 days in subsection (3) within which notice of termination must be given, and may extend it on the terms and conditions, if any, that the court thinks appropriate. (5) From the date of the appointment of the administrator, the duty of good faith set out in section 4 of the Employment Relations Act 2000 continues to apply between each employee of the company and his or her employer (who may be the administrator if the administrator has adopted the employment agreement under subsection (2)). Section 239Y: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239Z

Effect on dealing with company property

(1) A transaction or dealing by a company in administration, or by a person on behalf of the company, that affects the company’s property is void unless the transaction or dealing was entered into— (a) by the administrator, on the company’s behalf; or (b) with the administrator’s prior written consent; or (c) under an order of the court. (2) The court may validate a transaction or dealing that is void under subsection (1). (3) Subsection (1) does not apply to a payment made by a registered bank— (a) out of an account kept by the company with the bank; and (b) in good faith and in the ordinary course of the bank’s banking business; and

on or before the day on which the bank was notified in writing by the (c) administrator that the administration had begun, or before the bank had reason to believe that the company was in administration, whichever was earlier. (4) A director or officer of the company commits an offence if he or she— (a) purported, on the company’s behalf, to enter into a transaction or dealing that is void under subsection (1); or (b) was in any other way knowingly concerned in, or party to, the void transaction or dealing, whether— (i)

by act or omission; or

(ii) directly or indirectly. [page 347] Compare: Corporations Act 2001 s 437D (Aust) Section 239Z: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AA Company officer’s liability for compensation for void transaction or dealing The court may order a director or officer of a company who is convicted of an offence under section 239Z(4) to compensate any person, including the company, who has suffered loss as a result of the act or omission constituting the offence. Compare: Corporations Act 2001 s 437E(1) (Aust) Section 239AA: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AB Effect on transfer of shares (1) A share in a company in administration must not be transferred and the rights or liabilities of a shareholder of the company must not be altered. (2) However, the administrator may consent to the transfer of a share in a

company in administration if the administrator is satisfied that the transfer is in the best interests of the company’s creditors. (3) Also, despite subsection (1), the court may make an order— (a) for the transfer of a share in a company in administration, but only after the administrator has been asked to consent to the transfer and has refused or failed to respond in a reasonable time; or (b) altering the rights and liabilities of a shareholder in a company in administration. Compare: Corporations Act 2001 s 437F (Aust) Section 239AB: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AC Effect on liquidation (1) The appointment of an administrator to a company in liquidation suspends the liquidation, including the powers of the liquidator to act on the company’s behalf, but does not remove the liquidator from office. (2) The liquidator may apply to the court for any orders that may be necessary in relation to the suspension of the liquidation. (3) In this section, liquidator includes a liquidator or interim liquidator appointed before the administration began. Section 239AC: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AD Effect on receivership The appointment of an administrator to a company in receivership does not remove the receiver from office. Section 239AD: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 348]

Subpart 5—Administrator’s investigation of company’s affairs Subpart 5: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AE Administrator must investigate company’s affairs and consider possible courses of action As soon as practicable after the administration of a company begins, the administrator must— (a) investigate the company’s business, property, affairs, and financial circumstances; and (b) form an opinion about each of the following matters: (i)

whether it would be in the creditors’ interests for the company to execute a deed of company arrangement:

(ii) whether it would be in the creditors’ interests for the administration to end: (iii) whether it would be in the creditors’ interests for a liquidator to be appointed. Compare: Corporations Act 2001 s 438A (Aust) Section 239AE: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AF Directors’ statement of company’s position (1) Within 5 working days after the administration of a company begins, the directors must give to the administrator a statement about the company’s business, property, affairs, and financial circumstances. (2) The administrator may extend the time for compliance with subsection (1). (3) The administrator must table the directors’ statement— (a) at the first creditors’ meeting; or (b) if the administrator has extended the time for compliance by the directors, at the watershed meeting. Compare: Corporations Act 2001 s 438B(2) (Aust)

Section 239AF: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AG Administrator’s right to documents, etc Sections 261 and 263 to 267 apply with all necessary modifications as if every reference to liquidator and liquidation was a reference to administrator and administration. Section 239AG: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AH Administrator may lodge report with Registrar The administrator may lodge a report with the Registrar specifying any matter that, in his or her opinion, should be brought to the Registrar’s notice. Compare: Corporations Act 2001 s 438D(2) (Aust) Section 239AH: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 349]

239AI Administrator must report misconduct (1) The administrator must as soon as practicable report the matter to the Registrar if the administrator believes that— (a) a past or present director, officer, or shareholder of the company has committed an offence in relation to the company; or (b) an offence material to the administration has been committed by the company or any director, officer, or shareholder of the company under this Act or any of the following Acts: (i)

the Crimes Act 1961:

(ii) the Securities Act 1978: (iii) the Securities Markets Act 1988:

(iv) the Financial Reporting Act 1993: (v) the Takeovers Act 1993; or (c) a person who has taken part in the formation, promotion, administration, management, or liquidation of the company— (i)

may have misapplied or retained or become liable or accountable for the company’s money or property (whether in New Zealand or elsewhere); or

(ii) may have been guilty of negligence, default, or breach of duty or trust in relation to the company. (2) In any case where the administrator makes a report under subsection (1), the administrator must give the Registrar assistance that the Registrar may reasonably require by way of— (a) provision of information; and (b) access to documents; and (c) facilities for inspecting and copying documents. (3) In any case where the court is satisfied that the administrator should make a report under subsection (1) and has not done so, the court may, on the application of an interested person, direct the administrator to make a report. Compare: Corporations Act 2001 s 438D (Aust) Section 239AI: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 6—Creditors’ meetings generally Subpart 6: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AJ Administrator must call creditors’ meetings The administrator must call— (a) the first creditors’ meeting, for the appointment (if any) of a committee of creditors; and (b) the watershed meeting (see section 239AS); and (c) other creditors’ meetings as required (for example, because an administrator has been replaced). Section 239AJ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 350]

239AK Conduct of creditors’ meetings (1) The following clauses of Schedule 5 apply to creditors’ meetings called under this Part as if references to the liquidator were references to the administrator: (a) subject to section 239AZ, clause 4; and (b) clauses 6 to 11. (2) At any meeting of creditors or class of creditors held under this Part, a resolution is adopted if a majority in number representing 75% in value of the creditors or class of creditors voting in person, or by proxy vote or by postal vote, vote in favour of the resolution. (3) The administrator or the administrator’s nominee must chair a creditors’ meeting, and has a casting vote. (4) For the purposes of voting at a creditors’ meeting, the administrator may estimate the amount of a creditor’s claim that is for any reason uncertain.

On the application of the administrator, or of a creditor who is aggrieved by (5) an estimate made by the administrator, the court must determine the amount of the claim as it sees fit. Section 239AK: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AL Joint meetings of creditors of related companies in administration (1) The administrators of related companies may call meetings of creditors of their respective companies to be held at the same time and place, but only with the consent of all the creditors. (2) In the case of a joint meeting, a creditor of a company in administration may vote only on a resolution that relates to the administration of the company of which that person is a creditor. (3) For the purposes of subsection (1), a creditor is taken to have consented to the joint meeting if— (a) a written notice that complies with subsection (4) accompanies the notice of meeting; and (b) the creditor has not objected to the joint meeting within the time, and in the manner, specified in the written notice. (4) The notice must— (a) be in writing; and (b) state the administrator’s postal, email, and street addresses; and (c) state the names of the related companies in respect of which the joint meeting is to be held; and (d) state that the creditor to whom it is sent may object to the joint meeting by sending a written objection to the administrator at the administrator’s postal, email, or street address for receipt by the administrator within the time specified in the notice; and (e) state that, unless the creditor objects in accordance with the notice, the creditor will be taken to have agreed to the joint meeting. (5) For the purposes of subsection (4)(d), the administrator may in his or her

discretion determine the time for receipt of an objection, but must specify a time that is reasonably practicable in the circumstances. Section 239AL: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 351]

239AM Power of court where outcome of voting at creditors’ meeting determined by related entity (1) This section applies if the court is satisfied that— (a) a resolution at a creditors’ meeting under this Part was passed, defeated, or required to be decided by a casting vote; and (b) the resolution would not have been passed, defeated, or required to be decided by a casting vote if the vote or votes cast by a particular related creditor or particular related creditors were disregarded; and (c) the passing of the resolution, or the failure to pass it,— (i)

is contrary to the interests of the creditors, or a class of creditors, as a whole; and

(ii) has prejudiced, or is reasonably likely to prejudice, the interest of the creditors who voted against the resolution, or for it, as the case may be, to an extent that is unreasonable having regard to— (A) the benefits accruing to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the resolution; and (B) the nature of the relationship between the related creditor and the company, or between the related creditors and the company; and (C) any other related matter. (2) The court may, on the application of a creditor or the administrator,— (a) order that the resolution be set aside:

(b) order that a new meeting be held to consider and vote on the resolution: (c) order that a specified related creditor or creditors must not vote on the resolution or on a resolution to vary or amend it: (d) make any other orders that the court thinks necessary. (3) In this section,— promoter has the same meaning as in section 2(1) of the Securities Act 1978 related creditor means a creditor who is a related entity of the company in administration related entity means, in relation to the company in administration,— (a) a promoter; or (b) a relative or spouse of a promoter; or (c) a relative of a spouse of a promoter; or (d) a director or shareholder; or (e) a relative or spouse of a director or shareholder; or (f)

a relative of a spouse of a director or shareholder; or

(g) a related company; or (h) a beneficiary under a trust of which the company in administration is or has at any time been a trustee; or (i)

a relative or spouse of that beneficiary; or

(j)

a relative of a spouse of that beneficiary; or

(k) a company one of whose directors is also a director of the company in administration; or [page 352] (l)

a trustee of a trust under which a person (A) is a beneficiary, if A is a related entity of the company in administration under this subsection.

Compare: Corporations Act 2001 s 600A (Aust) Section 239AM: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006

(2006 No 56).

Subpart 7—First creditors’ meeting to appoint creditors’ committee Subpart 7: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AN Administrator must call first creditors’ meeting (1) The administrator must call the first creditors’ meeting to— (a) decide whether to appoint a creditors’ committee and, if so, to appoint its members; and (b) decide whether to replace the administrator. (2) The meeting must be held within 8 working days after the date on which the administration began. Compare: Corporations Act 2001 s 436E(1), (2) (Aust) Section 239AN: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AO Notice of first and subsequent creditors’ meetings (1) The administrator must call the first and subsequent creditors’ meetings by — (a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and (b) advertising the meeting in accordance with section 3(1)(b). (2) The administrator must take the steps in subsection (1) not less than 5 working days before the meeting. Compare: Corporations Act 2001 s 436E(3) (Aust) Section 239AO: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AP Administrator must table interests statement (1) The administrator must table at the first creditors’ meeting an interests

statement that complies with subsection (2). (2) The interests statement must disclose whether the administrator, or a firm of which the administrator is a partner, has a relationship (whether professional, business, or personal) with the company in administration, or any of its officers, shareholders, or creditors. (3) The administrator must, before tabling the interests statement, make the inquiries that are reasonably necessary for ensuring that the interests statement is complete. Section 239AP: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AQ Functions of creditors’ committee (1) The functions of the creditors’ committee of a company in administration are— [page 353] (a) to consult with the administrator about matters relating to the administration; and (b) to receive and consider reports by the administrator. (2) The committee must not give directions to the administrator, but the administrator must report to the committee about matters relating to the administration as and when the committee reasonably requires. Compare: Corporations Act 2001 s 436F (Aust) Section 239AQ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AR Membership of creditors’ committee A person may be a member of the creditors’ committee only if he or she is — (a) a creditor of the company; or (b) the agent of a creditor under a general power of attorney; or

(c) authorised in writing by a creditor to be a member. Compare: Corporations Act 2001 s 436G (Aust) Section 239AR: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 8—Watershed meeting Subpart 8: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AS What watershed meeting is The watershed meeting is the meeting of creditors called by the administrator to decide the future of the company and, in particular, whether the company and the deed administrator should execute a deed of company arrangement. Section 239AS: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AT Administrator must convene watershed meeting (1) The administrator must convene the watershed meeting within the convening period. (2) The convening period is the period of 20 working days after the date on which the administrator is appointed, and includes any period for which it is extended under subsection (3). (3) The court may, on the administrator’s application, extend the convening period. (4) The application to extend may be made before or after the convening period has expired. Section 239AT: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AU Notice of watershed meeting (1) The administrator must convene the watershed meeting by— (a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and (b) advertising the meeting in accordance with section 3(1)(b).

[page 354] (2) The administrator must take the steps in subsection (1) not less than 5 working days before the meeting. (3) The following documents must accompany the notice of the watershed meeting that is sent to the company’s creditors: (a) a report by the administrator about— (i)

the company’s business, property, affairs, and financial circumstances; and

(ii) any other matter material to the creditors’ decisions to be considered at the meeting; and (b) a statement setting out the administrator’s opinion, with reasons for that opinion, about each of the following matters: (i)

whether it would be in the creditors’ interests for the company to execute a deed of company arrangement:

(ii) whether it would be in the creditors’ interests for the administration to end: (iii) whether it would be in the creditors’ interests for the company to be placed in liquidation; and (c) if a deed of company arrangement is proposed, a statement setting out the details of the proposed deed. Compare: Corporations Act 2001 s 439A(3), (4) (Aust) Section 239AU: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AV When watershed meeting must be held The watershed meeting must be held within 5 working days after the end of the convening period or extended convening period, as the case may be. Compare: Corporations Act 2001 s 439A(2) (Aust) Section 239AV: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AW Directors must attend watershed meeting (1) The directors of the company must attend the watershed meeting, including any occasion to which the meeting is adjourned, but cannot be required to answer questions at the meeting. (2) A director need not attend the watershed meeting if— (a) the director has a valid reason for not attending; or (b) the administrator or the creditors by resolution have excused the director from attending. (3) A director attending the watershed meeting must leave for all or part of the remainder of the meeting if required by a resolution of the creditors to do so. (4) A director who contravenes subsection (1) commits an offence, unless subsection (2) applies, and is liable on conviction to the penalty set out in section 373(1). Section 239AW: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AX Disclosure of voting arrangements The administrator and the directors of the company under administration must, before the meeting votes on any resolution, inform the meeting of any [page 355] voting arrangement of which the administrator or a director, as the case may be, is aware that requires 1 or more creditors to vote in a particular way on any resolution that will or may be voted on by the meeting. Section 239AX: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AY Court may order that pooled property owners are separate class (1) On the application of the administrator, the court may order that, for the

limited purposes of this section only, pooled property owners are a separate class. (2) In this section— pooled property owners means all the owners or lessors of property that is pooled in a single enterprise forming part of the business of a company in administration requisite majority means a majority in number representing 75% in value of the pooled property owners voting in person or by proxy vote or by postal vote resolution means a resolution that the company in administration execute the deed of company arrangement specified in the resolution. (3) Each pooled property owner is bound by the deed of company arrangement as if that person had voted in favour of the resolution at the watershed meeting if— (a) the court has ordered that the pooled property owners are a separate class; and (b) at the watershed meeting the creditors (including the pooled property owners) approved the resolution; and (c) the requisite majority of the pooled property owners were included in the creditors who voted in favour of the resolution. (4) It is not necessary that a separate meeting of the pooled property owners be held for the purpose of voting on the resolution. (5) Subsection (3) applies no matter what sections 239ACS and 239ACT say. Section 239AY: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AZ Adjournment of watershed meeting (1) The watershed meeting may be adjourned, but only to a day that is not more than 30 working days after the first day on which the meeting was held. (2) However, the court may, on the administrator’s application, order that the meeting be adjourned for more than 30 working days. Compare: Corporations Act 2001 s 439B(2) (Aust) Section 239AZ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006

No 56).

239ABA What creditors may decide at watershed meeting At the watershed meeting, the creditors may— (a) resolve that the company execute a deed of company arrangement specified in the resolution (and it does not matter that the deed to be executed differs from any proposed deed of which details were given in the notice of the meeting); or (b) resolve that the administration should end; or [page 356] (c) unless the company is already in liquidation, by resolution appoint a liquidator. Compare: Corporations Act 2001 s 439C (Aust) Section 239ABA: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABB What happens if proposed deed not fully approved at watershed meeting (1) If, at the watershed meeting, the creditors resolve that the company execute a deed of company arrangement, but the proposed deed is not fully approved at the meeting, then the administrator must take the steps set out in section 239ACP (briefly, the administrator must draft a deed and circulate it to creditors). (2) The administrator must inform the creditors at the watershed meeting that— (a) they have the right to inspect and comment on the draft deed; and (b) the administrator has the ultimate responsibility for drafting the deed and the executed deed may differ from the draft. Section 239ABB: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 9—Protection of company’s property during administration Subpart 9: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABC Charge unenforceable Subject to subpart 10, a person must not, during the administration of a company, enforce a charge over the property of the company, except— (a) with the administrator’s written consent; or (b) with the permission of the court. Compare: Corporations Act 2001 s 440B (Aust) Section 239ABC: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABD Owner or lessor must not recover property used by company During the administration of a company, the owner or lessor of property that was used or occupied by, or is in the possession of, the company must not take possession of the property or otherwise recover it, except— (a) with the administrator’s written consent; or (b) with the permission of the court. Compare: Corporations Act 2001 s 440C (Aust) Section 239ABD: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABE Proceeding must not be begun or continued During the administration of a company, a proceeding in a court against the company or in relation to any of its property must not be begun or continued, except— [page 357]

(a) with the administrator’s written consent; or (b) with the permission of the court and in accordance with the terms that the court imposes. Compare: Corporations Act 2001 s 440D (Aust) Section 239ABE: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABF Administrator not liable in damages for refusing consent An administrator is not liable in damages for a refusal to give an approval or consent for the purposes of this subpart. Compare: Corporations Act 2001 s 440E (Aust) Section 239ABF: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABG Enforcement process halted During the administration of a company, an enforcement process in relation to the company’s property must not be begun or continued except with the permission of the court and in accordance with the terms that the court imposes. Compare: Corporations Act 2001 s 440F (Aust) Section 239ABG: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABH Duties of court officer in relation to company’s property (1) This section applies to a court officer, that is, a sheriff or registrar or other appropriate officer of the court, who receives written notice that a company is in administration. (2) During the administration, the court officer must not— (a) take action to sell property of the company under an execution process; or (b) pay to a person (other than the administrator)—

(i)

proceeds of the sale of the company’s property (at any time) under an execution process; or

(ii) money of the company seized (at any time) under an execution process; or (iii) money paid (at any time) to avoid seizure or sale of property of the company under an execution process; or (c) take action in relation to the attachment of a debt due to the company; or (d) pay to any person (other than the administrator) money received because of the attachment of a debt due to the company. (3) The court officer must deliver to the administrator any property of the company that is in the court officer’s possession under an execution process (whenever begun). (4) The court officer must pay to the administrator all proceeds or money of a kind referred to in subsection (2)(b) or (d) that— (a) are in the court officer’s possession; or (b) have been paid into the court and have not since been paid out. (5) The costs of the execution or attachment are a first charge over property delivered under subsection (3) or proceeds or money paid under subsection (4). [page 358] (6) In order to give effect to a charge under subsection (5) on proceeds or money the court officer may retain, on behalf of the person entitled to the charge, so much of the proceeds as the court officer thinks necessary. (7) The court may, if it is satisfied that it is appropriate to do so, permit the court officer to take action, or make a payment, that subsection (2) would otherwise prevent. (8) A person who buys property in good faith under a sale under an execution process obtains a good title to the property as against the company and the administrator, despite anything else in this section.

Compare: Corporations Act 2001 s 440G (Aust) Section 239ABH: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABI Lis pendens taken to exist (1) This section has effect only for the purposes of a law about the effect of a lis pendens on purchasers or mortgagees. (2) During the administration of a company, an application for the appointment of a liquidator to the company is taken to be pending. (3) An application that is taken because of subsection (2) to be pending constitutes a lis pendens. Compare: Corporations Act 2001 s 440H (Aust) Section 239ABI: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABJ Administration not to trigger enforcement of guarantee of liability of director or relative (1) During the administration of a company, except with the court’s permission and in accordance with the terms that the court may impose, a guarantee of a liability of the company must not be enforced against— (a) a director of the company; or (b) that person’s spouse or relative. (2) In this section, liability means a debt, liability, or other obligation. Compare: Corporations Act 2001 s 440J(1) (Aust) Section 239ABJ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 10—Rights of secured creditor, owner, or lessor Subpart 10: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABK Meaning of terms used in this subpart In this subpart, unless the context otherwise requires,— decision period means, in relation to a secured creditor holding a charge over property of a company in administration, the period that— (a) begins— [page 359] (i)

if notice of the appointment of the administrator must be given to the secured creditor under section 239ADW(1)(c), on the day when that notice is given; or

(ii) in any other case, on the day when the administration begins; and (b) ends at the end of the tenth working day after the day when it begins enforce, in relation to a charge over property of a company in administration, includes— (a) to appoint a receiver of property of the company under a power contained in an instrument relating to the charge; or (b) to obtain an order for the appointment of a receiver of that property for the purpose of enforcing the charge; or (c) to enter into possession, or assume control, of that property for that purpose; or (d) to appoint a person to enter into possession or assume control (whether as agent for the secured creditor or for the company) for that purpose; or (e) to exercise, as secured creditor or as a receiver or person so appointed, a right, power, or remedy existing because of the charge, whether arising under an instrument relating to the charge, under a written or

unwritten law, or otherwise. Section 239ABK: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABL If secured creditor acts before or during decision period (1) This section applies if— (a) the whole, or substantially the whole, of the property of a company in administration is subject to a charge; and (b) before or during the decision period, the secured creditor enforces the charge in relation to all property of the company subject to the charge, whether or not the charge is enforced in the same way in relation to all that property. (2) This section also applies if— (a) a company is in administration; and (b) the same person is the secured creditor in relation to each of 2 or more charges over the property of the company; and (c) the property of the company (in this subsection called the charged property) subject to the respective charges together constitutes the whole, or substantially the whole, of the company’s property; and (d) before or during the decision period, the secured creditor enforces together the charges in relation to all the charged property— (i)

whether or not the charges are enforced in the same way in relation to all the charged property; and

(ii) whether or not any of the charges is enforced in the same way in relation to all the property of the company subject to that charge; and (iii) in so far as the charges are enforced in relation to property of the company in a way referred to in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK, whether or not the same person is appointed in respect of all of the last-mentioned property.

[page 360] (3) Nothing in section 239ABC or in an order under section 239ABO prevents any of the following persons from enforcing the charge: (a) the secured creditor: (b) a receiver or person appointed as mentioned in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period). (4) Section 239Z does not apply in relation to a transaction or dealing that affects property of the company and is entered into by the secured creditor or a receiver or person of a kind referred to in subsection (3)(b) in the performance or exercise of a function or power as that secured creditor, receiver, or person, as the case may be. Compare: Corporations Act 2001 s 441A (Aust) Section 239ABL: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABM If enforcement of charges begins before administration (1) This section applies if, before the beginning of the administration of a company, a secured creditor, receiver, or other person, for the purpose of enforcing a charge over the property,— (a) entered into possession, or assumed control, of the property of the company; or (b) entered into an agreement to sell the property; or (c) made arrangements for the property to be offered for sale by public auction; or (d) publicly invited tenders for the purchase of the property; or (e) exercised any other power in relation to the property. (2) Nothing in section 239ABC prevents the secured creditor, receiver, or other person from enforcing the charge in relation to the property.

Section 239Z does not apply in relation to a transaction or dealing that (3) affects the property and is entered into, as the case may be,— (a) in the exercise of a power of the secured creditor as secured creditor; or (b) in the performance or exercise of a function or power of the receiver or other person. Compare: Corporations Act 2001 s 441B (Aust) Section 239ABM: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABN Charge over perishable property (1) This section applies if perishable property of a company in administration is subject to a charge. (2) Nothing in section 239ABC prevents the secured creditor, a receiver, or a person appointed (at any time) as mentioned in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK from enforcing the charge, so far as it is a charge over perishable property. (3) Section 239Z does not apply in relation to a transaction or dealing that affects perishable property of the company and is entered into, as the case may be,— [page 361] (a) in the exercise of a power of the secured creditor as secured creditor; or (b) in the performance or exercise of a function or power of the receiver or other person. Compare: Corporations Act 2001 s 441C (Aust) Section 239ABN: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABO Court may limit powers of secured creditor, etc, in relation to property subject to charge

(1) This section— (a) applies if,— (i)

for the purpose of enforcing a charge over property of a company, the secured creditor, a receiver, or other person does an act of a kind referred to in section 239ABM(1); and

(ii) the company is in administration when the secured creditor, receiver, or other person does that act, or an administrator is later appointed to the company: (b) does not apply in a case where section 239ABL applies. (2) On an application by the administrator, the court may order the secured creditor, receiver, or other person not to perform specified functions or exercise specified powers, except as permitted by the order. (3) The court may make an order only if satisfied that what the administrator proposes to do during the administration will adequately protect the secured creditor’s interests. (4) An order— (a) may be made only, and has effect only, during the administration; and (b) has effect despite section 239ABM and 239ABN. Compare: Corporations Act 2001 s 441D (Aust) Section 239ABO: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABP Giving notice under security agreement Section 239ABC does not prevent a person from giving a notice under the provisions of a security agreement. Compare: Corporations Act 2001 s 441E (Aust) Section 239ABP: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABQ If recovery of property begins before administration (1) This section applies if, before the beginning of the administration of a

company, a receiver or other person, for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it,— (a) entered into possession of, or assumed control of, property used or occupied by, or in the possession of, the company; or (b) exercised any other power in relation to the property. (2) Section 239ABD does not prevent the receiver or other person from performing a function, or exercising a power, in relation to the property. [page 362] (3) Section 239Z does not apply in relation to a transaction or dealing that affects the property and is entered into in the performance or exercise of a function or power of the receiver or other person. Compare: Corporations Act 2001 s 441F (Aust) Section 239ABQ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABR Recovering perishable property (1) Nothing in section 239ABD prevents a person from taking possession of, or otherwise recovering, perishable property. (2) Section 239Z does not apply in relation to a transaction or dealing that affects perishable property and is entered into for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it. Compare: Corporations Act 2001 s 441G (Aust) Section 239ABR: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABS Court may limit powers of receiver, etc, in relation to property used by company (1) This section applies if,—

for the purpose of enforcing a right of the owner or lessor of property (a) used or occupied by, or in the possession of, a company to take possession of the property or otherwise recover it, a person— (i)

enters into possession, or assumes control, of the property; or

(ii) exercises any other power in relation to the property; and (b) the company is in administration when the person does so, or an administrator is later appointed to the company. (2) On an application by the administrator, the court may order the person not to perform specified functions, or exercise specified powers, in relation to the property, except as permitted by the order. (3) The court may make an order only if satisfied that what the administrator proposes to do during the administration will adequately protect the interests of the owner or lessor. (4) An order— (a) may be made only, and has effect only, during the administration; and (b) has effect despite sections 239ABQ and 239ABR. Compare: Corporations Act 2001 s 441H (Aust) Section 239ABS: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABT Giving notice under agreement about property Nothing in section 239ABD prevents a person from giving a notice to a company under an agreement relating to property that is used or occupied by, or is in the possession of, the company. Compare: Corporations Act 2001 s 441J (Aust) Section 239ABT: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 363]

Subpart 11—Interface with liquidation Subpart 11: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABU When liquidator may be appointed to company in administration A liquidator may be appointed to a company in administration— (a) by the court, on an application for the appointment of a liquidator under section 241(2)(c); or (b) by resolution of the creditors at the watershed meeting or at a meeting convened under section 239ADF to consider the termination of the deed of company arrangement. Section 239ABU: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABV Court may adjourn application for liquidation The court may adjourn an application under section 241(2)(c) for the appointment of a liquidator of a company in administration if the court is satisfied that it is in the interests of the company’s creditors for the company to continue in administration rather than be placed in liquidation. Compare: Corporations Act 2001 s 440A(2) (Aust) Section 239ABV: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABW Court must not appoint interim liquidator if administration in creditors’ interests The court must not appoint an interim liquidator of a company in administration if the court is satisfied that it is in the interests of the company’s creditors for the company to continue in administration rather than have an interim liquidator appointed. Compare: Corporations Act 2001 s 440A(3) (Aust)

Section 239ABW: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABX Effect of appointment of liquidator The appointment of a liquidator to a company in administration ends the administration. Section 239ABX: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABY Former administrator is default liquidator In the case of the appointment of a liquidator to a company in administration by the creditors, the former administrator is the liquidator if — (a) the creditors’ resolution does not nominate a person for appointment; or (b) the person nominated is disqualified from acting as the liquidator or has not consented in writing; or (c) the person nominated is for any other reason unable or unwilling to act as liquidator. Section 239ABY: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 364]

239ABZ Person in control of company must lodge revised report with Registrar (1) This section applies when a liquidator is appointed to a company that is in administration or under a deed of company arrangement. (2) The administrator or, if the company is under a deed of company arrangement, the deed administrator must as soon as practicable lodge the following documents with the Registrar: (a) a copy of the administrator’s report that accompanied the notice to

creditors of the watershed meeting; and (b) a further report updating the administrator’s report with any matters of which the administrator or deed administrator is aware that— (i)

are not referred to in the administrator’s report, or have changed since that report; and

(ii) affect the financial position of the company. (3) If there is no administrator or deed administrator acting when the company is placed in liquidation, the director or directors of the company at the date of liquidation must take the steps described in subsection (2) as if they were the administrator or deed administrator. Section 239ABZ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACA Act of administrator in good faith must not be set aside in liquidation A payment made, transaction entered into, or any other act or thing done, in good faith, by or with the consent of the administrator of a company in administration, must not be set aside in a liquidation of the company. Compare: Corporations Act 2001 s 451C(b) (Aust) Section 239ACA: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACB Voidable transactions (1) The voidable transaction provisions do not apply to a transaction by a company in administration if the transaction is— (a) carried out by or with the authority of the administrator or deed administrator; or (b) specifically authorised by the deed of company arrangement and carried out by the deed administrator. (2) In this section, voidable transaction provisions means sections 292 to 296. Section 239ACB: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 12—Deed administrator Subpart 12: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACC Who is deed administrator The administrator of the company is the deed administrator, unless the creditors at the watershed meeting by resolution appoint someone else to be the deed administrator. [page 365] Compare: Corporations Act 2001 s 444A(2) (Aust) Section 239ACC: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACD Who may be appointed deed administrator (1) A natural person who is not disqualified under subsection (2) may be appointed deed administrator. (2) Unless the court orders otherwise, a person is disqualified from appointment as a deed administrator if that person is— (a) disqualified under section 280(1) from acting as a liquidator of the company; or (b) prohibited from being a deed administrator by an order made under section 239ADV. Section 239ACD: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACE Deed administrator must consent in writing A person must not be appointed deed administrator unless that person has consented in writing and has not withdrawn the consent at the time when the deed of company arrangement is executed. Compare: Corporations Act 2001 s 448A (Aust)

Section 239ACE: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACF Appointment of deed administrator must not be revoked Except in the case of removal by the court, the appointment of the deed administrator must not be revoked. Compare: Corporations Act 2001 s 449A (Aust) Section 239ACF: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACG Appointment of 2 or more deed administrators (1) Two or more persons may be appointed deed administrators in any case where this Act provides for the appointment of a deed administrator. (2) If 2 or more persons are appointed deed administrators jointly,— (a) a deed administrator’s function or power may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order, instrument, or resolution appointing them provides otherwise; and (b) a reference in this Act to a deed administrator or the deed administrator refers to whichever 1 or more of the deed administrators the case requires. Compare: Corporations Act 2001 s 451B (Aust) Section 239ACG: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 366]

239ACH When office of deed administrator vacant The office of the deed administrator is vacant if the deed administrator— (a) resigns; or

(b) becomes disqualified from appointment as a deed administrator (see section 239ACD(2)); or (c) is removed by the court. Section 239ACH: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACI Deed administrator may resign The deed administrator may resign by giving written notice to the company. Section 239ACI: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACJ Removal of deed administrator (1) The court may— (a) remove the deed administrator, and appoint a person in his or her place; or (b) appoint a new deed administrator, if the deed of company arrangement has not yet terminated but for some reason no deed administrator is acting. (2) The court may make an order under subsection (1) on the application of a creditor of the company, a shareholder, the liquidator (if the company is in liquidation), the FMA (if the company is a financial markets participant), or the Registrar. Section 239ACJ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ACJ(2): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

239ACK Remuneration of deed administrator (1) The deed administrator is entitled to charge reasonable remuneration for carrying out his or her duties and exercising his or her powers as deed administrator. (2) The court may, on the application of the deed administrator, a director or officer of the company, a creditor, or a shareholder, review or fix the deed administrator’s remuneration at a level that is reasonable in the

circumstances. (3) A creditor or shareholder may make an application under subsection (2) only with the leave of the court. Compare: 1993 No 105 ss 276(1), 284(1)(e) Section 239ACK: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACL Deed administrator may sell shares in company (1) The deed administrator may sell existing shares in the company— (a) with the consent of the shareholder in question; or (b) if the shareholder does not consent, with the permission of the court given on an application of the deed administrator. [page 367] (2) The shareholder concerned, a creditor, the FMA (if the company is a financial markets participant), or the Registrar may oppose an application by the administrator for the court’s permission. Section 239ACL: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ACL(2): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

Subpart 13—Execution and effect of deed of company arrangement Subpart 13: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACM When this subpart applies This subpart applies when the creditors, at the watershed meeting, have resolved that the company execute a deed of company arrangement. Compare: Corporations Act 2001 s 444A(1) (Aust) Section 239ACM: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACN Preparation and contents of deed (1) The deed administrator must prepare a document that sets out the terms of the deed. (2) The document must also specify the following: (a) who the deed administrator is: (b) the property of the company (whether or not it is already owned by the company when it executes the deed) that will be available to pay creditors: (c) the nature and duration of any moratorium period for which the deed provides: (d) to what extent the company will be released from its debts: (e) the conditions (if any) for the deed to come into operation: (f)

the conditions (if any) for the deed to continue in operation:

(g) the circumstances in which the deed terminates: (h) the order in which the proceeds of realisation of the property referred to in paragraph (b) will be distributed among creditors who are bound by the deed: (i)

the day (which is called the cut-off day and which must not be later than the day when the administration began) on or before which creditors’ claims must have arisen if they are to be admissible under the deed.

(3) The document is treated as including any prescribed provisions, except those prescribed provisions that the document expressly excludes. Compare: Corporations Act 2001 s 444A(3)–(5) (Aust)

Section 239ACN: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACO Execution of deed (1) The deed is a deed of company arrangement when it is executed by both the company in administration and the deed administrator. [page 368] (2) The deadline for the execution of the deed by the company and the deed administrator is— (a) 15 working days after the watershed meeting has approved it; or (b) the further time that the court allows, if the deed administrator has applied to the court for an extension before the end of the initial period of 15 working days after approval. (3) The company may not execute the deed unless the board of the company has, by resolution, authorised the deed to be executed by the company or on its behalf. (4) Subsection (3) has effect despite section 239X, but does not limit the functions and powers of the administrator of the company. Compare: Corporations Act 2001 s 444B (Aust) Section 239ACO: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACP Procedure if deed not fully approved at watershed meeting (1) If, at the watershed meeting, the creditors resolve that the company execute a deed of company arrangement, but the proposed deed is not fully approved at the meeting, then— (a) the administrator must draft the complete deed and circulate it to the creditors within 10 working days after the meeting (called in this section the preparation period); and (b) the creditors have a period of 3 working days (called in this section the

inspection period) after the end of the preparation period in which to inspect and comment on the deed; and (c) the company and the deed administrator must execute the deed within 2 working days (called in this section the execution period) after the end of the inspection period. (2) The court may extend the preparation period by up to 10 working days, on an application by the administrator, but only if the application is made within the original preparation period. (3) The court may extend the execution period by up to 2 working days, on an application by the administrator, but only if the application is made within the original execution period. Section 239ACP: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACQ Creditor must not act inconsistently with deed, etc, before execution (1) In this section, interim period means the period between a resolution passed at the watershed meeting that the company execute a deed of company arrangement and the sooner of— (a) execution of the deed by the company and the deed administrator; or (b) expiry of the period during which the deed may be executed. (2) In the interim period, in so far as a person would be bound by the deed if it had already been executed, that person— (a) must not do anything inconsistent with the deed, except with the permission of the court; and [page 369] (b) must not take a step that is prohibited under section 239ACU. Compare: Corporations Act 2001 s 444C (Aust) Section 239ACQ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACR Company’s failure to execute deed If the creditors at the watershed meeting have passed a resolution that the company execute a deed of company arrangement, and the company fails to do so within the deadline for execution, then, notwithstanding section 239E(2) (e),— (a) the administrator must apply for the appointment of a liquidator to the company; or (b) if the company is already in liquidation, the administrator must apply for the liquidation to resume. Section 239ACR: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACS Who is bound by deed A deed of company arrangement binds— (a) the company’s creditors, to the extent provided by section 239ACT; and (b) the company; and (c) the company’s directors, officers, and shareholders; and (d) the deed administrator. Compare: Corporations Act 2001 s 444G (Aust) Section 239ACS: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACT Extent to which deed binds creditors (1) A deed of company arrangement binds all creditors in respect of claims that arise on or before the cut-off day (see section 239ACN(2)(i)) specified in the deed. (2) This section does not prevent a secured creditor from enforcing or otherwise dealing with the charge, except so far as— (a) the deed provides otherwise in relation to a secured creditor who at the watershed meeting voted in favour of the resolution as a result of which the company executed the deed; or

(b) the court orders otherwise under section 239ACV(1)(a). (3) This section does not affect a right that an owner or lessor of property has in relation to that property, except so far as— (a) the deed provides otherwise in relation to an owner or lessor of property who at the watershed meeting voted in favour of the resolution as a result of which the company executed the deed; or (b) the court orders otherwise under section 239ACV(1)(b). Compare: Corporations Act 2001 s 444D (Aust) Section 239ACT: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 370]

239ACU Person bound by deed must not take steps to liquidate, etc (1) A person who is bound by a deed of company arrangement must not, while the deed is in force,— (a) apply, or continue with an application, to the court for the appointment of a liquidator of the company: (b) except with the court’s permission, begin or continue a proceeding against the company or in relation to any of its property: (c) except with the court’s permission, begin or continue an enforcement process against the company’s property. (2) In this section, property includes property used or occupied by the company, or in its possession. Compare: Corporations Act 2001 s 444E (Aust) Section 239ACU: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACV Court may restrain creditors and others from enforcing charge or recovering

property (1) The court may, at any time after creditors have resolved at the watershed meeting that a deed of company arrangement be executed, order that, except as permitted by the order,— (a) a secured creditor must not enforce or otherwise deal with the charge; or (b) the owner or lessor of property that is used or occupied by the company or is in the company’s possession must not take possession of the property or otherwise recover it. (2) The court may make the order only if— (a) it is satisfied that achieving the purposes of the deed would be materially adversely affected if the order was not made; and (b) having regard to the terms of the deed and the order, and any other relevant matter, it is satisfied that the interests of the person affected by the order, that is the creditor, property owner, or lessor, will be adequately protected. (3) An application for an order under this section may be made only,— (a) if the deed has not yet been executed, by the administrator; or (b) if the deed has been executed, by the deed administrator. (4) The court’s order may be made subject to conditions. Compare: Corporations Act 2001 s 444F (Aust) Section 239ACV: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACW Effect of deed on company’s debts (1) A deed of company arrangement releases the company from a debt only in so far as— (a) the deed provides for the release; and (b) the creditor concerned is bound by the deed. (2) The release of the company from a debt under subsection (1) does not discharge or otherwise affect the liability of—

(a) a guarantor of the debt; or [page 371] (b) a person who has indemnified the creditor concerned against default by the company in relation to the debt. Compare: Corporations Act 2001 s 444H (Aust) Section 239ACW: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACX Court may rule on validity of deed (1) The court may rule on the validity of a deed of company arrangement if there is doubt, on a specific ground, whether a deed of company arrangement— (a) was entered into in accordance with this Part; or (b) complies with this Part. (2) An application under this section may be made by— (a) the deed administrator; or (b) a shareholder or creditor of the company; or (ba) the FMA (if the company is a financial markets participant); or (c) the Registrar. (3) On an application under this section,— (a) the court may declare the deed void or not void: (b) if the deed is void for contravention of a provision of this Part, the court may validate the deed, or any part of it, provided the court is satisfied that— (i)

the provision was substantially complied with; and

(ii) no injustice will result for anyone bound by the deed if the contravention is disregarded. (4) The court may, if it declares that a provision of the deed is void, vary the

deed, but only if the deed administrator consents. Compare: Corporations Act 2001 s 445G (Aust) Section 239ACX: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ACX(2)(ba): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

Subpart 14—Administrator’s duty to file accounts Subpart 14: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACY Administrator includes deed administrator In this subpart, unless the context otherwise requires, administrator includes a deed administrator. Section 239ACY: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACZ Administrator must file accounts (1) Every administrator must file an account with the Registrar for each of the following periods: (a) the period of 6 months (or shorter, as the administrator decides) after the day on which the administrator was appointed; and [page 372] (b) each subsequent period of 6 months during which the administrator holds office; and (c) the period between the last period of the kind referred to in paragraph (b) and the day on which the administrator vacates office. (2) The administrator must file the account within 20 working days after the end of the period in question. (3) The account must be in the prescribed form and must show,— (a) for each period, the administrator’s receipts and payments; and (b) for each period except the first, the aggregates of the administrator’s receipts and payments since the day on which the administrator was appointed. Compare: Corporations Act 2001 s 432(1), (1A)(a), (b) (Aust) Section 239ACZ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 15—Variation and termination of deed Subpart 15: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADA Creditors may vary deed The creditors may vary a deed of company arrangement by a resolution passed at a meeting convened under section 239ADF, but the variation must not be materially different from the proposed variation set out in the notice of the meeting. Compare: Corporations Act 2001 s 445A (Aust) Section 239ADA: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADB Court may cancel creditors’ variation (1) A creditor of a company in administration may apply to the court for an order cancelling the variation of the deed of company arrangement by the creditors. (2) On the application, the court may, if it is just and equitable to do so,— (a) cancel or confirm the variation, wholly or in part, on specified conditions (if any); and (b) make any other orders that the court thinks appropriate. Compare: Corporations Act 2001 s 445B (Aust) Section 239ADB: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADC Termination of deed (1) A deed of company arrangement may be terminated— (a) by the court under section 239ADD; or (b) by a resolution of the creditors under section 239ADE; or (c) automatically, if the deed specifies circumstances in which the deed will terminate, and those circumstances occur.

The deed administrator must give written notice to the Registrar of the fact (2) that a deed has been terminated under subsection (1)(a) or (c). Compare: Corporations Act 2001 s 445C (Aust)

[page 373] Section 239ADC: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ADC(2): inserted, on 31 August 2012, by section 6 of the Companies Amendment Act (No 2) 2012 (2012 No 60).

239ADD Termination by court (1) The court may terminate a deed of company arrangement on the application of— (a) the company; or (b) a creditor; or (c) the deed administrator; or (d) any other interested person. (2) The court may terminate a deed of company arrangement if it is satisfied that— (a) an information breach has occurred; or (b) there has been a material contravention of the deed by a person bound by it; or (c) effect cannot be given to the deed without injustice or undue delay; or (d) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be done or made under the deed would be,— (i)

oppressive or unfairly prejudicial to, or unfairly discriminatory against, 1 or more of the creditors; or

(ii) contrary to the interests of the company as a whole; or (e) the deed should be terminated for some other reason.

(3)

The court must not terminate the deed without first taking into account the rights of third parties.

(4) In this section, an information breach has occurred if— (a) false or misleading information about the company’s business, property, affairs, or financial circumstances— (i)

was given to the administrator or the creditors; or

(ii) was contained in a report or statement under section 239AU(3) that accompanied a notice of the watershed meeting at which a resolution that the company execute a deed of company arrangement was passed; or (b) there was an omission from the report or statement referred to in paragraph (a)(ii); and (c) the information or the omission, as the case may be, can reasonably have been expected to be material to the creditors in deciding whether to vote in favour of the resolution that the company execute the deed of company arrangement. Compare: Corporations Act 2001 s 445D (Aust) Section 239ADD: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADE Termination by creditors (1) The creditors, by a resolution passed at a meeting convened under section 239ADF, may terminate the deed if there has occurred a material breach of the deed that has not been rectified. [page 374] (2) The creditors may also appoint a liquidator if the notice of the meeting sets out a proposed resolution that a liquidator be appointed to the company. Compare: Corporations Act 2001 s 445E (Aust) Section 239ADE: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Creditors’ meeting to consider proposed 239ADF variation or termination of deed (1) The deed administrator— (a) may at any time convene a meeting of the company’s creditors to consider a variation to, or the termination of, the deed; and (b) must convene a meeting if requested to do so in writing by creditors whose claims against the company are not less than 10% in value of the total value of all creditors’ claims. (2) The deed administrator must convene the meeting by— (a) giving written notice to as many of the company’s creditors as reasonably practicable; and (b) advertising the meeting in accordance with section 3(1)(b). (3) The administrator must take the steps in subsection (2) not less than 5 working days before the meeting. (4) The notice given to the creditors must set out any resolution for varying or terminating the deed that is to be considered by the meeting. (5) The deed administrator must preside at the meeting. (6) The meeting may be adjourned from time to time. Compare: Corporations Act 2001 s 445F (Aust) Section 239ADF: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 16—Administrator’s liability and indemnity for debts of administration Subpart 16: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADG Administrator not liable for company’s debts except as provided in this subpart and in section 239Y The administrator is not liable for the debts of the company except as provided in this subpart and in section 239Y. Compare: Corporations Act 2001 s 443C (Aust) Section 239ADG: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADH Administrator liable for general debts (1) The administrator is liable for debts that he or she incurs in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for— (a) the purpose of funding the company; or (b) any services rendered; or (c) any goods bought; or (d) any property hired, leased, or occupied. [page 375] (2) Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else. Compare: Corporations Act 2001 s 443A (Aust) Section 239ADH: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADI Administrator’s liability for rent (1) The administrator is personally liable, to the extent specified in subsection (2), for rent and other payments becoming due by the company under an agreement—

(a) made before the administration began; and (b) relating to the use, possession, or occupation of property by the company. (2) The administrator is liable for rent and other payments that accrue in the period— (a) beginning more than 7 days after the administration begins; and (b) throughout which— (i)

the company continues to use or occupy, or be in possession of, the property; and

(ii) the administration continues; and (c) ending on the earliest of the following: (i)

the end of the administration; or

(ii) the administrator ceasing to hold office; or (iii) the appointment of a receiver of the property; or (iv) the appointment of an agent by a secured creditor of the property, under the provisions of a charge over the property, to enter into possession or to assume control of the property; or (v) when a secured creditor takes possession or assumes control of the property under the provisions of a charge over the property. (3) The administrator is not taken, because of subsection (2),— (a) to have adopted the agreement; or (b) to be liable under the agreement except as set out in subsection (2). (4) This section does not affect the liability of the company for rent and other payments due under the agreement. Compare: Corporations Act 2001 s 443B(1), (2), (7), (9) (Aust) Section 239ADI: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADJ Administrator not liable for rental if non-use notice in force

The administrator is not liable under section 239ADI for any period for (1) which a non-use notice is in force. (2) In this section, non-use notice means, in relation to the property to which it refers, a notice that— (a) is given by the administrator to the owner or the lessor of the property within 7 days after the administration begins; and (b) specifies the property to which it relates; and (c) states that the company does not propose to use the property or otherwise exercise any rights in relation to it. (3) A non-use notice ceases to have effect if— [page 376] (a) the administrator revokes it by written notice to the owner or lessor; or (b) the company exercises, or purports to exercise, a right in relation to the property. (4) In subsection (3)(b), the company does not exercise, or purport to exercise, a right in relation to the property merely because the company continues to occupy, or to be in possession of, the property, unless the company— (a) also uses the property; or (b) asserts a right, as against the owner or the lessor, to continue to occupy or be in possession. (5) A non-use notice does not affect the company’s liability for rent and other payments. Compare: Corporations Act 2001 s 443B(3)–(6) (Aust) Section 239ADJ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADK Court may exempt administrator from liability for rent The court may exempt an administrator from liability for rent and other

payments under section 239ADI, but the court’s order does not affect the company’s liability. Compare: Corporations Act 2001 s 443B(8) (Aust) Section 239ADK: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADL Administrator’s indemnity The administrator is indemnified out of the company’s property for— (a) a personal liability incurred in the due performance of his or her duties, but not a personal liability incurred in bad faith or negligently; and (b) the remuneration to which the administrator is entitled under section 239O. Compare: Corporations Act 2001 s 443D (Aust) Section 239ADL: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADM Administrator’s right of indemnity has priority over other debts Subject to section 312, the administrator’s right of indemnity under this subpart has priority over— (a) all the company’s unsecured debts; and (b) debts of the company secured by a charge of the kind described in clause 2(1)(b) of Schedule 7. Compare: Corporations Act 2001 s 443E (Aust) Section 239ADM: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADN Lien to secure indemnity (1) The administrator has a lien on the company’s property to secure a right of indemnity under this subpart. (2) A lien under subsection (1) has priority over a charge to the same extent as the right of indemnity has priority over debts secured by the relevant charge. Compare: Corporations Act 2001 s 443F (Aust)

[page 377] Section 239ADN: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 17—Powers of court Subpart 17: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADO Court’s general power (1) The court may make any order that it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, the court may terminate the administration under subsection (1) if the court is satisfied that the administration should end— (a) because the company is solvent; or (b) because the provisions of this Part are being abused; or (c) for some other reason. (3) The court’s order may be made subject to conditions. (4) The court may make an order under this section on the application of— (a) the company or a shareholder of the company; or (b) a creditor of the company; or (c) the administrator; or (d) the deed administrator; or (da) the FMA (if the company is a financial markets participant); or (e) the Registrar; or (f)

any other interested person.

Compare: Corporations Act 2001 s 447A (Aust) Section 239ADO: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ADO(4)(da): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

239ADP Orders to protect creditors during administration (1) On the application of the Registrar or, if the company is a financial markets

participant, the FMA, the court may make any order that it thinks necessary to protect the interests of the company’s creditors while the company is in administration. (2) On the application of a creditor of a company, the court may make any order that it thinks necessary to protect the interests of that creditor while the company is in administration. (3) An order may be made subject to conditions. Compare: Corporations Act 2001 s 447B (Aust) Section 239ADP: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ADP(1): substituted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

239ADQ Court may rule on validity of administrator’s appointment (1) If there is doubt, on a specific ground, as to the validity of the appointment of a person as administrator or deed administrator, any of the following persons may apply to the court for a ruling on the validity of the appointment: [page 378] (a) the person appointed; or (b) the company in question; or (c) any of the company’s creditors. (2) In ruling that the appointment is invalid, the court is not limited to the grounds specified in the application. Compare: Corporations Act 2001 s 447C (Aust) Section 239ADQ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADR Administrator may seek directions (1) The administrator or the deed administrator may apply to the court for

directions in relation to the performance or exercise of any of the administrator’s functions and powers. (2) The deed administrator may apply to the court for directions in relation to the operation of, or giving effect to, the deed. Compare: Corporations Act 2001 s 447D (Aust) Section 239ADR: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADS Court may supervise administrator or deed administrator (1) The court may make any order it thinks just if it is satisfied that— (a) the administrator’s or the deed administrator’s management of the company’s business, property, or affairs is prejudicial to the interests of some or all of the company’s creditors or shareholders; or (b) the administrator’s or deed administrator’s conduct or proposed conduct has been or is or will be prejudicial to those interests. (2) An application for an order under this section may be made by— (a) a creditor or shareholder of the company in question; or (b) the Registrar. Compare: Corporations Act 2001 s 447E(1) (Aust) Section 239ADS: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADT Court may order administrator or deed administrator to remedy default (1) The court may order an administrator or deed administrator to remedy his or her default. (2) Examples of default include the following: (a) the administrator or deed administrator has failed, as required by this Act or otherwise by law, to make or file any return, account, or other document or to give a notice, and has not remedied the default within 10 working days after service on him or her of a notice by a

shareholder or creditor of the company in administration requiring that the default be remedied: (b) the administrator or deed administrator has failed, after being required at any time by the liquidator of the company to do so,— (i)

to render proper accounts of, and to vouch, his or her receipts and payments as administrator or deed administrator: [page 379]

(ii) to pay to the liquidator the amount properly payable to the liquidator. (3) An application for an order under this section may be made by— (a) a shareholder or creditor of the company, in the case of a default referred to in subsection (2)(a): (b) the liquidator, in the case of a default referred to in subsection (2)(b): (c) in any case, by the Registrar. Section 239ADT: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADU Court’s power when office of administrator or deed administrator vacant, etc (1) The court may make any order it thinks just if it is satisfied that,— (a) in the case of a company in administration, the office of the administrator is vacant or no administrator is acting; or (b) in the case of a deed of company arrangement that is still in force, the office of the deed administrator is vacant or no deed administrator is acting. (2) An application for an order under this section may be made by— (a) a creditor or shareholder of the company; or (b) if the company is in liquidation, the liquidator; or (ba) if the company is a financial markets participant, the FMA; or

(c) the Registrar. Compare: Corporations Act 2001 s 447E(2) (Aust) Section 239ADU: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239ADU(2)(ba): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

239ADV Prohibition order (1) The court must make a prohibition order in relation to a person if it is shown to the satisfaction of the court that that person is unfit to act as administrator or deed administrator by reason of persistent failures to comply or the seriousness of a failure to comply. (2) The period of the order is a matter for the discretion of the court and the court may make a prohibition period for an indefinite period. (3) A person to whom a prohibition order applies must not act as an administrator or deed administrator in a current or other administration. (4) The court may make an order under this section in relation to a past or current administrator or deed administrator of a company in administration on the application of— (a) the company or a shareholder of the company; or (b) a creditor of the company; or (c) the administrator or deed administrator of the company; or (d) the Registrar; or (e) any other interested person. (5) In this section, failure to comply means a failure of an administrator or deed administrator to comply with a relevant duty arising— [page 380] (a) under this or any other enactment or law or rules of court; or (b) under any order or direction of the court made under this subpart. (6) In subsection (5), relevant duty includes the duty of a person in his or her

capacity as liquidator of a company. (7) A copy of every order made under subsection (1) must, within 10 working days of the order being made, be delivered by the applicant to the Official Assignee for New Zealand who must keep it on a file indexed by reference to the name of the administrator or deed administrator concerned. Section 239ADV: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 18—Notices about steps taken under this Part Subpart 18: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADW Administrator must give notice of appointment (1) An administrator appointed by the company under section 239I, by the liquidator or interim liquidator under section 239J, by a secured creditor under section 239K, by the court under section 239L, or by the creditors under section 239R(2)(a) must,— (a) before the end of the next working day after appointment, lodge a notice of the appointment with the Registrar; and (b) not later than 3 working days after appointment, advertise the appointment in accordance with section 3(1)(b); and (c) as soon as practicable, and in any event not later than the end of the next working day after appointment, give written notice of the appointment to— (i)

each person who holds a charge over the whole, or substantially the whole, of the company’s property; or

(ii) each person who holds 2 or more charges in the property of the company if the property of the company subject to those charges together is the whole, or substantially the whole, of the company’s property; and (d) in the notice referred to in paragraph (c), set out the rights of the creditor to enforce the charge under section 239ABL. (2) The administrator need not give notice under subsection (1) to the person who appointed him or her. Compare: Corporations Act 2001 s 450A(1), (3), (4) (Aust) Section 239ADW: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADX Secured creditor who appoints

administrator must give notice to company A secured creditor who appoints an administrator under section 239K must give written notice of the appointment to the company as soon as practicable and in any event before the end of the next working day. Compare: Corporations Act 2001 s 450A(2) (Aust)

[page 381] Section 239ADX: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADY Deed administrator must give notice of execution of deed of company arrangement As soon as practicable after a deed of company arrangement is executed, the deed administrator must— (a) send to each creditor a written notice of the execution of the deed; and (b) advertise the execution of the deed in accordance with section 3(1)(b); and (c) file a copy of the deed with the Registrar. Compare: Corporations Act 2001 s 450B (Aust) Section 239ADY: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADZ Deed administrator must give notice of failure to execute deed of company arrangement If a company does not meet the deadline under section 239ACO or 239ACP(1)(c) for the execution of a deed of company arrangement, the deed administrator must as soon as practicable— (a) cause a notice of the failure to execute the deed to be advertised in accordance with section 3(1)(b); and

(b) file a copy of the notice with the Registrar. Compare: Corporations Act 2001 s 450C (Aust) Section 239ADZ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEA Deed administrator must give notice of termination by creditors of deed of company arrangement If the creditors terminate the deed of company arrangement, the deed administrator must as soon as practicable— (a) send a notice of the termination to each of the creditors; and (b) advertise the termination in accordance with section 3(1)(b); and (c) file a copy of the notice with the Registrar. Compare: Corporations Act 2001 s 450D (Aust) Section 239AEA: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEB Company must disclose fact of administration (1) A company must set out, in every document issued or signed by, or on behalf of, the company that evidences or creates a legal obligation of the company, after the company’s name where it first appears,— (a) for as long as the company is in administration, the words “administrator appointed”; and (b) for as a long as a deed of company arrangement is in force, the words “subject to deed of company arrangement”. (2) The court may, on an application by the company, exempt the company from the requirement in subsection (1)(b). [page 382]

A company that fails to comply with subsection (1) commits an offence and (3) is liable on conviction to the penalty set out in section 373(1). Compare: Corporations Act 2001 s 450E (Aust) Section 239AEB: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEC Notice of change of name (1) A company in administration that changed its name less than 6 months before the appointment of the administrator must, in any document of the company where its name appears, include also its former name. (2) If a company to which subsection (1) applies is, in the course of the administration, placed in liquidation, the liquidator must, in any document of the company where its name appears, include also its former name. Section 239AEC: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AED Effect of contravention of this subpart A contravention of this subpart does not affect the validity of anything done or omitted under this Part, except so far as the court orders otherwise. Compare: Corporations Act 2001 s 450F (Aust) Section 239AED: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 19—Miscellaneous Subpart 19: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEE Effect of things done during administration of company A payment made, transaction entered into, or any other act or thing done, in good faith, by or with the consent of the administrator of a company in administration is valid and effective for the purposes of this Act. Compare: Corporations Act 2001 s 451C(a) (Aust) Section 239AEE: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEF Interruption of time for doing act If there is a time before which, or a period during which, an act for any purpose may or must be done, and this Act prevents the act from being done in time, then the time or period in question is extended by the period during which this Act prevents the act from being done in time. Compare: Corporations Act 2001 s 451D (Aust) Section 239AEF: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 383]

Subpart 20—Set-off and netting agreements Subpart 20: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEG Mutual credit and set-off Where there have been mutual credits, mutual debts, or other mutual dealings between a company and a person who seeks or, but for the operation of this section, would seek to have a claim admitted under a deed of company arrangement,— (a) an account must be taken of what is due from the one party to the other in respect of those credits, debts, or dealings; and (b) an amount due from one party must be set off against an amount due from the other party; and (c) only the balance of the account may be admitted under the deed of company arrangement, or is payable to the company, as the case may be. Section 239AEG: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEH Application of set-off under netting agreement (1) Sections 239AEI to 239AEP apply— (a) to a netting agreement— (i)

made in or evidenced by writing; and

(ii) in which the application of sections 239AEI to 239AEP has not been expressly excluded; and (iii) whether made before or after the commencement of this section; and (b) to all obligations under a netting agreement (whether those obligations are payable in New Zealand currency or in some other currency). (2) Sections 239AEI to 239AEP apply despite— (a) any disposal of rights under a transaction that is subject to a netting

agreement, in contravention of a prohibition in the netting agreement; or (b) the creation of a charge or other interest in respect of the rights referred to in paragraph (a) in contravention of a prohibition in the netting agreement. (3) Nothing in sections 239AEI to 239AEP applies to an amount paid or payable by a shareholder— (a) as the consideration, or part of the consideration, for the issue of a share; or (b) in satisfaction of a call in respect of an outstanding liability of the shareholder made by the board of the company or by the administrator. Section 239AEH: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEI Calculation of netted balance If a company in administration is a party to a netting agreement,— (a) any netted balance payable by or to the company must be calculated in accordance with the netting agreement; and [page 384] (b) that netted balance constitutes, in respect of the transactions that are included in the calculation,— (i)

the debt that is owed to the creditor and that may be admitted under the deed of company arrangement; or

(ii) the amount that is payable to the company,— as the case may be. Section 239AEI: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEJ Mutuality required for transactions under bilateral netting agreements

Sections 239AEI to 239AEP apply to transactions that are subject to a bilateral netting agreement only if those transactions constitute mutual credits, mutual debts, or other mutual dealings. Section 239AEJ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEK When mutuality required for transactions under recognised multilateral netting agreements (1) Sections 239AEI to 239AEP apply to transactions that are subject to a recognised multilateral netting agreement, whether or not those transactions constitute mutual credits, mutual debts, or other mutual dealings. (2) Despite subsection (1), sections 239AEI to 239AEP do not apply to transactions that are subject to a recognised multilateral netting agreement if— (a) those transactions do not constitute mutual credits, mutual debts, or other mutual dealings; and (b) a party to any of those transactions is acting as a trustee for another person; and (c) the party acting as trustee is not authorised by the terms of the trust of which the party is a trustee to enter into the transaction. Section 239AEK: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEL Application of set-off under section 239AEG to transactions subject to netting agreements (1) Section 239AEG does not apply to transactions that are subject to a netting agreement to which sections 239AEI to 239AEP apply. (2) However, a netted balance is to be treated as an amount to which section 239AEG applies if the company in administration and the other party to the netting agreement also have mutual credits, mutual debts, or other mutual dealings between them that are not subject to the netting agreement. Section 239AEL: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEM Transactions under netting agreement and effect on certain sections (1) Nothing in sections 239AEH to 239AEP prevents the operation of section 56 or, subject to section 239ACB, section 292, 297 or 298 in respect of a transaction that is subject to a netting agreement. [page 385] (2) However, nothing in section 292(4A) applies to a transaction that is subject to a netting agreement. (3) For the purposes of sections 292 and 297, the term transaction, in relation to a company, does not include a netting agreement entered into by the company, except to the extent that the effect of entering into the netting agreement is to reduce any amount that was owing by or to the company at the time the company entered into the agreement. Section 239AEM: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56). Section 239AEM(2): amended, on 7 July 2010, by section 5 of the Companies Amendment Act (No 2) 2010 (2010 No 53).

239AEN Rights under netting agreement not affected

by commencement of administration Nothing in section 239Z affects, in respect of a company in administration, the exercise of any of the following rights under a netting agreement: (a) the termination, in accordance with the netting agreement, of all or any transactions that are subject to the netting agreement by reason of the occurrence of an event specified in the netting agreement, being an event (including the appointment of an administrator) occurring not later than the commencement of the administration; or (b) the taking of an account, in accordance with the netting agreement, of all money due between the parties to the netting agreement in respect of transactions affected by the termination. Section 239AEN: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEO Effect of declaration of person as recognised clearing house under section 310K A person who is declared a recognised clearing house under section 310K is deemed to be a recognised clearing house for the purposes of sections 239AEI to 239AEP also. Section 239AEO: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEP Transactions under recognised multilateral netting agreement not affected by variation or revocation of declaration under section 310K The variation or revocation of a declaration under section 310K does not affect the application of sections 239AEI to 239AEP to any transaction— (a) that is or was subject to a recognised multilateral netting agreement; and (b) that was entered into before the variation or revocation of the declaration. Section 239AEP: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 386]

Subpart 21—Single administration of related companies in administration Subpart 21: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEQ Interpretation of terms for purposes of this subpart (1) In this subpart,— pool means a pool of related companies in a single administration under a single administration order made under section 239AER pool administrator means the administrator of a pool pool company means a company in respect of which a single administration order has been made under section 239AER. (2) For the purposes of the single administration of a pool, in this Part, unless the context indicates otherwise,— administrator includes a pool administrator company includes a pool deed administrator includes the deed administrator of a deed of company administration executed by a pool deed of company administration includes a deed of company administration executed under section 239AEW. Section 239AEQ: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AER Court may order single administration for related companies in administration (1) If 2 or more related companies are in administration, the court may, if it is satisfied that it is just and equitable, order that the administration in respect of each company must proceed together as if they were 1 company to the extent that the court orders and subject to the terms and conditions that the court imposes.

(2) An application under subsection (1) may be made by the administrator or a creditor of any of the companies in administration. (3) Notwithstanding anything in this Part, the court may, on first making the order and otherwise from time to time, make any other order, or give any direction to facilitate giving effect to an order, under subsection (1) as it sees fit. (4) The fact that creditors of the company in administration relied on the fact that another company was, or is, related to it is not a ground for making an order under this section. Compare: 1993 No 105 s 271(b) Section 239AER: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AES Notice that application filed must be given to administrators and creditors (1) Unless the court orders otherwise, an applicant for an order under section 239AER must give notice that the application has been filed to— (a) the administrator of each company in administration; and [page 387] (b) each creditor of each company in administration. (2) The notice must— (a) identify each company to which the proposed order relates; and (b) summarise all information known to the applicant that is material to whether the order should be made; and (c) state that a person to whom the notice must be given may oppose the application by filing a statement of defence in accordance with the High Court Rules. (3) The notice requirement in this section is in addition to anything required by the High Court Rules to be done. Section 239AES: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006

(2006 No 56).

239AET Guidelines for single administration order In deciding whether it is just and equitable to make an order under section 239AER, the court must have regard to the following criteria: (a) the extent to which any of the companies took part in the management of any of the other companies in the proposed pool: (b) the conduct of any of the companies towards the creditors of any of the other companies in the proposed pool: (c) the extent to which the circumstances that gave rise to any of the companies in the proposed pool being placed in administration are attributable to the actions of any of the other companies: (d) the extent to which the businesses of the companies in the proposed pool have been combined: (e) any other matters that the court thinks fit. Compare: 1993 No 105 s 272(2) Section 239AET: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEU Court may order that related company in administration be added to existing pool (1) The court may order that a company in administration that is related to the companies in an existing pool be added to the pool for the purposes of administration. (2) An application under subsection (1) may be made by— (a) the administrator or any creditor of the company; or (b) the administrator or any creditors of the pool. (3) The court may make the order if it is satisfied that it is just and equitable to do so having regard to any 1 or more of the criteria in section 239AET. (4) Sections 239AER and 239AES apply with all necessary modifications to an application under this section. (5) The court must not make the order unless the pool administrator consents.

Section 239AEU: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

[page 388]

239AEV Creditors’ meetings in single administration of pool companies (1) The provisions of this Part in relation to creditors’ meetings apply except that, subject to subsection (2), a creditor of a pool company may only vote on a matter related to the pool company of which that person is a creditor. (2) If separate voting by creditors is impracticable (because, for example, the affairs of the pool companies are intermingled), the court may, on the application of the pool administrator, give directions as to how voting at a creditors’ meeting must proceed. Section 239AEV: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEW Pool companies may execute single deed of company administration For the purposes of the single administration of a pool, the pool companies may execute a single deed of company arrangement. Section 239AEW: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Part 16 Liquidations The process of liquidation

240 Interpretation (1) In this Act, unless the context otherwise requires,— creditor means a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and includes a secured creditor only— (a) for the purposes of sections 241(2)(c), 247, 250, and 289; or (b) to the extent of the amount of any debt owing to the secured creditor in respect of which the secured creditor claims under section 305 as an unsecured creditor liquidation committee means a liquidation committee appointed under section 314 Official Assignee means an Official Assignee or Deputy Assignee appointed under the Insolvency Act 2006 statutory demand has the meaning set out in section 289. (2) For the purposes of this Act, the power to appoint a liquidator of a company includes the power to appoint 2 or more persons as liquidators of a company. Section 240(1) creditor: substituted, on 1 July 1994, by section 30 of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 240(1) Official Assignee: amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

240A

Liquidation of licensed insurers

If a licensed insurer may be put into liquidation under or in accordance with this Part, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Prudential Supervision) Act 2010. [page 389]

Section 240A: inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

241 Commencement of liquidation (1) A company may be put into liquidation by the appointment as liquidator of a named person or of an Official Assignee for a named district. (2) A liquidator may be appointed by— (a) special resolution of those shareholders entitled to vote and voting on the question; or (b) the board of the company on the occurrence of an event specified in the constitution; or (c) the court, on the application of— (i)

the company; or

(ii) a director; or (iii) a shareholder or other entitled person; or (iv) a creditor (including any contingent or prospective creditor); or (v) if the company is in administration, the administrator; or (va) if the company is a financial markets participant, the FMA; or (vi) the Registrar; or (vii) if the company is a licensed insurer, the Reserve Bank of New Zealand; or (viii)in the case of a company that has been removed from the New Zealand register, the Registrar or a person who, immediately before the company was removed from the New Zealand register, was a person described in subparagraph (ii), (iii), (iv), or (vii); or (d) a resolution of the creditors passed at the watershed meeting held under section 239AT. (2A) However, the court must not appoint a liquidator under subsection (2)(c) (viii) unless the company is restored to the New Zealand register under section 328 or 329. (3) An Official Assignee may be appointed liquidator of a company only—

(a) if the special resolution passed in accordance with paragraph (a) of subsection (2) is passed by reason of the Official Assignee exercising voting rights attaching to shares in the company of— (i)

a person who has been adjudged bankrupt; or

(ii) another company of which the Official Assignee is liquidator; or (b) by the court. (4) The court may appoint a liquidator if it is satisfied that— (a) the company is unable to pay its debts; or (b) the company or the board has persistently or seriously failed to comply with this Act; or (c) the company does not comply with section 10; or (d) it is just and equitable that the company be put into liquidation. (5) The liquidation of a company commences on the date on which, and at the time at which, the liquidator is appointed. Section 241(2): substituted, on 1 November 2007, by section 7 of the Companies Amendment Act 2006 (2006 No 56). Section 241(2)(c)(va): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

[page 390] Section 241(2)(c)(vii): added, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111). Section 241(2)(c)(vii): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 241(2)(c)(viii): inserted, on 25 February 2012, by regulation 4(1) of the Companies Amendment Act 2012 (2012 No 7). Section 241(2A): inserted, on 25 February 2012, by regulation 4(2) of the Companies Amendment Act 2012 (2012 No 7). Section 241(5): substituted, on 26 April 1999, by section 3 of the Companies Amendment Act 1999 (1999 No 19).

241AA

Restriction on appointment of liquidator by shareholders or board after application filed

for court appointment (1) This section applies if an application has been filed for the appointment of a liquidator of a company by the court under section 241(2)(c). (2) A liquidator of the company may only be appointed under section 241(2)(a) or (b) if the liquidator is appointed within 10 working days after service on the company of the application. (3) If a liquidator is appointed under section 241(2)(a) or (b), the creditor who filed the application referred to in subsection (1) may apply to the court under section 283(4) for the review of his or her appointment as if the words “successor to a liquidator” in section 283(4) read “liquidator”. (4) Subsection (2) does not apply once the application has been finally disposed of. Section 241AA: inserted, on 1 November 2007, by section 15 of the Companies Amendment Act 2006 (2006 No 56).

241A

Commencement of liquidation to be recorded

(1) If— (a) a liquidator is appointed under section 241(2)(a), the shareholders must record in the special resolution appointing the liquidator the date on which, and the time at which, the special resolution was passed; or (b) a liquidator is appointed under section 241(2)(b), the board of the company must record in the instrument appointing the liquidator the date on which, and the time at which, the liquidator was appointed; or (c) a liquidator is appointed under section 241(2)(c), the court must record in the order appointing the liquidator the date on which, and the time at which, the order was made. (d) a liquidator is appointed under section 241(2)(d), the creditors must record in the resolution appointing the liquidator the date on which, and the time at which, the resolution was passed. (2) If any question arises as to whether on the date on which a liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been

done or entered into or effected, as the case may be, after that time. Section 241A: inserted, on 26 April 1999, by section 4 of the Companies Amendment Act 1999 (1999 No 19). Section 241A(1)(d): added, on 1 November 2007, by section 8 of the Companies Amendment Act 2006 (2006 No 56).

[page 391]

242 Liquidators to act jointly unless otherwise stated Where 2 or more persons are appointed as liquidators of a company, those persons must act jointly unless the special resolution of shareholders or the resolution of the board of the company or the order of the court appointing the liquidators states that the liquidators may exercise their powers individually.

243 Liquidator to summon meeting of creditors (1) Subject to section 245 and to subsection (8), the liquidator of a company must call a meeting of the creditors of the company for the purpose,— (a) in the case of a liquidator appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241, of resolving whether to confirm the appointment of that liquidator or to appoint another liquidator in place of the liquidator so appointed: (b) in the case of a liquidator appointed pursuant to paragraph (c) of subsection (2) of section 241, of resolving whether to confirm the appointment of that liquidator or to make an application to the court for the appointment of a liquidator in place of the liquidator so appointed: (c) in either case, of determining whether to pass a resolution for the purposes of section 258(1)(b). (1A) If the appointment of a liquidator under paragraph (a) or paragraph (b) of section 241(2) is not confirmed at a meeting of creditors and another liquidator is not appointed in place of that liquidator, the appointment of the liquidator under paragraph (a) or paragraph (b) of section 241(2) continues until another liquidator is appointed.

(2) Notice in writing of a meeting of creditors— (a) must be given to every known creditor together with the report and notice referred to in section 255(2)(c); and (b) if the liquidator receives a notice under section 245(1)(b)(iii), must be given within 10 working days after receiving the notice. (3) Public notice of the meeting of creditors must also be given by the liquidator not less than 5 working days before the date of the meeting. (4) Except if subsection (2)(b) applies, a meeting of creditors must be held,— (a) in the case of a liquidator appointed under paragraph (a) or paragraph (b) of subsection (2) of section 241, within 10 working days of the liquidator’s appointment; or (b) in the case of a liquidator appointed under paragraph (c) of subsection (2) of section 241, within 30 working days of the liquidator’s appointment; or (c) in either case, within such longer period as the court may allow. (4A) If subsection (2)(b) applies, a meeting of creditors must be held within 15 working days after the liquidator receives a notice under section 245(1) (b) (iii) requiring a meeting of creditors to be called. (5) Every meeting of creditors must be held in accordance with Schedule 5. (6) If at a meeting of creditors it is resolved to appoint a person as liquidator of the company in place of the liquidator appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241, the person who it is resolved to appoint as liquidator shall, subject to section 282, be the liquidator of the company. [page 392] (7) If at a meeting of creditors it is resolved to apply to the court for the appointment of a person as liquidator in place of the liquidator appointed pursuant to paragraph (c) of subsection (2) of section 241, the liquidator of the company must forthwith apply to the court for the appointment of that person as liquidator and the court may, if it thinks fit, appoint that person as the liquidator of the company.

(8) Nothing in this section applies to the liquidator of a company appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241 if, within 20 working days before the appointment of the liquidator, the board of the company resolved that the company would, on the appointment of a liquidator under either paragraph (a) or paragraph (b) of that subsection, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration. (9) The directors who vote in favour of such a resolution must sign a certificate stating that, in their opinion, the company would, on the appointment of a liquidator under either paragraph (a) or paragraph (b) of subsection (2) of section 241, as the case may be, be able to pay its debts, and the grounds for that opinion. (10) Every director who fails to comply with subsection (9) commits an offence and is liable on conviction to the penalty set out in section 373(1). (11) Except for subsection (5), this section does not apply if the liquidator is appointed under section 241(2)(d). Section 243(1)(a): amended, on 3 June 1998, by section 9(1)(a) of the Companies Amendment Act 1998 (1998 No 31). Section 243(1)(b): amended, on 3 June 1998, by section 9(1)(b) of the Companies Amendment Act 1998 (1998 No 31). Section 243(1A): inserted, on 3 June 1998, by section 9(2) of the Companies Amendment Act 1998 (1998 No 31). Section 243(2): substituted, on 1 November 2007, by section 16 of the Companies Amendment Act 2006 (2006 No 56). Section 243(4): amended, on 3 June 1998, by section 9(4) of the Companies Amendment Act 1998 (1998 No 31). Section 243(4A): inserted, on 3 June 1998, by section 9(5) of the Companies Amendment Act 1998 (1998 No 31). Section 243(11): added, on 1 November 2007, by section 9 of the Companies Amendment Act 2006 (2006 No 56).

244 Liquidator to summon meeting of creditors in other cases Subject to section 245, the liquidator of a company who was not, by reason of section 243(8), required to call a meeting of creditors of the company must,— (a) if the liquidator is satisfied that the directors who voted in favour of a

resolution referred to in that subsection did not have reasonable grounds to believe that the company would, on the appointment of a liquidator under paragraph (a) or paragraph (b) of subsection (2) of section 241, be able to pay its debts; or (b) if the liquidator is satisfied that the company is not able to pay its debts,— forthwith call a meeting of the creditors of the company for the purpose specified in paragraph (a) or paragraph (b) of subsection (1) of section 243, [page 393] as the case may be; and the provisions of that section shall apply accordingly with such modifications as may be necessary.

245 Liquidator may dispense with meetings of creditors (1) A liquidator is not required to call a meeting of creditors under section 243 or section 244, as the case may be, if— (a) the liquidator considers, having regard to the assets and liabilities of the company, the likely result of the liquidation of the company, and any other relevant matters, that no such meeting should be held; and (b) the liquidator gives notice in writing to the creditors stating— (i)

that the liquidator does not consider that a meeting should be held; and

(ii) the reasons for the liquidator’s view; and (iii) that no such meeting will be called unless a creditor gives notice in writing to the liquidator, within 10 working days after receiving the notice, requiring a meeting to be called; and (c) no notice requiring the meeting to be called is received by the liquidator within that period. (2) Notice under subsection (1)(b) must be given to every known creditor together with the report and notice referred to in section 255(2)(c).

Compare: 1955 No 63 s 235A; 1989 No 101 s 8 Section 245(2): substituted, on 1 November 2007, by section 17 of the Companies Amendment Act 2006 (2006 No 56).

245A

Power of court where outcome of voting at meeting of creditors determined by related entity

(1) This section applies if the court is satisfied that— (a) a resolution at a meeting of creditors was passed, defeated, or required to be decided by a casting vote; and (b) the resolution would not have been passed, defeated, or required to be decided by a casting vote if the vote or votes cast by a particular related creditor or particular related creditors were disregarded; and (c) the passing of the resolution, or the failure to pass it,— (i)

is contrary to the interests of the creditors, or a class of creditors, as a whole; and

(ii) has prejudiced, or is reasonably likely to prejudice, the interest of the creditor who voted against the resolution, or for it, as the case may be, to an extent that is unreasonable having regard to— (A) the benefits accruing to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the resolution; and (B) the nature of the relationship between the related creditor and the company, or between the related creditors and the company; and (C) any other related matter. (2) The court may, on the application of the liquidator or a creditor,— (a) order that the resolution be set aside: (b) order that a new meeting be held to consider and vote on the resolution: [page 394]

(c) order that a specified related creditor or creditors must not vote on the resolution or on a resolution to vary or amend it: (d) make any other orders that the court thinks necessary. (3) In this section,— promoter has the same meaning as in section 2(1) of the Securities Act 1978 related creditor means a creditor who is a related entity of the company in liquidation related entity means, in relation to the company in liquidation,— (a) a promoter; or (b) a relative or spouse of a promoter; or (c) a relative of a spouse of a promoter; or (d) a director or shareholder; or (e) a relative or spouse of a director or shareholder; or (f)

a relative of a spouse of a director or shareholder; or

(g) a related company; or (h) a beneficiary under a trust of which the company in liquidation is or has at any time been a trustee; or (i)

a relative or spouse of that beneficiary; or (j) a relative of a spouse of that beneficiary; or

(k) a company one of whose directors is also a director of the company in liquidation; or (l)

a trustee of a trust under which a person (A) is a beneficiary, if A is a related entity of the company in liquidation under this subsection.

Compare: Corporations Act 2001 s 600A (Aust) Section 245A: inserted, on 1 November 2007, by section 18 of the Companies Amendment Act 2006 (2006 No 56).

246 Interim liquidator (1) If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or

managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator. (2) Subject to subsection (3), an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company. (3) The court may limit the rights and powers of an interim liquidator in such manner as it thinks fit. (4) The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made. (5) The court must record in the order appointing the interim liquidator the date on which, and the time at which, the order was made. (6) If any question arises as to whether on the date on which an interim liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the interim liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time. [page 395] Section 246(4): added, on 26 April 1999, by section 5 of the Companies Amendment Act 1999 (1999 No 19). Section 246(5): added, on 26 April 1999, by section 5 of the Companies Amendment Act 1999 (1999 No 19). Section 246(6): added, on 26 April 1999, by section 5 of the Companies Amendment Act 1999 (1999 No 19).

247 Power to stay or restrain certain proceedings against company At any time after the making of an application to the court under section 241(2) (c) to appoint a liquidator of a company and before a liquidator is appointed, the company or any creditor or shareholder of the company may, —

(a) in the case of any application or proceeding against the company that is pending in the court or Court of Appeal, apply to the court or Court of Appeal, as the case may be, for a stay of the application or proceeding: (b) in the case of any other application or proceeding pending against the company in any court or tribunal, apply to the court to restrain the application or proceeding— and the court or Court of Appeal, as the case may be, may stay or restrain the application or proceeding on such terms as it thinks fit. Compare: 1955 No 63 s 221

248 Effect of commencement of liquidation (1) With effect from the commencement of the liquidation of a company,— (a) the liquidator has custody and control of the company’s assets: (b) the directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part: (c) unless the liquidator agrees or the court orders otherwise, a person must not— (i)

commence or continue legal proceedings against the company or in relation to its property; or

(ii) exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company: (d) unless the court orders otherwise, a share in the company must not be transferred: (e) an alteration must not be made to the rights or liabilities of a shareholder of the company: (f)

a shareholder must not exercise a power under the constitution of the company or this Act except for the purposes of this Part:

(g) the constitution of the company must not be altered. (2) Subsection (1) does not affect the right of a secured creditor, subject to section 305, to take possession of, and realise or otherwise deal with, property of the company over which that creditor has a charge.

249 Completion of liquidation The liquidation of a company is completed when the liquidator— (a) complies with section 257(1)(b); or (b) delivers to the Registrar for registration— (i)

a copy of any order made by the court under section 257(2)(a); or

(ii) a copy of any order made by the court under section 257(2)(b) together with any documents required to comply with the order,— as the case may be. [page 396]

250 Court may terminate liquidation (1) The court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company. (2) An application under this section may be made by— (a) the liquidator; or (b) if the company has executed a deed of company arrangement, the deed administrator; or (c) a director or shareholder of the company; or (d) any other entitled person; or (e) a creditor of the company; or (ea) if the company is a financial markets participant, the FMA; or (f)

the Registrar.

(2A) On an application by a deed administrator, the court must have regard to— (a) any misconduct by the company’s officers reported by the deed administrator, the liquidator, or the Registrar; and (b) the commercial decision of the creditors in accepting the deed of company arrangement; and

(c) whether the deed of company arrangement would leave the company insolvent; and (d) any other matters that the court thinks fit. (3) The court may require the liquidator of the company to furnish a report to the court with respect to any facts or matters relevant to the application. (4) The court may, on making an order under subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation. (5) Where the court makes an order under this section, the person who applied for the order must, within 10 working days after the order was made, deliver a copy of the order to the Registrar for registration. (6) Where the court makes an order under subsection (1), the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order. (7) Every person who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(2). Section 250(2): substituted, on 1 November 2007, by section 10 of the Companies Amendment Act 2006 (2006 No 56). Section 250(2)(ea): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 250(2A): inserted, on 1 November 2007, by section 10 of the Companies Amendment Act 2006 (2006 No 56).

Provisions relating to prior execution process

251 Restriction on rights of creditors to complete execution, distraint, or attachment (1) Subject to subsection (3), a creditor is not entitled to retain the benefit of any execution process, distress, or attachment over or against the property of a [page 397]



company unless the execution process, distress, or attachment is completed before— (a) the passing of a special resolution under section 241(2)(a) or a resolution under section 241(2)(d) appointing a liquidator of the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or (b) the passing of a resolution by the board of a company under section 241(2)(b) appointing a liquidator or the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or (c) the making of an application to the court under section 241(2)(c) to appoint a liquidator of the company.

(2) Notwithstanding subsection (1),— (a) a person who, in good faith, purchases property of a company from an officer charged with an execution process acquires a good title as against the liquidator of the company: (b) a person who, in good faith, purchases property of a company on which distress has been levied acquires a good title as against the liquidator of the company. (3) The court may set aside the application of subsection (1) to such an extent and on such terms and conditions as the court thinks fit. (4) For the purposes of this section,— (a) an execution or distraint against personal property is completed by seizure and sale: (b) an attachment of a debt is completed by receipt of the debt: (c) an execution against land is completed by sale, and, in the case of an equitable interest, by the appointment of a receiver. (5) Nothing in this section limits or affects section 292. Compare: 1955 No 63 s 314; 1980 No 43 s 29 Section 251(1)(a): amended, on 1 November 2007, by section 11 of the Companies Amendment Act 2006 (2006 No 56).

252 Duties of officer in execution process (1) Subject to subsection (6), where— (a) property of a company is taken in an execution process; and (b) before completion of the execution process the officer charged with the execution process receives notice that a liquidator of the company has been appointed,—

he or she must, on being required by the liquidator to do so, deliver or transfer the property and any money received in satisfaction or partial satisfaction of the execution or paid to avoid a sale of the property, as the case may be, to the liquidator.

(2) The costs of the execution process are a first charge on any property or money delivered or transferred to the liquidator under subsection (1) and the liquidator may sell all or some of the property to satisfy that charge. (3) Subject to subsection (6), where— (a) property of a company is sold in an execution process in respect of a judgment for a sum exceeding $500; or [page 398] (b) money is paid to the officer charged with the execution process to avoid a sale of the property,— the officer must retain the proceeds of sale or the money so paid for 10 working days. (4) Subject to subsection (6), if,— (a) within the period of 10 working days, the officer has notice of— (i)

the calling of a meeting at which a special resolution is proposed to appoint a liquidator pursuant to section 241(2)(a); or

(ii) the calling of a meeting of the board at which a resolution is proposed to appoint a liquidator pursuant to section 241(2)(b); or (iii) the making of an application to the court to appoint a liquidator pursuant to section 241(2)(c); and

(b) the company is put into liquidation— the officer must deduct from the amount the costs of the execution process and pay the balance to the liquidator. (5) A liquidator to whom money is paid under subsection (4) is entitled to retain it as against the execution creditor. (6) The court may set aside the application of this section to such extent and on such terms and conditions as it thinks fit. Compare: 1955 No 63 s 315

Duties, rights, and powers of liquidators

253 Principal duty of liquidator Subject to section 254, the principal duty of a liquidator of a company is— (a) to take possession of, protect, realise, and distribute the assets, or the proceeds of the realisation of the assets, of the company to its creditors in accordance with this Act; and (b) if there are surplus assets remaining, to distribute them, or the proceeds of the realisation of the surplus assets, in accordance with section 313(4)— in a reasonable and efficient manner.

254 Liquidator not required to act in certain cases Notwithstanding any other provisions of this Part,— (a) except where the charge is surrendered or taken to be surrendered or redeemed under section 305, a liquidator may, but is not required to, carry out any duty or exercise any power in relation to property that is subject to a charge: (b) where— (i)

a company is put into liquidation under section 241(2)(c); and

(ii) the Official Assignee is the liquidator of the company; and (iii) the company has no assets available for distribution to creditors of the company,—

the Official Assignee shall not be required, without the consent of the Minister of the Crown who, under the authority of any warrant or with [page 399] the authority of the Prime Minister, is for the time being responsible for the administration of this Act, to carry out any duty or exercise any power in connection with the liquidation if, to do so, would or would be likely to involve incurring any expense. Section 254(b): amended, on 1 October 1995, by section 10(3) of the Department of Justice (Restructuring) Act 1995 (1995 No 39).

255 Other duties of liquidator (1) Without limiting section 253, a liquidator has the other functions and duties specified in this Act. (2) Without limiting subsection (1), a liquidator must,— (a) forthwith after being appointed or being notified of his or her appointment, give public notice of— (i)

the liquidator’s appointment; and

(ii) the date and time of the commencement of the liquidation; and (iii) the address and telephone number to which, during normal business hours, inquiries may be directed by a creditor or shareholder; and (b) within 10 working days of being appointed or being notified of his or her appointment, deliver to the Registrar for registration a notice of the liquidator’s appointment; and (c) within the applicable period referred to in subsection (3),— (i)

prepare a list of every known creditor of the company with each creditor’s address (if known); and

(ii) prepare and send to every known creditor, every shareholder, and the Registrar for registration,— (A) a report containing a statement of the company’s affairs,

proposals for conducting the liquidation, and, if practicable, the estimated date of its completion; and (B) a notice explaining the right of a creditor or shareholder to require the liquidator to call a meeting of creditors under section 314; and (C) the list of creditors referred to in subparagraph (i); and (d) within 20 working days of the end of each period of 6 months following the date of commencement of the liquidation, prepare and send to every known creditor and every shareholder, and send or deliver to the Registrar, a report— (i)

on the conduct of the liquidation during the preceding 6 months; and

(ii) of any further proposals which the liquidator has for completing the liquidation. (3) For the purposes of subsection (2)(c), applicable period means,— (a) in the case of a liquidator appointed under section 241(2)(a), (b), or (d), 5 working days after the liquidator’s appointment; or (b) in the case of a liquidator appointed under paragraph (c) of subsection (2) of section 241, 25 working days after the liquidator’s appointment; or (c) in either case, such longer period as the court may allow. [page 400] (4) The court may, on the application of a liquidator,— (a) exempt the liquidator from compliance with the provisions of paragraph (c) or paragraph (d) of subsection (2); or (b) modify the application of those provisions in relation to the liquidator, — on such terms and conditions as the court thinks fit. (5) [Repealed] (6) [Repealed]

Section 255(2)(a)(ii): amended, on 26 April 1999, by section 6(a) of the Companies Amendment Act 1999 (1999 No 19). Section 255(2)(c)(i): substituted, on 1 November 2007, by section 19(1) of the Companies Amendment Act 2006 (2006 No 56). Section 255(2)(c)(ii)(C): added, on 1 November 2007, by section 19(2) of the Companies Amendment Act 2006 (2006 No 56). Section 255(2)(d): amended, on 26 April 1999, by section 6(b) of the Companies Amendment Act 1999 (1999 No 19). Section 255(3)(a): amended, on 1 November 2007, by section 12 of the Companies Amendment Act 2006 (2006 No 56). Section 255(5): repealed, on 1 November 2007, by section 19(3) of the Companies Amendment Act 2006 (2006 No 56). Section 255(6): repealed, on 1 November 2007, by section 19(3) of the Companies Amendment Act 2006 (2006 No 56).

256 Duties in relation to accounts (1) Subject to subsection (2), the liquidator of a company must— (a) keep accounts and records of the liquidation and permit those accounts and records, and the accounts and records in the company, to be inspected by— (i)

any liquidation committee appointed under section 314, unless the liquidator believes on reasonable grounds that inspection would be prejudicial to the liquidation; and

(ii) if the court so orders, a creditor or shareholder; and (b) retain the accounts and records of the liquidation and of the company for not less than 1 year after completion of the liquidation. (2) The Registrar may, whether before or after the completion of the liquidation,— (a) authorise the disposal of any accounts and records; and (b) require any accounts or records to be retained for longer than 1 year after the completion of the liquidation. Section 256(2)(b): amended, on 3 June 1998, by section 11 of the Companies Amendment Act 1998 (1998 No 31).

257 Duties in relation to final report and accounts

As soon as practicable after completing his or her duties in relation to the (1) liquidation, the liquidator of a company must— (a) prepare and send to every creditor whose claim has been admitted and every shareholder— (i)

the final report and statement of realisation and distribution in respect of the liquidation; and

(ii) a statement that— [page 401] (A) all known assets have been disclaimed, or realised, or distributed without realisation; and (B) all proceeds of realisation have been distributed; and (C) the company is ready to be removed from the New Zealand register; and (iii) a summary of the applicable grounds on which the creditor or shareholder may object to the removal of the company from the New Zealand register under section 321: (b) send or deliver copies of the documents referred to in paragraph (a) to the Registrar for registration. (2) The court may, on the application of a liquidator,— (a) exempt the liquidator from compliance with the provisions of subsection (1); or (b) modify the application of those provisions in relation to the liquidator, — on such terms and conditions as the court thinks fit.

258 Duty to have regard to views of creditors and shareholders (1) The liquidator must have regard to—

the views of the shareholders by whom any special resolution was (a) passed at a meeting held for the purposes of section 241(2)(a) set out in a resolution passed at that meeting: (b) the views of creditors set out in any resolution passed at a meeting held for the purposes of section 243: (c) the views of creditors or shareholders set out in a resolution passed at a meeting called in accordance with subsection (2): (d) the views of any liquidation committee given in writing to the liquidator. (2) For the purposes of subsection (1), a liquidator— (a) must summon meetings of shareholders at such times as may be specified by any resolution of shareholders passed at a meeting held for the purposes of section 241(2)(a): (b) must summon meetings of creditors at such times as may be specified by any resolution of creditors passed at a meeting held for the purposes of section 243: (c) must summon a meeting of shareholders forthwith when required to do so by notice in writing given by shareholders holding shares on which has been paid up not less than 10% of the total amount paid up on all shares issued by the company: (d) must summon a meeting of creditors forthwith when required to do so by notice in writing given by creditors to whom is owed not less than 10% of the total amount owed to all creditors of the company: (e) may, at his or her discretion, summon a meeting of shareholders or creditors of the company. (3) A liquidator who calls a meeting of creditors or shareholders must call such a meeting in accordance with Schedule 1 or, if applicable, Schedule 5, as the case may be. (4) Nothing in this section limits or prevents a liquidator from exercising his or her discretion in carrying out his or her functions and duties under this Act. Compare: 1955 No 63 s 241

[page 402]

258A

Duty to report suspected offences

(1) A liquidator of a company who considers that an offence that is material to the liquidation has been committed by the company or any director of the company against this Act or any of the following Acts must report that fact to the Registrar: (a) the Crimes Act 1961: (b) the Securities Act 1978: (c) the Securities Markets Act 1988: (d) the Financial Reporting Act 1993: (e) the Takeovers Act 1993: (f)

the Insurance (Prudential Supervision) Act 2010.

(2) A report made under subsection (1), and any communications between the liquidator and Registrar relating to that report, are protected by absolute privilege. (3) If the company is a licensed insurer, a copy of the report made under subsection (1) must be sent to the Reserve Bank of New Zealand. (4) A copy of a report sent under subsection (3), and any communications between the liquidator and Reserve Bank of New Zealand relating to that report, are protected by absolute privilege. (5) A liquidator who fails to comply with subsection (1) or (3) commits an offence and is liable on conviction to the penalty set out in section 373(2). Section 258A: substituted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

258B

Registrar may supply report to FMA

(1) If a report is made under section 258A in respect of a financial markets participant, the Registrar may supply a copy of the report to the FMA. (2) Any communications between— (a) the Registrar and the FMA that relate to that report are protected by absolute privilege: (b) the liquidator and the FMA that relate to that report are protected by

absolute privilege. Section 258B: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

259 Documents to state company in liquidation Every document entered into, made, or issued by a liquidator of a company on behalf of the company must state in a prominent position that the company is in liquidation.

260 Powers of liquidator (1) A liquidator has the powers— (a) necessary to carry out the functions and duties of a liquidator under this Act; and (b) conferred on a liquidator by this Act. (2) Without limiting subsection (1), a liquidator has the powers set out in Schedule 6. [page 403]

260A

Liquidator may assign right to sue under this Act

(1) The liquidator may, if the court has first approved it, assign any right to sue that is conferred on the liquidator by this Act. (2) The application for approval may be— (a) made by the liquidator or the person to whom it is proposed to assign the right to sue; and (b) opposed by a person who is a defendant to the liquidator’s action, if already begun, or a proposed defendant. Section 260A: inserted, on 1 November 2007, by section 21 of the Companies Amendment Act 2006 (2006 No 56).

261 Power to obtain documents and information (1) A liquidator may, from time to time, by notice in writing, require a director or shareholder of the company or any other person to deliver to the liquidator such books, records, or documents of the company in that person’s possession or under that person’s control as the liquidator requires. (2) A liquidator may, from time to time, by notice in writing require— (a) a director or former director of the company; or (b) a shareholder of the company; or (c) a person who was involved in the promotion or formation of the company; or (d) a person who is, or has been, an employee of the company; or (e) a receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; or (f)

a person who is acting or who has at any time acted as a solicitor for the company—

to do any of the things specified in subsection (3). (3) A person referred to in subsection (2) may be required— (a) to attend on the liquidator at such reasonable time or times and at such place as may be specified in the notice: (b) to provide the liquidator with such information about the business, accounts, or affairs of the company as the liquidator requests: (c) to be examined on oath or affirmation by the liquidator or by a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company: (d) assist in the liquidation to the best of the person’s ability. (3A) Without limiting subsection (3)(a), a person may be required to attend on the liquidator under that subsection at a meeting of creditors of the company. (4) Without limiting subsection (5), the liquidator may pay to a person referred to in paragraph (d) or paragraph (e) or paragraph (f) of subsection (2), not being an employee of the company, reasonable travelling and other

expenses in complying with a requirement of the liquidator under subsection (3). (5) The court may, on the application of the liquidator or a person referred to in paragraph (d) or paragraph (e) or paragraph (f) of subsection (2), not being an employee of the company, order that that person is entitled to receive reasonable remuneration and travelling and other expenses in complying with a requirement of the liquidator under subsection (3). [page 404] (6) A person referred to in paragraph (d) or paragraph (e) or paragraph (f) of subsection (2) is not entitled to refuse to comply with a requirement of the liquidator under subsection (3) by reason only that— (a) an application to the court to be paid remuneration or travelling and other expenses has not been made or determined; or (b) remuneration or travelling and other expenses to which that person is entitled have not been paid in advance; or (c) the liquidator has not paid that person travelling or other expenses. (6A) A person who fails to comply with a notice given under this section commits an offence and is liable on conviction to the penalty set out in section 373(3). (7) Nothing in this section limits or affects section 260. Section 261(2): amended, on 1 July 1994, by section 31(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 261(3A): inserted, on 1 July 1994, by section 31(2) of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 261(6A): inserted, on 3 May 2001, by section 13 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

262 Documents in possession of receiver (1) A receiver is not required to deliver to a liquidator under section 261 any books, records, or documents that the receiver requires for the purpose of exercising any powers or functions as receiver in relation to property of a company in liquidation.

(2) The liquidator may, from time to time, by notice in writing, require the receiver— (a) to make such books, records, and documents available for inspection by the liquidator at any reasonable time or times; and (b) to provide the liquidator with copies of such books, records, and documents or extracts from them. (3) The liquidator may take copies of such books, records, and documents made available for inspection or extracts from them. (4) The liquidator must pay the reasonable expenses of the receiver in complying with a requirement of the liquidator under subsection (2).

263 Restriction on enforcement of lien over documents (1) A person is not entitled, as against the liquidator of a company, to claim or enforce a lien over books, records, or documents of the company. (2) If the lien arises in relation to a debt for the provision of services to the company before the commencement of the liquidation, the debt is a preferential claim against the company under section 312 to the extent of 10% of the total value of the debt, up to a maximum amount of $2,000. (3) Nothing in this section applies to a company that was put into liquidation pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241 if— (a) the board of the company passed a resolution of the kind referred to in section 243(8); and (b) section 244 does not apply in relation to the company. Section 263(2): amended, on 1 November 2007, by section 13 of the Companies Amendment Act 2006 (2006 No 56).

[page 405]

264 Delivery of document creating charge over

property (1) A person is required to deliver a document to a liquidator under section 261 even though possession of the document creates a charge over property of a company. (2) Production of the document to the liquidator does not prejudice the existence or priority of the charge, but the liquidator must make the document available to the person entitled to it for the purpose of dealing with or realising the charge or the secured property.

265 Examination by liquidator (1) A liquidator or a barrister or solicitor acting on behalf of the liquidator may administer an oath to, or take the affirmation of, a person required to be examined under section 261. (2) A person required to be examined under section 261 is entitled to be represented by a barrister or solicitor. (3) A liquidator or a barrister or solicitor acting on behalf of the liquidator who conducts an examination under section 261 must ensure that the examination is recorded in writing or by means of a tape recorder or other similar device.

266 Powers of court (1) The court may, on the application of the liquidator, order a person who has failed to comply with a requirement of the liquidator under section 261 to comply with that requirement. (2) The court may, on the application of the liquidator, order a person to whom section 261 applies to— (a) attend before the court and be examined on oath or affirmation by the court or the liquidator or a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company: (b) produce any books, records, or documents relating to the business, accounts, or affairs of the company in that person’s possession or under that person’s control.

(3) Where a person is examined under subsection (2)(a),— (a) the examination must be recorded in writing; and (b) the person examined must sign the record. (4) Subject to any directions by the court, a record of an examination under this section is admissible in evidence in any proceedings under this Part, section 383, section 60A of the Securities Act 1978, section 43F of the Securities Markets Act 1988, or section 44F of the Takeovers Act 1993. Section 266(4): amended, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

267 Self-incrimination (1) A person is not excused from answering a question in the course of being examined under section 261 or section 266 on the ground that the answer may incriminate or tend to incriminate that person. (2) The testimony of the person examined is not admissible as evidence in criminal proceedings against that person except on a charge of perjury in relation to that testimony. [page 406]

268 Power of liquidator to enforce liability of shareholders and former shareholders (1) The liquidator may— (a) if a shareholder is liable to calls, make calls on the shares held by that shareholder: (b) if a shareholder or former shareholder is liable to the company, enforce that liability. (2) A call made under subsection (1)(a) must be made in writing.

269 Power to disclaim onerous property (1) Subject to section 270, a liquidator may disclaim onerous property even

though the liquidator has taken possession of it, tried to sell it, or otherwise exercised rights of ownership in relation to it. (2) For the purposes of this section, onerous property— (a) means— (i)

an unprofitable contract; or

(ii) property of the company that is unsaleable, or not readily saleable, or that may give rise to a liability to pay money or perform an onerous act; or (iii) a litigation right that, in the opinion of the liquidator, has no reasonable prospect of success or cannot reasonably be funded from the assets of the company; but (b) does not include— (i)

a netting agreement to which sections 310A to 310O apply; or

(ii) any contract of the company that constitutes a transaction under a netting agreement; or (iii) a settlement instruction or a settlement under the rules of a settlement system that is declared to be a designated settlement system under Part 5C of the Reserve Bank of New Zealand Act 1989. (3) A disclaimer under this section— (a) brings to an end on and from the date of the disclaimer the rights, interests, and liabilities of the company in relation to the property disclaimed: (b) does not, except so far as necessary to release the company from a liability, affect the rights or liabilities of any other person. (4) A liquidator who disclaims onerous property must, within 10 working days of the disclaimer, give notice in writing of the disclaimer to every person whose rights are, to the knowledge of the liquidator, affected by the disclaimer. (5) A person suffering loss or damage as a result of a disclaimer under this section may— (a) claim as a creditor of the company for the amount of the loss or

damage, taking account of the effect of an order made by the court under paragraph (b): (b) apply to the court for an order that the disclaimed property be delivered to or vested in that person. [page 407] (6) The court may make an order under subsection (5)(b) if it is satisfied that it is just that the property should be vested in the applicant. Compare: 1955 No 63 s 312 Section 269(2): substituted, on 26 April 1999, by section 7 of the Companies Amendment Act 1999 (1999 No 19). Section 269(2)(a)(ii): substituted, on 1 November 2007, by section 22 of the Companies Amendment Act 2006 (2006 No 56). Section 269(2)(a)(iii): added, on 1 November 2007, by section 22 of the Companies Amendment Act 2006 (2006 No 56). Section 269(2)(b): substituted, on 21 August 2003, by section 48(1) of the Reserve Bank of New Zealand Amendment Act 2003 (2003 No 46). Section 269(2)(b)(iii): amended, on 24 November 2009, by section 19 of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53).

270 Liquidator may be required to elect whether to disclaim onerous property If a person whose rights would be affected by the disclaimer of onerous property gives a liquidator notice in writing requiring the liquidator to elect, before the close of such date as is stated in the notice, not being a date that is less than 20 working days after the date on which the notice is received by the liquidator, whether to disclaim the onerous property, the liquidator is not entitled to disclaim the onerous property unless he or she does so before the close of that date.

271 Pooling of assets of related companies (1) On the application of the liquidator, or a creditor or shareholder, the court, if satisfied that it is just and equitable to do so, may order that— (a) a company that is, or has been, related to the company in liquidation

must pay to the liquidator the whole or part of any or all of the claims made in the liquidation: (b) where 2 or more related companies are in liquidation, the liquidations in respect of each company must proceed together as if they were 1 company to the extent that the court so orders and subject to such terms and conditions as the court may impose. (2) The court may make such other order or give such directions to facilitate giving effect to an order under subsection (1) as it thinks fit. Compare: 1955 No 63 ss 315A, 315B; 1980 No 43 s 30

271A

Notice that application filed must be given to administrators and creditors

(1) Unless the court orders otherwise, an applicant for an order under section 271(1)(b) must give notice that the application has been filed to the liquidator and each creditor of each related company in liquidation. (2) An applicant need not give notice to himself or herself. (3) The notice must— (a) identify each company to which the proposed order relates; and (b) summarise all information known to the applicant that is material to whether the order should be made; and [page 408] (c) state that a person to whom the notice must be given may oppose the application by filing a statement of defence in accordance with the High Court Rules. (4) The notice requirement in this section is in addition to anything required to be done by the High Court Rules. Section 271A: inserted, on 1 November 2007, by section 23 of the Companies Amendment Act 2006 (2006 No 56).

272 Guidelines for orders

(1) In deciding whether it is just and equitable to make an order under section 271(1)(a), the court must have regard to the following matters: (a) the extent to which the related company took part in the management of the company in liquidation: (b) the conduct of the related company towards the creditors of the company in liquidation: (c) the extent to which the circumstances that gave rise to the liquidation of the company are attributable to the actions of the related company: (d) such other matters as the court thinks fit. (2) In deciding whether it is just and equitable to make an order under section 271(1)(b), the court must have regard to the following matters: (a) the extent to which any of the companies took part in the management of any of the other companies: (b) the conduct of any of the companies towards the creditors of any of the other companies: (c) the extent to which the circumstances that gave rise to the liquidation of any of the companies are attributable to the actions of any of the other companies: (d) the extent to which the businesses of the companies have been combined: (e) such other matters as the court thinks fit. (3) The fact that creditors of a company in liquidation relied on the fact that another company is, or was, related to it is not a ground for making an order under section 271. Compare: 1955 No 63 s 315C; 1980 No 43 s 30

273 Certain conduct prohibited (1) If a company is in liquidation, or an application has been made to the court for an order that a company be put into liquidation, as the case may be, no person may— (a) leave New Zealand with the intention of— (i)

avoiding payment of money due to the company; or

(ii) avoiding examination in relation to the affairs of the company; or (iii) avoiding compliance with an order of the court or some other obligation under this Part in relation to the affairs of the company; or (b) conceal or remove property of the company with the intention of preventing or delaying the liquidator taking custody or control of it; or (c) destroy, conceal, or remove records or other documents of the company. (2) A person who contravenes subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(3). [page 409]

274 Duty to identify and deliver property (1) A present or former director or employee of a company in liquidation must, — (a) forthwith after the company is put into liquidation, give the liquidator details of property of the company in his or her possession or under his or her control; and (b) on being required to do so by the liquidator, forthwith or within such time as may be specified by the liquidator, deliver the property to the liquidator or such other person as the liquidator may direct, or dispose of the property in such manner as the liquidator may direct. (2) A person who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(3).

275 Refusal to supply essential services prohibited (1) For the purposes of this section, an essential service means— (a) the retail supply of gas: (b) the retail supply of electricity: (c) the supply of water:

(d) telecommunications services. (2) For the purposes of this section, telecommunications services means the conveyance from one device to another by a line, radio frequency, or other medium, of a sign, signal, impulse, writing, image, sound, instruction, information, or intelligence of any nature, whether or not for the information of a person using the device. (3) Notwithstanding the provisions of any other Act or any contract, a supplier of an essential service must not— (a) refuse to supply the service to a liquidator, or to a company in liquidation, by reason of the company’s default in paying charges due for the service in relation to a period before the commencement of the liquidation; or (b) make it a condition of the supply of the service to a liquidator, or to a company in liquidation, that payment be made of outstanding charges due for the service in relation to a period before the commencement of the liquidation; or (c) make it a condition of the supply of the service to a company in liquidation that the liquidator personally guarantees payment of the charges that would be incurred for the supply of the service. (4) The charges incurred by a liquidator for the supply of an essential service are an expense incurred by the liquidator for the purposes of clause 1(1)(a) of Schedule 7. Section 275(4): amended, on 1 November 2007, by section 37 of the Companies Amendment Act 2006 (2006 No 56).

276 Remuneration of liquidators (1) Subject to section 284(1)(e), every liquidator, not being an Official Assignee, appointed under paragraph (a) or paragraph (b) of subsection (2) of section 241 is entitled to charge reasonable remuneration for carrying out his or her duties and exercising his or her powers as liquidator. (2) Unless the court otherwise orders, every Official Assignee who is appointed a liquidator under paragraph (a) of subsection (2) of section 241 and every [page 410]



liquidator appointed under paragraph (c) of that subsection shall charge remuneration either— (a) of an amount equal to the amount fixed under section 277; or (b) at, or in accordance with, such rate or rates as may be prescribed under that section.

Section 276(1): amended, on 1 July 1994, by section 32 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

277 Rates of remuneration (1) The Governor-General may from time to time, by Order in Council, for the purposes of section 276, make regulations fixing an amount or prescribing a rate or rates in respect of the remuneration of liquidators to which that section applies. (2) Without limiting subsection (1), such regulations may— (a) prescribe an hourly or other rate or rates of remuneration and different rates may be prescribed in respect of work undertaken in the liquidation by different classes of persons: (b) prescribe a rate or rates by reference to the net value of the assets realised by the liquidator, together with such other amounts as may be specified: (c) prescribe a rate or rates in respect of the exercise of a particular function or power: (d) prescribe a rate or rates by reference to such other criteria as may be specified.

278 Expenses and remuneration payable out of assets of company The expenses and remuneration of the liquidator are payable out of the assets of the company.

279 Liquidator ceases to hold office on completion of liquidation

(1) A liquidator ceases to hold office on the completion of the liquidation in accordance with section 249. (2) Subsection (1) does not limit section 284 or section 286. Qualifications and supervision of liquidators

280 Qualifications of liquidators (1) Unless the court orders otherwise, none of the following persons may be appointed or act as a liquidator of a company: (a) a person less than 18 years old: (b) a creditor of the company in liquidation: (c) a person who has, within the 2 years immediately preceding the commencement of the liquidation, been a shareholder, director, auditor, or receiver of the company or of a related company: (ca) a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, provided professional services to the company, unless, within 20 working days before the appointment of the liquidator, the board of the company resolves that the company will, on the appointment of the liquidator, be able to [page 411]

pay its debts and a copy of the resolution is delivered to the Registrar for registration:

(cb) a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, had a continuing business relationship (other than through the provision of banking or financial services) with the company, its majority shareholder, any of its directors, or any of its secured creditors, unless, within 20 working days before the appointment of the liquidator, the board of the company resolves that the company will, on the appointment of the liquidator, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration: (d) an undischarged bankrupt:

(e) a person who is, or is deemed to be, subject to a compulsory treatment order made under Part 2 of the Mental Health (Compulsory Assessment and Treatment) Act 1992: (f)

a person in respect of whom an order has been made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988:

(g) a person in respect of whom an order has been made under section 286(5): (h) a person in respect of whom an order has been made under section 37(6) of the Receiverships Act 1993: (ha) a person who would, but for the repeal of section 188A or section 189 or section 189A of the Companies Act 1955, be prohibited from being a director or promoter of, or being concerned or taking part in the management of, a company within the meaning of that Act: (i)

a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 199K or section 199L of the Companies Act 1955 or who would be so prohibited but for the repeal of that Act:

(j)

a person who is prohibited from being an officer or promoter of, or being concerned or taking part in the management of, a company under section 199N of the Companies Act 1955 or who would be so prohibited but for the repeal of that Act:

(k) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 382 or section 383 or section 385: (ka) a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Securities Act 1978, or the Securities Markets Act 1988, or the Takeovers Act 1993: (l)

a person who is prohibited under section 299(1)(c) of the Insolvency Act 2006 from acting as a director or taking part directly or indirectly in the management of any company or class of company:

(m) a person who is prohibited from being administrator or deed administrator under section 239ADV.

(1A) Subsection (1)(ca) or (cb) does not apply if all the creditors consent to the appointment of the person in question. (2) A body corporate must not be appointed or act as a liquidator. [page 412] (3) A person who contravenes subsection (1) or subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(2). (4) A person other than the Official Assignee must not be appointed a liquidator unless he or she has first certified in writing that he or she is not disqualified under subsection (1). Section 280(1)(ca): inserted, on 1 November 2007, by section 24(1) of the Companies Amendment Act 2006 (2006 No 56). Section 280(1)(cb): inserted, on 1 November 2007, by section 24(1) of the Companies Amendment Act 2006 (2006 No 56). Section 280(1)(ha): inserted, on 1 July 1994, by section 33 of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 280(1)(ka): inserted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46). Section 280(1)(l): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55). Section 280(1)(m): added, on 1 November 2007, by section 24(2) of the Companies Amendment Act 2006 (2006 No 56). Section 280(1A): inserted, on 1 November 2007, by section 24(3) of the Companies Amendment Act 2006 (2006 No 56). Section 280(4): added, on 1 November 2007, by section 24(4) of the Companies Amendment Act 2006 (2006 No 56).

281 Validity of acts of liquidators The acts of a person as a liquidator are valid even though that person is not qualified to act as a liquidator.

282 Consent to appointment The appointment of a person, other than an Official Assignee, as liquidator is of no effect unless that person has consented in writing to the appointment.

283 Vacancies in office of liquidator (1) The office of liquidator becomes vacant if the person holding office resigns, dies, or becomes disqualified under section 280. (2) A person, other than an Official Assignee, may resign from the office of liquidator by appointing another such person as his or her successor and sending or delivering notice in writing of the appointment of his or her successor to the Registrar for registration. (3) With the approval of the Official Assignee for New Zealand, an Official Assignee may resign from the office of liquidator by appointing another Official Assignee as his or her successor. (4) The court may, on the application of the company, or a shareholder or other entitled person, or a director or creditor of the company, review the appointment of a successor to a liquidator and may appoint any person who could be appointed as liquidator under paragraph (a) or paragraph (b) or paragraph (c), as the case may be, of subsection (2) of section 241 to be the liquidator of the company. (5) If, for any reason other than resignation, a vacancy occurs in the office of liquidator, written notice of the vacancy must forthwith be sent or delivered to the Official Assignee for New Zealand by the person vacating office or, if that person is unable to act, by his or her personal representative. [page 413] (6) If, as the result of the vacation of office by a liquidator, other than an Official Assignee, no person is acting as liquidator, the Official Assignee for New Zealand may appoint a person to act as liquidator until a successor is appointed under this section. (7) If a vacancy occurs in the office of the liquidator, or a liquidator has been appointed under subsection (6), as the case may be, the court may, on the application of the company, or a shareholder or other entitled person, or a director or creditor of the company, or the Official Assignee for New Zealand, appoint any person who could be appointed as liquidator under paragraph (a) or paragraph (b) or paragraph (c), as the case may be, of subsection (2) of section 241 to be the liquidator of the company.

(8) A liquidator appointed under subsection (7) must, within 10 working days of being appointed or being notified of his or her appointment, deliver a notice of his or her appointment to the Registrar for registration. (9) A person vacating the office of liquidator must, where practicable, provide such information and give such assistance to that person’s successor as he or she reasonably requires in taking over the duties of liquidator.

284 Court supervision of liquidation (1) On the application of the liquidator, a liquidation committee, or, with the leave of the court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the court may— (a) give directions in relation to any matter arising in connection with the liquidation: (b) confirm, reverse, or modify an act or decision of the liquidator: (c) order an audit of the accounts of the liquidation: (d) order the liquidator to produce the accounts and records of the liquidation for audit and to provide the auditor with such information concerning the conduct of the liquidation as the auditor requests: (e) in respect of any period, review or fix the remuneration of the liquidator at a level which is reasonable in the circumstances: (f)

to the extent that an amount retained by the liquidator as remuneration is found by the court to be unreasonable in the circumstances, order the liquidator to refund the amount:

(g) declare whether or not the liquidator was validly appointed or validly assumed custody or control of property: (h) make an order concerning the retention or the disposition of the accounts and records of the liquidation or of the company. (2) The powers given by subsection (1) are in addition to any other powers a court may exercise in its jurisdiction relating to liquidators under this Part, and may be exercised in relation to a matter occurring either before or after the commencement of the liquidation, or the removal of the company from the New Zealand register, and whether or not the liquidator has ceased to act as liquidator when the application or the order is made.

(3) Subject to subsection (4), a liquidator who has— (a) obtained a direction of a court with respect to a matter connected with the exercise of the powers or functions of liquidator; and (b) acted in accordance with the direction— [page 414]

is entitled to rely on having so acted as a defence to a claim in relation to anything done or not done in accordance with the direction.

(4) A court may, on the application of any person, order that, by reason of the circumstances in which a direction was obtained under subsection (1), the liquidator does not have the protection given by subsection (3).

285 Meaning of failure to comply (1) In section 286 unless the context otherwise requires, failure to comply means a failure of a liquidator to comply with a relevant duty arising— (a) under this or any other Act or rule of law or rules of court; or (b) under any order or direction of a court other than an order to comply made under that section;— and comply, compliance, and failed to comply have corresponding meanings. (2) In subsection (1), relevant duty includes the duty of a person in his or her capacity as administrator or deed administrator of a company. Section 285(2): added, on 1 November 2007, by section 25 of the Companies Amendment Act 2006 (2006 No 56).

286 Orders to enforce liquidator’s duties (1) An application for an order under this section may be made by— (a) a liquidator: (b) a person seeking appointment as a liquidator: (c) a liquidation committee:

(d) a creditor, shareholder, other entitled person, or a director of the company in liquidation: (e) a receiver appointed in relation to property of the company in liquidation: (f)

if the liquidator is a chartered accountant, the President of the New Zealand Institute of Chartered Accountants:

(g) if the liquidator is a barrister and solicitor or a solicitor, the President of the New Zealand Law Society: (h) an Official Assignee. (2) No application may be made to a court by a person other than a liquidator in relation to a failure to comply unless notice of the failure to comply has been served on the liquidator not less than 5 working days before the date of the application and, as at the date of the application, there is a continuing failure to comply. (3) If the court is satisfied that there is, or has been, a failure to comply, the court may— (a) relieve the liquidator of the duty to comply wholly or in part; or (b) without prejudice to any other remedy which may be available in relation to a breach of duty by the liquidator, order the liquidator to comply to the extent specified in the order. (4) A court may, in relation to a person who fails to comply with an order made under subsection (3), or is or becomes disqualified under section 280 to become or remain a liquidator,— (a) remove the liquidator from office; or (b) order that the person may be appointed and act, or may continue to act, as liquidator, notwithstanding the provisions of section 280. [page 415] (5) If the court is satisfied that a person is unfit to act as a liquidator by reason of persistent failures to comply or the seriousness of a failure to comply,— (a) the court must make a prohibition order; and

(b) the period of the order is a matter for the discretion of the court but the court may make a prohibition period for an indefinite period. (6) A person to whom a prohibition order applies must not— (a) act as a liquidator in a current or other liquidation; or (b) act as a receiver in a current or other receivership. (7) Evidence that, on 2 or more occasions,— (a) a court has made an order to comply under this section in respect of the same person; or (b) an application for an order to comply under this section has been made in respect of the same person and that in each case the person has complied after the making of the application and before the hearing,— is, in the absence of special reasons to the contrary, evidence of persistent failures to comply for the purposes of this section. (8) In making an order under this section a court may, if it thinks fit,— (a) make an order extending the time for compliance; or (b) impose a term or condition; or (c) make an ancillary order. (9) A copy of every order made under subsection (5) must, within 10 working days of the order being made, be delivered by the applicant to the Official Assignee for New Zealand who must keep it on a file indexed by reference to the name of the liquidator concerned. Section 286(1)(f): amended, on 7 July 2010, by section 10 of the New Zealand Institute of Chartered Accountants Amendment Act 2010 (2010 No 74). Section 286(5): substituted, on 1 November 2007, by section 26(1) of the Companies Amendment Act 2006 (2006 No 56). Section 286(7): amended, on 1 November 2007, by section 26(2) of the Companies Amendment Act 2006 (2006 No 56).

Company unable to pay its debts

287 Meaning of inability to pay debts Unless the contrary is proved, and subject to section 288, a company is presumed to be unable to pay its debts if—

(a) the company has failed to comply with a statutory demand; or (b) execution issued against the company in respect of a judgment debt has been returned unsatisfied in whole or in part; or (c) a person entitled to a charge over all or substantially all of the property of the company has appointed a receiver under the instrument creating the charge; or (d) a compromise between a company and its creditors has been put to a vote in accordance with Part 14 but has not been approved.

288 Evidence and other matters (1) On an application to the court for an order that a company be put into liquidation, evidence of failure to comply with a statutory demand is not [page 416]

admissible as evidence that a company is unable to pay its debts unless the application is made within 30 working days after the last date for compliance with the demand.

(2) Section 287 does not prevent proof by other means that a company is unable to pay its debts. (3) Information or records acquired under section 178 or, if the court so orders, under section 179, may be received as evidence that a company is unable to pay its debts. (4) In determining whether a company is unable to pay its debts, its contingent or prospective liabilities may be taken into account. (5) An application to the court for an order that a company be put into liquidation on the ground that it is unable to pay its debts may be made by a contingent or prospective creditor only with the leave of the court; and the court may give such leave, with or without conditions, only if it is satisfied that a prima facie case has been made out that the company is unable to pay its debts.

289 Statutory demand

(1) A statutory demand is a demand by a creditor in respect of a debt owing by a company made in accordance with this section. (2) A statutory demand must— (a) be in respect of a debt that is due and is not less than the prescribed amount; and (b) be in writing; and (c) be served on the company; and (d) require the company to pay the debt, or enter into a compromise under Part 14, or otherwise compound with the creditor, or give a charge over its property to secure payment of the debt, to the reasonable satisfaction of the creditor, within 15 working days of the date of service, or such longer period as the court may order.

290 Court may set aside statutory demand (1) The court may, on the application of the company, set aside a statutory demand. (2) The application must be— (a) made within 10 working days of the date of service of the demand; and (b) served on the creditor within 10 working days of the date of service of the demand. (3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand. (4) The court may grant an application to set aside a statutory demand if it is satisfied that— (a) there is a substantial dispute whether or not the debt is owing or is due; or (b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of [page 417]



the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c) the demand ought to be set aside on other grounds. (5) A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside. (6) In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand. (7) An order under this section may be made subject to conditions.

291 Additional powers of court on application to set aside statutory demand (1) If, on the hearing of an application under section 290, the court is satisfied that there is a debt due by the company to the creditor that is not the subject of a substantial dispute, or is not subject to a counterclaim, set-off, or crossdemand, the court may— (a) order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or (b) dismiss the application and forthwith make an order under section 241(4) putting the company into liquidation,— on the ground that the company is unable to pay its debts. (2) For the purposes of the hearing of an application to put the company into liquidation pursuant to an order made under subsection (1)(a), the company is presumed to be unable to pay its debts if it failed to pay the debt within the specified period.

Voidable transactions

292 Insolvent transaction voidable (1) A transaction by a company is voidable by the liquidator if it— (a) is an insolvent transaction; and

(b) is entered into within the specified period. (2) An insolvent transaction is a transaction by a company that— (a) is entered into at a time when the company is unable to pay its due debts; and (b) enables another person to receive more towards satisfaction of a debt owed by the company than the person would receive, or would be likely to receive, in the company’s liquidation. (3) In this section, transaction means any of the following steps by the company: (a) conveying or transferring the company’s property: (b) creating a charge over the company’s property: (c) incurring an obligation: (d) undergoing an execution process: (e) paying money (including paying money in accordance with a judgment or an order of a court): [page 418] (f)

anything done or omitted to be done for the purpose of entering into the transaction or giving effect to it.

(4) In this section, transaction includes a transaction by a receiver, except a transaction that discharges, whether in part or in full, a liability for which the receiver is personally liable under section 32(1) or (5) of the Receiverships Act 1993 or otherwise personally liable under a contract entered into by the receiver. (4A) A transaction that is entered into within the restricted period is presumed, unless the contrary is proved, to be entered into at a time when the company is unable to pay its due debts. (4B) Where— (a) a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company (including a

relationship to which other persons are parties); and (b) in the course of the relationship, the level of the company’s net indebtedness to the creditor is increased and reduced from time to time as the result of a series of transactions forming part of the relationship; then— (c) subsection (1) applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and (d) the transaction referred to in paragraph (a) may only be taken to be an insolvent transaction voidable by the liquidator if the effect of applying subsection (1) in accordance with paragraph (c) is that the single transaction referred to in paragraph (c) is taken to be an insolvent transaction voidable by the liquidator. (5) For the purposes of subsections (1) and (4B), specified period means— (a) the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and (b) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order was made; and (c) if— (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. (6) For the purposes of subsection (4A), restricted period means— (a) the period of 6 months before the date of commencement of the

liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and [page 419] (b) in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and (c) if— (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. Compare: 1955 No 63 s 309; 1980 No 43 s 24(1); 1982 No 152 s 18 Section 292 heading: substituted, on 1 November 2007, by section 27(1) of the Companies Amendment Act 2006 (2006 No 56). Section 292(1): substituted, on 1 November 2007, by section 27(2) of the Companies Amendment Act 2006 (2006 No 56). Section 292(2): substituted, on 1 November 2007, by section 27(2) of the Companies Amendment Act 2006 (2006 No 56). Section 292(3): substituted, on 1 November 2007, by section 27(2) of the Companies Amendment Act 2006 (2006 No 56). Section 292(4): substituted, on 1 November 2007, by section 27(2) of the Companies Amendment Act 2006 (2006 No 56). Section 292(4): amended, on 31 August 2012, by section 7 of the Companies Amendment Act (No 2) 2012 (2012 No 60). Section 292(4A): inserted, on 1 November 2007, by section 27(2) of the Companies Amendment Act 2006 (2006 No 56). Section 292(4B): inserted, on 1 November 2007, by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).

Section 292(5): amended, on 1 November 2007, by section 27(3) of the Companies Amendment Act 2006 (2006 No 56). Section 292(5)(a): substituted, on 26 April 1999, by section 8(1) of the Companies Amendment Act 1999 (1999 No 19). Section 292(5)(b): amended, on 26 April 1999, by section 8(2)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 292(5)(b): amended, on 3 June 1998, by section 12(1) of the Companies Amendment Act 1998 (1998 No 31). Section 292(5)(c): added, on 3 June 1998, by section 12(1) of the Companies Amendment Act 1998 (1998 No 31). Section 292(5)(c): amended, on 26 April 1999, by section 8(2)(b) of the Companies Amendment Act 1999 (1999 No 19). Section 292(6): amended, on 1 November 2007, by section 27(4) of the Companies Amendment Act 2006 (2006 No 56). Section 292(6)(a): substituted, on 26 April 1999, by section 8(3) of the Companies Amendment Act 1999 (1999 No 19). Section 292(6)(b): amended, on 26 April 1999, by section 8(4)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 292(6)(b): amended, on 3 June 1998, by section 12(2) of the Companies Amendment Act 1998 (1998 No 31).

[page 420] Section 292(6)(c): added, on 3 June 1998, by section 12(2) of the Companies Amendment Act 1998 (1998 No 31). Section 292(6)(c): amended, on 26 April 1999, by section 8(4)(b) of the Companies Amendment Act 1999 (1999 No 19).

293 Voidable charges (1) A charge over any property or undertaking of a company is voidable by the liquidator if— (a) the charge was given within the specified period; and (b) immediately after the charge was given, the company was unable to pay its due debts. (1A) Subsection (1) does not apply if— (a) the charge secures money actually advanced or paid, or the actual price or value of property sold or supplied to the company, or any other

valuable consideration given in good faith by the grantee of the charge at the time of, or at any time after, the giving of the charge; or (b) the charge is in substitution for a charge given before the specified period. (2) Unless the contrary is proved, a company giving a charge within the restricted period is presumed to have been unable to pay its due debts immediately after giving the charge. (3) Subsection (1A)(b) does not apply to the extent that— (a) the amount secured by the substituted charge exceeds the amount secured by the existing charge; or (b) the value of the property subject to the substituted charge at the date of the substitution exceeds the value of the property subject to the existing charge at that date. (4) Nothing in subsection (1) applies to a charge given by a company that secures the unpaid purchase price of property, whether or not the charge is given over that property, if the instrument creating the charge is executed not later than 30 days after the sale of the property or, in the case of the sale of an estate or interest in land, not later than 30 days after the final settlement of the sale. (5) For the purposes of subsection (1A)(a) and subsection (4), where any charge was given by the company within the period specified in subsection (1), all payments received by the grantee of the charge after it was given shall be deemed to have been appropriated so far as may be necessary— (a) towards repayment of money actually advanced or paid by the grantee to the company on or after the giving of the charge; or (b) towards payment of the actual price or value of property sold by the grantee to the company on or after the giving of the charge; or (c) towards payment of any other liability of the company to the grantee in respect of any other valuable consideration given in good faith on or after the giving of the charge. (6) For the purposes of subsection (1), specified period means— (a) the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and

ending at the time at which the liquidator is appointed; and (b) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of the [page 421]

application and ending on the date on which, and at the time at which, the order of the court was made; and

(c) if— (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. (7) For the purposes of subsection (2), restricted period means— (a) the period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and (b) in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of the application and ending on the date on which, and at the time at which, the order of the court was made; and (c) if— (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was

appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. Section 293(1): substituted, on 1 November 2007, by section 28(1) of the Companies Amendment Act 2006 (2006 No 56). Section 293(1A): inserted, on 1 November 2007, by section 28(1) of the Companies Amendment Act 2006 (2006 No 56). Section 293(3): amended, on 1 November 2007, by section 28(2) of the Companies Amendment Act 2006 (2006 No 56). Section 293(5): amended, on 1 November 2007, by section 28(3) of the Companies Amendment Act 2006 (2006 No 56). Section 293(6)(a): substituted, on 26 April 1999, by section 9(1) of the Companies Amendment Act 1999 (1999 No 19). Section 293(6)(a): amended, on 1 November 2007, by section 28(4) of the Companies Amendment Act 2006 (2006 No 56). Section 293(6)(b): amended, on 1 November 2007, by section 28(4) of the Companies Amendment Act 2006 (2006 No 56). Section 293(6)(b): amended, on 26 April 1999, by section 9(2)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 293(6)(b): amended, on 3 June 1998, by section 13(1) of the Companies Amendment Act 1998 (1998 No 31). Section 293(6)(c): added, on 3 June 1998, by section 13(1) of the Companies Amendment Act 1998 (1998 No 31). Section 293(6)(c): amended, on 1 November 2007, by section 28(4) of the Companies Amendment Act 2006 (2006 No 56).

[page 422] Section 293(6)(c): amended, on 26 April 1999, by section 9(2)(b) of the Companies Amendment Act 1999 (1999 No 19). Section 293(7)(a): substituted, on 26 April 1999, by section 9(3) of the Companies Amendment Act 1999 (1999 No 19). Section 293(7)(b): amended, on 26 April 1999, by section 9(4)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 293(7)(b): amended, on 3 June 1998, by section 13(2) of the Companies Amendment Act 1998 (1998 No 31). Section 293(7)(c): added, on 3 June 1998, by section 13(2) of the Companies Amendment Act 1998 (1998

No 31). Section 293(7)(c): amended, on 26 April 1999, by section 9(4)(b) of the Companies Amendment Act 1999 (1999 No 19).

294 Procedure for setting aside transactions and charges (1) A liquidator who wishes to set aside a transaction or charge that is voidable under section 292 or 293 must— (a) file a notice with the court that meets the requirements set out in subsection (2); and (b) serve the notice as soon as practicable on— (i)

the other party to the transaction or the charge holder, as the case may be; and

(ii) any other party from whom the liquidator intends to recover. (2) The liquidator’s notice must— (a) be in writing; and (b) state the liquidator’s postal, email, and street addresses; and (c) specify the transaction or charge to be set aside; and (d) describe the property or state the amount that the liquidator wishes to recover; and (e) state that the person named in the notice may object to the transaction or charge being set aside by sending to the liquidator a written notice of objection that is received by the liquidator at his or her postal, email, or street address within 20 working days after the liquidator’s notice has been served on that person; and (f)

state that the written notice of objection must contain full particulars of the reasons for objecting and must identify any documents that evidence or substantiate the reasons for objecting; and

(g) state that the transaction or charge will be set aside as against the person named in the notice if that person does not object; and (h) state that if the person named in the notice does object, the liquidator may apply to the court for the transaction or charge to be set aside.

(3) The transaction or charge is automatically set aside as against the person on whom the liquidator has served the liquidator’s notice, if that person has not objected by sending to the liquidator a written notice of objection that is received by the liquidator at his or her postal, email, or street address within 20 working days after the liquidator’s notice has been served on that person. (4) The notice of objection must contain full particulars of the reasons for objecting and must identify documents that evidence or substantiate the reasons for objecting. (5) A transaction or charge that is not automatically set aside may still be set aside by the court on the liquidator’s application. [page 423] Section 294: substituted, on 1 November 2007, by section 29 of the Companies Amendment Act 2006 (2006 No 56).

295 Other orders If a transaction or charge is set aside under section 294, the court may make 1 or more of the following orders: (a) an order that a person pay to the company an amount equal to some or all of the money that the company has paid under the transaction: (b) an order that a person transfer to the company property that the company has transferred under the transaction: (c) an order that a person pay to the company an amount that, in the court’s opinion, fairly represents some or all of the benefits that the person has received because of the transaction: (d) an order that a person transfer to the company property that, in the court’s opinion, fairly represents the application of either or both of the following: (i)

money that the company has paid under the transaction:

(ii) proceeds of property that the company has transferred under the transaction: (e) an order releasing, in whole or in part, a charge given by the company:

(f)

an order requiring security to be given for the discharge of an order made under this section:

(g) an order specifying the extent to which a person affected by the setting aside of a transaction or by an order made under this section is entitled to claim as a creditor in the liquidation. Compare: Corporations Act 2001 s 588FF(1)(a)–(d) (Aust) Section 295: substituted, on 1 November 2007, by section 30 of the Companies Amendment Act 2006 (2006 No 56).

296 Additional provisions relating to setting aside transactions and charges (1) The setting aside of a transaction or an order made under section 295 does not affect the title or interest of a person in property which that person has acquired— (a) from a person other than the company; and (b) for valuable consideration; and (c) without knowledge of the circumstances under which the property was acquired from the company. (2) The setting aside of a charge or an order made under section 295 does not affect the title or interest of a person in property which that person has acquired— (a) as the result of the exercise of a power of sale by the grantee of the charge; and (b) for valuable consideration; and (c) without knowledge of the circumstances relating to the giving of the charge. (3) A court must not order the recovery of property of a company (or its equivalent value) by a liquidator, whether under this Act, any other enactment, or in law or in equity, if the person from whom recovery is sought (A) proves that when A received the property— [page 424]

(a) A acted in good faith; and (b) a reasonable person in A’s position would not have suspected, and A did not have reasonable grounds for suspecting, that the company was, or would become, insolvent; and (c) A gave value for the property or altered A’s position in the reasonably held belief that the transfer of the property to A was valid and would not be set aside. (4) Nothing in the Land Transfer Act 1952 restricts the operation of this section or sections 292 to 295. Section 296(3): substituted, on 1 November 2007, by section 31 of the Companies Amendment Act 2006 (2006 No 56).

Recovery in other cases

297 Transactions at undervalue (1) Under subsection (2) the liquidator may recover from a person (X) the amount C in the formula A − B = C, where— (a) A is the value that X received from a company under a transaction to which the company was or is a party; and (b) B is the value (if any) that the company received from X under the transaction. (2) The liquidator may recover the difference in value (that is, C in the formula in subsection (1)) from X if— (a) the company entered into the transaction within the specified period; and (b) either— (i)

the company was unable to pay its due debts when it entered into the transaction; or

(ii) the company became unable to pay its due debts as a result of entering into the transaction. (3) For the purposes of this section,— (a) transaction has the same meaning as in section 292(3): (b) specified period means—

(i)

the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(ii) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and (iii) if— (A) an application was made to the court to put a company into liquidation; and (B) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 2 years before the making of the application to the court together with the period commencing on the date of the [page 425]



making of that application and ending on the date and at the time of the commencement of the liquidation.

Section 297(1): substituted, on 1 November 2007, by section 32(1) of the Companies Amendment Act 2006 (2006 No 56). Section 297(2): substituted, on 1 November 2007, by section 32(1) of the Companies Amendment Act 2006 (2006 No 56). Section 297(3)(a): substituted, on 1 November 2007, by section 32(2) of the Companies Amendment Act 2006 (2006 No 56). Section 297(3)(b)(i): substituted, on 26 April 1999, by section 10(1) of the Companies Amendment Act 1999 (1999 No 19). Section 297(3)(b)(i): amended, on 1 November 2007, by section 32(3) of the Companies Amendment Act 2006 (2006 No 56). Section 297(3)(b)(ii): amended, on 1 November 2007, by section 32(3) of the Companies Amendment Act 2006 (2006 No 56). Section 297(3)(b)(ii): amended, on 26 April 1999, by section 10(2)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 297(3)(b)(ii): amended, on 3 June 1998, by section 14 of the Companies Amendment Act 1998

(1998 No 31). Section 297(3)(b)(iii): added, on 3 June 1998, by section 14 of the Companies Amendment Act 1998 (1998 No 31). Section 297(3)(b)(iii): amended, on 1 November 2007, by section 32(3) of the Companies Amendment Act 2006 (2006 No 56). Section 297(3)(b)(iii): amended, on 26 April 1999, by section 10(2)(b) of the Companies Amendment Act 1999 (1999 No 19).

298 Transactions for inadequate or excessive consideration with directors and certain other persons (1) Where, within the specified period, a company has acquired a business or property from, or the services of,— (a) a person who was, at the time of the acquisition, a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (b) a person, or a relative of a person, who, at the time of the acquisition, had control of the company; or (c) another company that was, at the time of the acquisition, controlled by a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (d) another company that was, at the time of the acquisition, a related company,— the liquidator may recover from the person, relative, company, or related company, as the case may be, any amount by which the value of the consideration given for the acquisition of the business, property, or services exceeded the value of the business, property, or services at the time of the acquisition. (2) Where, within the specified period, a company has disposed of a business or property, or provided services, or issued shares, to— (a) a person who was, at the time of the disposition, provision, or issue, a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (b) a person, or a relative of a person, who, at the time of the disposition,

provision, or issue, had control of the company; or [page 426] (c) another company that was, at the time of the disposition, provision, or issue, controlled by a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (d) another company that, at the time of the disposition, provision, or issue, was a related company,— the liquidator may recover from the person, relative, company, or related company, as the case may be, any amount by which the value of the business, property, or services, or the value of the shares, at the time of the disposition, provision, or issue exceeded the value of any consideration received by the company. (3) For the purposes of this section,— (a) the value of a business or property includes the value of any goodwill attaching to the business or property; (b) the provisions of section 7 apply with such modifications as may be necessary to determine control of a company. (4) For the purposes of subsections (1) and (2), specified period means— (a) the period of 3 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and (b) in the case of a company that was put into liquidation by the court, the period of 3 years before the making of the application to the court together with the period commencing on the date of the making of the application and ending on the date on which, and at the time at which, the order of the court was made; and (c) if— (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 3 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. Compare: 1955 No 63 s 311C; 1980 No 43 s 28 Section 298(4)(a): substituted, on 26 April 1999, by section 11(1) of the Companies Amendment Act 1999 (1999 No 19). Section 298(4)(b): amended, on 26 April 1999, by section 11(2)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 298(4)(b): amended, on 3 June 1998, by section 15 of the Companies Amendment Act 1998 (1998 No 31). Section 298(4)(c): added, on 3 June 1998, by section 15 of the Companies Amendment Act 1998 (1998 No 31). Section 298(4)(c): amended, on 26 April 1999, by section 11(2)(b) of the Companies Amendment Act 1999 (1999 No 19).

299 Court may set aside certain securities and charges (1) Subject to subsection (2), if a company that is in liquidation is unable to meet all its debts, the court, on the application of the liquidator, may order [page 427]

that a security or charge, or part of it, created by the company over any of its property or undertaking in favour of— (a) a person who was, at the time the security or charge was created, a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (b) a person, or a relative of a person, who, at the time when the security or charge was created, had control of the company; or (c) another company that was, when the security or charge was created, controlled by a director of the company, or a nominee or relative of or

a trustee for, or a trustee for a relative of, a director of the company; or (d) another company, that at the time when the security or charge was created, was a related company,— shall, so far as any security on the property or undertaking is conferred, be set aside as against the liquidator of the company, if the court considers that, having regard to the circumstances in which the security or charge was created, the conduct of the person, relative, company, or related company, as the case may be, in relation to the affairs of the company, and any other relevant circumstances, it is just and equitable to make the order. (2) Subsection (1) does not apply to a security or charge that has been transferred by the person in whose favour it was originally created and has been purchased by another person (whether or not from the first-mentioned person) if,— (a) at the time of the purchase, the purchaser was not a person specified in any of paragraphs (a) to (d) of that subsection; and (b) the purchase was made in good faith and for valuable consideration. (3) The court may make such other orders as it thinks proper for the purpose of giving effect to an order under this section. (4) Nothing in the Land Transfer Act 1952 restricts the operation of this section. (5) The provisions of section 7 apply with such modifications as may be necessary to determine control of a company. Compare: 1955 No 63 s 311B; 1980 No 43 s 27

300 Liability if proper accounting records not kept (1) Subject to subsection (2), if— (a) a company that is in liquidation and is unable to pay all its debts has failed to comply with— (i)

section 194 (which relates to the keeping of accounting records); or

(ii) section 10 of the Financial Reporting Act 1993 (which relates to the preparation of financial statements); and

(b) the court considers that— (i)

the failure to comply has contributed to the company’s inability to pay all its debts, or has resulted in substantial uncertainty as to the assets and liabilities of the company, or has substantially impeded the orderly liquidation; or

(ii) for any other reason it is proper to make a declaration under this section,— the court, on the application of the liquidator, may, if it thinks it proper to do so, declare that any 1 or more of the directors and former directors of the company [page 428] is, or are, personally responsible, without limitation of liability, for all or any part of the debts and other liabilities of the company as the court may direct. (2) The court must not make a declaration under subsection (1) in relation to a person if the court considers that the person— (a) took all reasonable steps to secure compliance by the company with the applicable provision referred to in paragraph (a) of that subsection; or (b) had reasonable grounds to believe and did believe that a competent and reliable person was charged with the duty of seeing that that provision was complied with and was in a position to discharge that duty. (3) The court may give any direction it thinks fit for the purpose of giving effect to the declaration. (4) The court may make a declaration under this section even though the person concerned is liable to be convicted of an offence. (5) An order under this section is deemed to be a final judgment within the meaning of section 17(1)(a) of the Insolvency Act 2006. Compare: 1955 No 63 s 319; 1980 No 43 s 31 Section 300(5): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

301 Power of court to require persons to repay money or return property (1) If, in the course of the liquidation of a company, it appears to the court that a person who has taken part in the formation or promotion of the company, or a past or present director, manager, administrator, liquidator, or receiver of the company, has misapplied, or retained, or become liable or accountable for, money or property of the company, or been guilty of negligence, default, or breach of duty or trust in relation to the company, the court may, on the application of the liquidator or a creditor or shareholder, — (a) inquire into the conduct of the promoter, director, manager, administrator, liquidator, or receiver; and (b) order that person— (i)

to repay or restore the money or property or any part of it with interest at a rate the court thinks just; or

(ii) to contribute such sum to the assets of the company by way of compensation as the court thinks just; or (c) where the application is made by a creditor, order that person to pay or transfer the money or property or any part of it with interest at a rate the court thinks just to the creditor. (2) This section has effect even though the conduct may constitute an offence. (3) An order for payment of money under this section is deemed to be a final judgment within the meaning of section 17(1)(a) of the Insolvency Act 2006. (4) In making an order under subsection (1) against a past or present director, the court must, where relevant, take into account any action that person took for the appointment of an administrator to the company under Part 15A. Compare: 1955 No 63 s 321; 1980 No 43 s 33 Section 301(1): amended, on 1 November 2007, by section 14(1) of the Companies Amendment Act 2006 (2006 No 56).

[page 429]

Section 301(1)(a): amended, on 1 November 2007, by section 14(1) of the Companies Amendment Act 2006 (2006 No 56). Section 301(3): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55). Section 301(4): added, on 1 November 2007, by section 14(2) of the Companies Amendment Act 2006 (2006 No 56).

Creditors’ claims

302 Application of bankruptcy rules to liquidation of insolvent companies (1) Subject to this Part, the rules in force under the law of bankruptcy with respect to the estates of persons adjudged bankrupt apply in the liquidation of a company that is unable to pay its debts to— (a) the rights of secured and unsecured creditors: (b) claims by creditors: (c) the valuation of annuities and future and contingent liabilities— and all persons who in any such case would be entitled to make claims and receive payment in whole or in part are so entitled in the liquidation. (2) In applying in a liquidation the rules in force under the law of bankruptcy, a claim made under section 304 and admitted by a liquidator is to be treated as if it were a debt proved in accordance with the requirements of the Insolvency Act 2006. Section 302(2): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

303 Admissible claims (1) Subject to subsection (2), a debt or liability, present or future, certain or contingent, whether it is an ascertained debt or a liability for damages, may be admitted as a claim against a company in liquidation. (2) Fines, monetary penalties, and costs to which section 308 applies are not claims that may be admitted against a company in liquidation. Section 303: substituted, on 1 July 1994, by section 34 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

304 Claims by unsecured creditors

(1) A claim by an unsecured creditor against a company in liquidation must be made in the prescribed form and must— (a) contain full particulars of the claim; and (b) identify any documents that evidence or substantiate the claim. (2) The liquidator may require the production of a document referred to in subsection (1)(b). (3) The liquidator must, as soon as practicable, either admit or reject a claim in whole or in part, and if the liquidator subsequently considers that a claim has been wrongly admitted or rejected in whole or in part, may revoke or amend that decision. (4) If a liquidator rejects a claim, whether in whole or in part, he or she must forthwith give notice in writing of the rejection to the creditor. (5) The costs of making a claim under subsection (1) or producing a document under subsection (2) must be met by the creditor making the claim. [page 430] (6) Every person who— (a) makes, or authorises the making of, a claim under this section that is false or misleading in a material particular knowing it to be false or misleading; or (b) omits, or authorises the omission, from a claim under this section of any matter knowing that the omission makes the claim false or misleading in a material particular— commits an offence, and is liable on conviction to the penalties set out in section 373(4).

305 Rights and duties of secured creditors (1) A secured creditor may— (a) realise property subject to a charge, if entitled to do so; or (b) value the property subject to the charge and claim in the liquidation as

an unsecured creditor for the balance due, if any; or (c) surrender the charge to the liquidator for the general benefit of creditors and claim in the liquidation as an unsecured creditor for the whole debt. (2) A secured creditor may exercise the power referred to in paragraph (a) of subsection (1) whether or not the secured creditor has exercised the power referred to in paragraph (b) of that subsection. (3) A secured creditor who realises property subject to a charge— (a) may, unless the liquidator has accepted a valuation and claim by the secured creditor under subsection (6), claim as an unsecured creditor for any balance due after deducting the net amount realised: (b) must account to the liquidator for any surplus remaining from the net amount realised after satisfaction of the debt, including interest payable in respect of that debt up to the time of its satisfaction, and after making any proper payments to the holder of any other charge over the property subject to the charge. (4) If a secured creditor values the security and claims as an unsecured creditor for the balance due, if any, the valuation and any claim must be made in the prescribed form and— (a) contain full particulars of the valuation and any claim; and (b) contain full particulars of the charge including the date on which it was given; and (c) identify any documents that substantiate the claim and the charge. (5) The liquidator may require production of any document referred to in subsection (4)(c). (6) Where a claim is made by a secured creditor under subsection (4), the liquidator must— (a) accept the valuation and claim; or (b) reject the valuation and claim in whole or in part, but— (i)

where a valuation and claim is rejected in whole or in part, the creditor may make a revised valuation and claim within 10 working days of receiving notice of the rejection; and

(ii) the liquidator may, if he or she subsequently considers that a valuation and claim was wrongly rejected in whole or in part, revoke or amend that decision. [page 431] (7) Where the liquidator— (a) accepts a valuation and claim under subsection (6)(a); or (b) accepts a revised valuation and claim under subsection (6)(b)(i); or (c) accepts a valuation and claim on revoking or amending a decision to reject a claim under subsection (6)(b)(ii),— the liquidator may, unless the secured creditor has realised the property, at any time, redeem the security on payment of the assessed value. (8) The liquidator may at any time, by notice in writing, require a secured creditor, within 20 working days after receipt of the notice, to— (a) elect which of the powers referred to in subsection (1) the creditor wishes to exercise; and (b) if the creditor elects to exercise the power referred to in paragraph (b) or paragraph (c) of that subsection, exercise the power within that period. (9) A secured creditor on whom notice has been served under subsection (8) who fails to comply with the notice, is to be taken as having surrendered the charge to the liquidator under subsection (1)(c) for the general benefit of creditors, and may claim in the liquidation as an unsecured creditor for the whole debt. (10) A secured creditor who has surrendered a charge under subsection (1)(c) or who is taken as having surrendered a charge under subsection (9) may, with the leave of the court or the liquidator and subject to such terms and conditions as the court or the liquidator thinks fit, at any time before the liquidator has realised the property charged,— (a) withdraw the surrender and rely on the charge; or (b) submit a new claim under this section.

(11) Every person who— (a) makes, or authorises the making of, a claim under subsection (4) that is false or misleading in a material particular knowing it to be false or misleading; or (b) omits, or authorises the omission, from a claim under that subsection of any matter knowing that the omission makes the claim false or misleading in a material particular— commits an offence, and is liable on conviction to the penalties set out in section 373(4). Section 305(4): substituted, on 1 July 1994, by section 35 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

306 Ascertainment of amount of claim (1) The amount of a claim must be ascertained as at the date and time of commencement of the liquidation. (2) The amount of a claim based on a debt or liability denominated in a currency other than New Zealand currency must be converted into New Zealand currency at the rate of exchange on the date of commencement of the liquidation, or, if there is more than 1 rate of exchange on that date, at the average of those rates. Section 306(1): amended, on 26 April 1999, by section 12 of the Companies Amendment Act 1999 (1999 No 19).

[page 432]

307 Claim not of an ascertained amount (1) If a claim is subject to a contingency, or is for damages, or, if for some other reason, the amount of the claim is not certain, the liquidator may— (a) make an estimate of the amount of the claim; or (b) refer the matter to the court for a decision on the amount of the claim. (2) On the application of the liquidator, or of a claimant who is aggrieved by an estimate made by the liquidator, the court shall determine the amount of the

claim as it sees fit.

308 Fines and penalties Nothing in this Part limits or affects the recovery of— (a) a fine imposed on a company, whether before or after the commencement of the liquidation of the company, for the commission of an offence; or (b) a monetary penalty payable to the Crown imposed on a company by a court, whether before or after the commencement of the liquidation of the company, for the breach of any enactment; or (c) costs ordered to be paid by the company in relation to proceedings for the offence or breach.

309 Claims relating to debts payable after commencement of liquidation (1) A claim in respect of a debt that, but for the liquidation, would not be payable until a date that is 6 months, or later than 6 months, after the date of commencement of the liquidation is to be treated, for the purposes of this Part, as a claim for the present value of the debt. (2) For the purposes of subsection (1), the present value of a debt is to be determined by deducting from the amount of the debt interest at the prescribed rate (within the meaning of section 87(3) of the Judicature Act 1908) for the period from the date on which the company is put into liquidation to the date when the debt is due. Section 309(1): amended, on 26 April 1999, by section 13 of the Companies Amendment Act 1999 (1999 No 19).

310 Mutual credit and set-off (1) Where there have been mutual credits, mutual debts, or other mutual dealings between a company and a person who seeks or, but for the operation of this section, would seek to have a claim admitted in the liquidation of the company,— (a) an account must be taken of what is due from the one party to the other

in respect of those credits, debts, or dealings; and (b) an amount due from one party must be set off against an amount due from the other party; and (c) only the balance of the account may be claimed in the liquidation, or is payable to the company, as the case may be. (2) A person, other than a related person, is not entitled under this section to claim the benefit of a set-off arising from— (a) a transaction made within the specified period, being a transaction by which the person gave credit to the company or the company gave credit to the person; or (b) the assignment within the specified period to that person of a debt owed by the company to another person— [page 433]

unless the person proves that, at the time of the transaction or assignment, the person did not have reason to suspect that the company was unable to pay its debts as they became due.

(3) A related person is not entitled under this section to claim the benefit of a set-off arising from— (a) a transaction made within the restricted period, being a transaction by which the related person gave credit to the company or the company gave credit to the related person; or (b) the assignment within the restricted period to that person of a debt owed by the company to another person— unless the related person proves that, at the time of the transaction or assignment, the related person did not have reason to suspect that the company was unable to pay its debts as they became due. (4) This section does not apply to an amount paid or payable by a shareholder — (a) as the consideration, or part of the consideration, for the issue of a share; or

(b) in satisfaction of a call in respect of an outstanding liability of the shareholder made by the board of directors or by the liquidator. (5) In this section, related person means a related company and includes a director of the company in liquidation. (6) For the purposes of subsection (2), specified period means— (a) the period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and (b) in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and (c) if— (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. (7) For the purposes of subsection (3), restricted period means— (a) the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and (b) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and (c) if—

[page 434] (i)

an application was made to the court to put a company into liquidation; and

(ii) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2), — the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. Section 310(6)(a): substituted, on 26 April 1999, by section 14(1) of the Companies Amendment Act 1999 (1999 No 19). Section 310(6)(b): amended, on 26 April 1999, by section 14(2)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 310(6)(b): amended, on 3 June 1998, by section 16(1) of the Companies Amendment Act 1998 (1998 No 31). Section 310(6)(c): added, on 3 June 1998, by section 16(1) of the Companies Amendment Act 1998 (1998 No 31). Section 310(6)(c): amended, on 26 April 1999, by section 14(2)(b) of the Companies Amendment Act 1999 (1999 No 19). Section 310(7)(a): substituted, on 26 April 1999, by section 14(3) of the Companies Amendment Act 1999 (1999 No 19). Section 310(7)(b): amended, on 26 April 1999, by section 14(4)(a) of the Companies Amendment Act 1999 (1999 No 19). Section 310(7)(b): amended, on 3 June 1998, by section 16(2) of the Companies Amendment Act 1998 (1998 No 31). Section 310(7)(c): added, on 3 June 1998, by section 16(2) of the Companies Amendment Act 1998 (1998 No 31). Section 310(7)(c): amended, on 26 April 1999, by section 14(4)(b) of the Companies Amendment Act 1999 (1999 No 19).

310A

Definitions relating to set-off under netting agreement

In this Act, unless the context otherwise requires,— Bank means the Reserve Bank of New Zealand

bilateral netting agreement means an agreement that provides, in respect of transactions between 2 persons to which the agreement applies,— (a) that on the occurrence of an event specified in the agreement, all or any of those transactions must (or may, at the option of a party) be terminated and— (i)

an account taken of all money due between the parties in respect of the terminated transactions; and

(ii) all obligations in respect of that money satisfied by payment of the net amount due from or on behalf of the party having a net debit to or on behalf of the party having a net credit; or (b) that each transaction is to be debited or credited to an account with the effect that the rights and obligations of each party that existed in respect of the relevant account prior to the transaction are extinguished and replaced by rights and obligations in respect of the net debit due on the relevant account after taking into account that transaction; or (c) that amounts payable by each party to the other party are to be paid or satisfied by payment of the net amount of those obligations by the party having a net debit to the party having a net credit;— [page 435]

but does not include any bilateral netting agreement that is part of a multilateral netting agreement

clearing house means a person that provides clearing or settlement services in respect of financial transactions between parties to a multilateral netting agreement multilateral netting agreement means an agreement that provides for the settlement, between more than 2 persons, of payment obligations arising under transactions that are subject to the agreement, and that provides, in respect of transactions to which it relates, that debits and credits arising between the parties are to be brought into account so that amounts payable by or to each party are satisfied by— (a) payment by or on behalf of each party having a net debit to or on behalf of a clearing house (whether as agent or as principal) or a party

having a net credit; and (b) receipt by or on behalf of each party having a net credit from or on behalf of a clearing house (whether as agent or as principal) or a party having a net debit netted balance means any amount calculated under a netting agreement as the net debit payable by or on behalf of a party to the agreement to or on behalf of another party to the agreement in respect of all or any transactions to which the netting agreement applies netting agreement means a bilateral netting agreement or a recognised multilateral netting agreement recognised clearing house means a clearing house declared under section 310K to be a recognised clearing house recognised multilateral netting agreement means a multilateral netting agreement that is contained in, or is subject to, the rules of a recognised clearing house. Section 310A: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310B

Application of set-off under netting agreement

(1) Despite anything in section 313, sections 310A to 310O apply— (a) to a netting agreement— (i)

made in or evidenced by writing; and

(ii) in which the application of sections 310A to 310O has not been expressly excluded; and (iii) whether made before or after the commencement of this section; and (b) to all obligations under a netting agreement (whether those obligations are payable in New Zealand currency or in some other currency). (2) Sections 310A to 310O apply despite— (a) any disposal of rights under a transaction that is subject to a netting agreement in contravention of a prohibition in the netting agreement;

or (b) the creation of a charge or other interest in respect of the rights referred to in paragraph (a) in contravention of a prohibition in the netting agreement. (3) Nothing in sections 310A to 310O applies to an amount paid or payable by a shareholder— [page 436] (a) as the consideration, or part of the consideration, for the issue of a share; or (b) in satisfaction of a call in respect of an outstanding liability of the shareholder made by the board of directors or by the liquidator. Section 310B: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310C

Calculation of netted balance

If a company that is a party to a netting agreement is in liquidation,— (a) any netted balance payable by or to the company must be calculated in accordance with the netting agreement; and (b) that netted balance constitutes the amount that may be claimed in the liquidation or is payable to the company, as the case may be, in respect of the transactions that are included in the calculation. Section 310C: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310D

Mutuality required for transactions under bilateral netting agreements

Sections 310A to 310O apply to transactions that are subject to a bilateral netting agreement only if those transactions constitute mutual credits, mutual debts, or other mutual dealings. Section 310D: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310E

When mutuality required for transactions under recognised multilateral netting agreements

(1) Sections 310A to 310O apply to transactions that are subject to a recognised multilateral netting agreement, whether or not those transactions constitute mutual credits, mutual debts, or other mutual dealings. (2) Despite subsection (1), sections 310A to 310O do not apply to transactions that are subject to a recognised multilateral netting agreement if— (a) those transactions do not constitute mutual credits, mutual debts, or other mutual dealings; and (b) a party to any of those transactions is acting as a trustee for another person; and (c) the party acting as trustee is not authorised by the terms of the trust of which the party is a trustee to enter into the transaction. Section 310E: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310F

Application of set-off under section 310 to transactions subject to netting agreements

(1) Section 310 does not apply to transactions that are subject to a netting agreement to which sections 310A to 310O apply. (2) However, a netted balance is to be treated as an amount to which section 310(1) applies if the company that is in liquidation and the other party to the netting agreement also have mutual credits, mutual debts, or other mutual dealings between them that are not subject to the netting agreement. [page 437] Section 310F: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310G

Transactions under netting agreement and effect on certain sections

(1) Nothing in sections 310A to 310O prevents the operation of section 56 or section 292 or section 297 or section 298 in respect of a transaction that is subject to a netting agreement. (2) However, nothing in section 292(4A) applies to a transaction that is subject to a netting agreement. (3) For the purposes of sections 292 and 297, the term transaction, in relation to a company, does not include a netting agreement entered into by the company, except to the extent that the effect of entering into the netting agreement is to reduce any amount that was owing by or to the company at the time the company entered into the agreement. Section 310G: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19). Section 310G(2): amended, on 7 July 2010, by section 6 of the Companies Amendment Act (No 2) 2010 (2010 No 53).

310H

Rights under netting agreement not affected

by commencement of liquidation Nothing in section 248(1) affects, in respect of a company in liquidation, the exercise of any of the following rights under a netting agreement: (a) the termination, in accordance with the netting agreement, of all or any transactions that are subject to the netting agreement by reason of the occurrence of an event specified in the netting agreement, being an event (including the appointment of a liquidator) occurring not later than the commencement of the liquidation; or (b) the taking of an account, in accordance with the netting agreement, of all money due between the parties to the netting agreement in respect of transactions affected by the termination. Section 310H: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310I

Set-off under netting agreement not affected by notice under section 294

The filing of a notice under section 294 in respect of any transaction that is subject to a netting agreement does not affect the operation of section 310C in respect of the transaction, and that section continues to apply to the transaction until the transaction is set aside under subsection (3) or subsection (4) of section 294. Section 310I: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310J

Court may set aside bilateral netting agreement between company and related person

(1) The court may order, on the application of a liquidator, that a bilateral netting agreement entered into by a company be set aside as against the liquidator of the company if— [page 438] (a) the netting agreement is between the company and a person who was a related person at the time that the netting agreement was entered into; and (b) the netting agreement was entered into within the restricted period; and (c) the related person does not prove that, at the time the netting agreement was entered into, the related person did not have reason to suspect that the company was unable to pay its debts as they became due. (2) The court may make any other orders it thinks proper for the purpose of giving effect to an order under subsection (1). (3) In this section, unless the context otherwise requires,— related person, in relation to the company in liquidation, means—

(a) a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (b) a person, or a relative of a person, who has control of the company; or (c) another company that is controlled by a director of the company, or a nominee or relative of or a trustee for, or a trustee for a relative of, a director of the company; or (d) a related company restricted period has the same meaning as in section 310(7). Section 310J: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310K

Certain persons may be declared to be recognised clearing houses

(1) The Bank may, by notice in the Gazette, declare any person that provides or proposes to provide clearing or settlement services to be a recognised clearing house for the purposes of sections 310A to 310O. (2) The Bank may, by notice in the Gazette, vary or revoke any declaration made under subsection (1). Section 310K: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310L

Matters that Bank must or may have regard to when making, varying, or revoking declaration under section 310K

(1) In determining whether a declaration should be made, varied, or revoked under section 310K, the Bank must have regard to the extent to which the application of sections 310A to 310O to any multilateral netting agreement that is subject to the rules of that clearing house would assist in promoting the soundness or efficiency of the financial system. (2) In determining whether a declaration should be made, varied, or revoked under section 310K, the Bank may have regard to any of the following matters: (a) the type of transactions that may be effected through the clearing house; and (b) any laws or regulatory requirements relating to the operation of that clearing house and compliance with those laws or regulatory requirements; and (c) any other matters that the Bank may, in any particular case, consider appropriate. [page 439] Section 310L: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310M

Bank may impose conditions in declaration under section 310K

(1) The Bank may, in any declaration made or varied under section 310K, impose conditions relating to any of the matters referred to in section 310L. (2) If a recognised clearing house fails to comply with any conditions referred to in subsection (1), the Bank may revoke the declaration made under section 310K that relates to the clearing house. Section 310M: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310N

Bank to notify recognised clearing house about Bank’s intention to revoke or vary declaration under section 310K

The Bank must not revoke or vary a declaration made under section 310K unless— (a) the recognised clearing house to which the notice applies has been given not less than 7 days’ notice in writing of the Bank’s intention to do so; and (b) the clearing house has a reasonable opportunity to make submissions to the Bank; and (c) the Bank considers those submissions. Section 310N: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

310O

Transactions under recognised multilateral netting agreement not affected by variation or revocation of declaration under section 310K

The variation or revocation of a declaration under section 310K does not affect the application of sections 310A to 310O to any transaction— (a) that is or was subject to a recognised multilateral netting agreement; and (b) that was entered into before the variation or revocation of the declaration. Section 310O: inserted, on 26 April 1999, by section 15 of the Companies Amendment Act 1999 (1999 No 19).

311 Interest on claims (1) The amount of a claim may include interest up to the date of commencement of the liquidation— (a) at such rate as may be specified or contained in any contract that makes provision for the payment of interest on that amount; or (b) in the case of a judgment debt, at such rate as is payable on the judgment debt. (2) If any surplus assets remain after the payment of all admitted claims, interest shall be paid at the prescribed rate on those claims from the date of commencement of the liquidation to the date on which each claim is paid, and if the amount of the surplus assets is insufficient to pay interest in full on all claims, payment shall abate rateably among all claims. (3) If any surplus assets remain after the payment of interest in accordance with subsection (2), interest shall be paid on all admitted claims referred to in subsection (1) from the date of commencement of the liquidation to [page 440]

the date on which the claim is paid at a rate equal to the excess between the

prescribed rate and the rate referred to in paragraph (a) or paragraph (b) of that subsection, as the case may be, and, if the amount of the surplus assets is insufficient to pay interest in full on all claims, payment shall abate rateably among all claims. (4) For the purposes of this section, prescribed rate means the prescribed rate within the meaning of section 87(3) of the Judicature Act 1908. Section 311(1): amended, on 26 April 1999, by section 16 of the Companies Amendment Act 1999 (1999 No 19). Section 311(3): amended, on 26 April 1999, by section 16 of the Companies Amendment Act 1999 (1999 No 19). Section 311(3): amended, on 1 July 1994, by section 36 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

312 Preferential claims (1) The liquidator must pay out of the assets of the company the expenses, fees, and claims set out in Schedule 7 to the extent and in the order of priority specified in that schedule and that schedule applies to the payment of those expenses, fees, and claims according to its tenor. (2) Without limiting clause 2(1)(b) of Schedule 7, the term assets in subsection (1) does not include assets subject to a charge unless the charge is surrendered or taken to be surrendered or redeemed under section 305. Section 312(2): amended, on 1 November 2007, by section 38 of the Companies Amendment Act 2006 (2006 No 56).

313 Claims of other creditors and distribution of surplus assets (1) After paying preferential claims in accordance with section 312, the liquidator must apply the assets of the company in satisfaction of all other claims. (2) The claims referred to in subsection (1) rank equally among themselves and must be paid in full, unless the assets are insufficient to meet them, in which case payment shall abate rateably among all claims. (3) Where, before the commencement of a liquidation, a creditor agrees to accept a lower priority in respect of a debt than that which it would otherwise have under this section, nothing in this section prevents the

agreement from having effect according to its terms. (4) Subject to section 311, after paying the claims referred to in subsection (1), the liquidator must distribute the company’s surplus assets— (a) in accordance with the provisions contained in the company’s constitution; or (b) if the company’s constitution does not contain provisions for the distribution of surplus assets or, if the company does not have a constitution, in accordance with this Act.

Liquidation committees

314 Meetings of creditors or shareholders (1) At any time in the course of the liquidation, the liquidator shall, at the request in writing of any creditor or shareholder or on the liquidator’s own motion, call a meeting of creditors or shareholders— [page 441] (a) to vote on a proposal that a liquidation committee be appointed to act with the liquidator; and (b) if it is so decided, to choose the members of the committee. (2) A liquidator may decline a request by a creditor or shareholder to call a meeting on the ground that— (a) the request is frivolous or vexatious; or (b) the request was not made in good faith; or (c) except where a creditor or shareholder agrees to meet the costs, the costs of calling a meeting would be out of all proportion to the value of the company’s assets. (3) The decision of a liquidator to decline the request may be reviewed by the court on the application of any creditor or shareholder, as the case may be. (4) Subject to subsections (2) and (3), a liquidator who receives a request to call a meeting of creditors or of shareholders must forthwith call such a meeting in accordance with Schedule 1 or, if applicable, Schedule 5 as the

case may be. (5) The members of a liquidation committee chosen by a meeting of creditors or of shareholders take office forthwith, but if there is a difference between the decisions of meetings of creditors and meetings of shareholders on— (a) the question of appointing a liquidation committee; or (b) the membership of a liquidation committee— the liquidator must refer the matter to the court which may make such decision as it thinks fit. (6) The sole shareholder of a company may present to the liquidator a view on any matter which could have been decided at a meeting of shareholders under this section, and that view must, for all purposes, be treated as though it were a decision taken at a meeting of shareholders. Section 314(2)(c): substituted, on 1 July 1994, by section 37 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

315 Liquidation committees (1) A liquidation committee must consist of not less than 3 persons who are— (a) creditors or shareholders; or (b) persons holding general powers of attorney from creditors or shareholders; or (c) authorised directors or representatives of companies which are creditors or shareholders of the company in liquidation. (2) A liquidation committee has the power to— (a) call for reports from the liquidator on the progress of the liquidation: (b) call a meeting of creditors or of shareholders: (c) apply to the court under section 284 and section 286: (d) assist the liquidator as appropriate in the conduct of the liquidation. (3) The provisions set out in Schedule 8 govern proceedings at meetings of liquidation committees. (4) A meeting of creditors called under subsection (2)(b) shall be held in accordance with Schedule 5.

(5) Where, by reason of vacancies in a liquidation committee, the committee is unable to act, the liquidator must call attention to the situation in the next 6monthly report required to be prepared and sent under section 255(2)(d). [page 442]

Liquidation Surplus Account

316 Establishment of Liquidation Surplus Account (1) Money representing unclaimed assets of a company standing to the credit of a liquidator shall, after completion of the liquidation, be paid to Public Trust. (2) At the expiration of a period of 12 months after the date on which the money is paid, Public Trust must, after deduction of any amount required to meet the claim of any person which is established within that period, pay the balance into an account entitled the “Liquidation Surplus Account” for distribution in accordance with this section. (3) Money held in the Liquidation Surplus Account may be invested in accordance with the provisions of the Trustee Act 1956 as to the investment of trust funds. Interest on any investment must be distributed in accordance with this section. (4) Money held in the Liquidation Surplus Account may be— (a) paid or distributed to any person entitled to payment or distribution in the liquidation of a company any money representing the surplus assets of which has been credited to the Account; or (b) paid, subject to such conditions as the Official Assignee for New Zealand may impose, in meeting the claims of the creditors of a company in the liquidation of which the Official Assignee or any other person is the liquidator, for payment of the costs of proceedings in the liquidation after the commencement of the liquidation, legal or other expert advice, or the costs of any expert witness, where the Official Assignee for New Zealand is satisfied that it is fair and reasonable for those costs to be met out of the Account. (5) Payments from the Liquidation Surplus Account shall be made by Public

Trust at the direction of the Official Assignee for New Zealand. (6) In making a payment under this section, Public Trust is not required to ascertain that money or sufficient money was received on account of any company to which the claim for payment relates. (7) Nothing in the Unclaimed Money Act 1971 applies in relation to money to which this section applies. Compare: 1955 No 63 s 330A; 1989 No 101 s 12 Section 316(1): amended, on 1 March 2002, by section 170(1) of the Public Trust Act 2001 (2001 No 100). Section 316(1): amended, on 3 June 1998, by section 17 of the Companies Amendment Act 1998 (1998 No 31). Section 316(2): amended, on 1 March 2002, by section 170(1) of the Public Trust Act 2001 (2001 No 100). Section 316(5): amended, on 1 March 2002, by section 170(1) of the Public Trust Act 2001 (2001 No 100). Section 316(6): amended, on 1 March 2002, by section 170(1) of the Public Trust Act 2001 (2001 No 100).

[page 443]

Transitional provisions Heading: substituted, on 30 June 1997, by section 17 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

316A

Transitional provision in relation to voidable transactions

Where an existing company that reregisters as a company under this Act is put into liquidation, nothing in sections 292 to 299 shall apply in relation to any transaction entered into by the company before the commencement of this Act; but sections 309, 310, 311, 311A, 311B, and 311C of the Companies Act 1955, as in force immediately before the commencement of this Act, shall continue to apply in respect of the transaction or matter as if this Act had not been passed. Section 316A: inserted, on 1 July 1994, by section 38 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

316B

Transitional provision in relation to Liquidation Surplus Account under section 290 of Companies Act 1955

On the repeal of the Companies Act 1955 by section 2 of the Companies Act Repeal Act 1993,— (a) all money standing to the credit of the Liquidation Surplus Account established under section 290 of the Companies Act 1955 and representing unclaimed assets of an existing company is deemed to be money held in the Liquidation Surplus Account established under section 316, and that section applies as if the money represented unclaimed assets of a company registered under this Act; and (b) section 316 applies to all money to which section 290 of the Companies Act 1955 would have applied if the Companies Act 1955 had been in force, and section 316 applies as if the money represented unclaimed assets of a company registered under this Act. Section 316B: inserted, on 30 June 1997, by section 18 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

342 Liquidation of overseas company (1) An application may be made to the court for the liquidation of an overseas company in accordance with Part 16, subject to the modifications and exclusions set out in Schedule 9. (2) An application may be made under subsection (1) whether or not the overseas company— (a) is registered under this Part; or (b) has given public notice of an intention to cease to carry on business in New Zealand in accordance with section 341(1)(a); or (c) has given notice to the Registrar of the date on which it will cease to carry on business in New Zealand in accordance with section 341(1) (b); or (d) has been dissolved, or otherwise ceased to exist as a company, under or by virtue of the laws of any other country.

Section 342 heading: amended, on 24 July 2008, by section 13 of the Insolvency (Cross-border) Act 2006 (2006 No 57). Section 342(1): amended, on 24 July 2008, by section 13 of the Insolvency (Cross-border) Act 2006 (2006 No 57).

[page 444]

Part 21 Offences and Penalties

373 Penalty for failure to comply with Act (1) A person convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $5,000: (1) section 25(5)(a) (which relates to the use of a company name): (2) section 47(7) (which relates to the consideration for which shares are issued): (3) section 49(5) (which relates to the consideration for which convertible securities, options, and shares are issued): (4) section 52(5) (which relates to distributions to shareholders): (5) section 60(7) (which relates to offers to shareholders to acquire shares): (6) section 61(9) (which relates to the procedure for making a certain type of offer to shareholders): (7) section 61(10)(a) (which relates to the procedure for making a certain type of offer to shareholders): (8) section 63(9) (which relates to stock exchange acquisitions of a company’s own shares subject to prior notice to shareholders): (9) section 65(3)(a) (which relates to stock exchange acquisitions of a company’s own shares without prior notice to shareholders): (10) section 69(6) (which relates to the redemption of shares at the option of a company): (11) section 70(4) (which relates to the requirement for a company to satisfy the solvency test on the redemption of shares): (12) section 71(8) (which relates to special redemptions of shares): (13) section 71(9)(a) (which relates to special redemptions of shares): (14) section 76(7) (which relates to offers of financial assistance to acquire shares):

(15) section 77(4) (which relates to the requirement to satisfy the solvency test): (16) section 78(8) (which relates to offers of financial assistance in certain cases): (17) section 78(9)(a) (which relates to offers of financial assistance in certain cases): (18) section 80(2)(a) (which relates to the provision of financial assistance not exceeding 5% of shareholders’ funds): (19) section 83(5)(a) (which relates to statements of shareholders’ rights): (20) section 84(6)(a) (which relates to the transfer of shares): (21) section 85(2)(a) (which relates to the transfer of shares under an approved system): (22) section 95(7)(a) (which relates to share certificates): (23) section 108(6) (which relates to the requirement to satisfy the solvency test): (24) section 122(7)(a) (which relates to resolutions in lieu of meetings): (25) section 218(2)(a) (which relates to the obligation to provide copies of documents): [page 445] (26) section 221(6) (which relates to approval of an amalgamation proposal): (27) section 222(6) (which relates to short form amalgamations): (27A) section 239AEA(3) (which relates to the failure by a company in administration to disclose the fact of administration): (27B) section 239AW(4) (which relates to attendance by a director at a watershed meeting): (28) section 243(10) (which relates to the duty of a liquidator to summon meetings of creditors). (2) A person convicted of an offence against any of the following sections of

this Act is liable to a fine not exceeding $10,000: (a) section 34(3) (which relates to an alteration to the constitution of a company by the court): (b) section 87(4)(a) (which relates to the obligation to keep a share register): (c) section 88(5)(a) (which relates to the place where the share register must be kept): (d) section 90(2) (which relates to the duties of directors in relation to the share register): (e) section 140(4) (which relates to the disclosure of directors’ interests): (f)

section 179(8) (which relates to disclosure and use of information obtained in the course of an investigation):

(g) section 189(5)(a) (which relates to company records): (h) section 195(3)(a) (which relates to the place where accounting records must be kept): (i)

section 196(7)(a) (which relates to the appointment of an auditor): (j) section 206(4) (which relates to access to information by auditors):

(k) section 215(2)(a) (which relates to public inspection of company records): (l)

section 216(2)(a) (which relates to inspection of company records by shareholders):

(m) section 250(7) (which relates to the termination of the liquidation of a company): (ma) section 258A(5) (which relates to the duty of liquidators to report suspected offences): (n) section 280(3) (which relates to the qualifications of liquidators): (o) section 333(5)(a) (which relates to name reservation by overseas companies): (p) section 334(6)(a) (which relates to the registration of overseas companies): (q) section 339(2)(a) (which relates to changes in the constitution of an overseas company):

(r)

section 340(6)(a) (which relates to the filing of annual returns by overseas companies):

(s) section 365(5) (which relates to the Registrar’s powers of inspection): (t)

section 366(4) (which relates to the disclosure of information and reports obtained during an investigation):

(u) section 381 (which relates to improper use of the word “Limited”). (3) A person convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 2 years: [page 446] (a) section 261(6A) (which relates to the power of liquidators to obtain documents and information): (b) section 273(2) (which relates to certain prohibited conduct): (c) section 274(2) (which relates to the duty to identify and deliver property). (4) A person convicted of an offence against any of the following sections of this Act is liable to imprisonment for a term not exceeding 5 years or to a fine not exceeding $200,000: (a) section 304(6) (which relates to false claims by unsecured creditors in liquidations): (b) section 305(11) (which relates to false claims by secured creditors in liquidations): (c) section 377 (which relates to false statements): (d) section 378 (which relates to the fraudulent use or destruction of property): (e) section 379 (which relates to falsifying records): (f)

section 380 (which relates to carrying on business fraudulently):

(g) section 382(4) (which relates to persons prohibited from managing companies):

(h) section 383(5) (which relates to acting as a director of a company while prohibited by the court): (i)

section 385(9) (which relates to acting as a director of a company or taking part in the management of a company while prohibited by the Registrar or the FMA):

(j)

section 386A(2) (which relates to acting as a director of a phoenix company).

Section 373(1)(2): amended, on 1 July 1994, by section 46 of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 373(1)(27A): inserted, on 1 November 2007, by section 39(1) of the Companies Amendment Act 2006 (2006 No 56). Section 373(1)(27B): inserted, on 1 November 2007, by section 39(1) of the Companies Amendment Act 2006 (2006 No 56). Section 373(2)(ma): substituted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111). Section 373(3)(a): substituted, on 3 May 2001, by section 14(2) of the Companies Act 1993 Amendment Act 2001 (2001 No 18). Section 373(3)(b): substituted, on 3 May 2001, by section 14(2) of the Companies Act 1993 Amendment Act 2001 (2001 No 18). Section 373(3)(c): added, on 3 May 2001, by section 14(2) of the Companies Act 1993 Amendment Act 2001 (2001 No 18). Section 373(4)(i): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 373(4)(j): added, on 1 November 2007, by section 39(2) of the Companies Amendment Act 2006 (2006 No 56).

374 Penalties that may be imposed on directors in cases of failure by board or company to comply with Act (1) A director of a company who is convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $5,000: (a) section 25(5)(b) (which relates to the use of a company name): [page 447] (b) section 61(10)(b) (which relates to the procedure for making a certain

type of offer to shareholders): (c) section 63(10) (which relates to stock exchange acquisitions of a company’s own shares subject to prior notice to shareholders): (d) section 65(3)(b) (which relates to stock exchange acquisitions of a company’s own shares without prior notice to shareholders): (e) section 71(9)(b) (which relates to special redemptions of shares): (f)

section 78(9)(b) (which relates to offers of financial assistance in certain cases):

(g) section 80(2)(b) (which relates to the provision of financial assistance not exceeding 5% of shareholders’ funds): (h) section 83(5)(b) (which relates to statements of shareholders’ rights): (i)

section 84(6)(b) (which relates to the transfer of shares):

(j)

section 85(2)(b) (which relates to the transfer of shares under an approved system):

(k) section 95(7)(b) (which relates to share certificates): (l)

section 107(8) (which relates to unanimous assent to certain types of action):

(m) section 122(7)(b) (which relates to resolutions in lieu of meetings): (n) section 188(6) (which relates to a requirement to change a company’s registered office): (o) section 218(2)(b) (which relates to the obligation to provide copies of documents). (2) A director of a company who is convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $10,000: (1) [Repealed] (2) section 32(4) (which relates to the adoption and alteration of a constitution): (3) section 33(6) (which relates to a new form of constitution): (4) section 43(2) (which relates to the obligation of the board to deliver a notice of the issue of shares): (5) section 44(5) (which relates to the issue of shares with the approval of

shareholders): (6) section 47(9) (which relates to the consideration for which shares are issued): (7) section 49(6) (which relates to the consideration for which convertible securities, options, and shares are issued): (8) section 58(4) (which relates to the acquisition by a company of its own shares): (9) section 87(4)(b) (which relates to the obligation to keep a share register): (10) section 88(5)(b) (which relates to the place where the share register must be kept): (11) section 159(3) (which relates to the obligation to give notice of a change of directors): (12) section 176(4) (which relates to alterations to the constitution of a company by the court): (13) section 189(5)(b) (which relates to company records): (14) section 190(3) (which relates to the form in which company records are kept): [page 448] (15) section 194(4) (which relates to the keeping of accounting records): (16) section 195(3)(b) (which relates to the place where accounting records must be kept): (16A) section 196(3B) (which relates to the notification of the resignation of an auditor): (17) section 196(7)(b) (which relates to the appointment of an auditor): (18) section 206(3) (which relates to access to information by auditors): (19) section 207(2) (which relates to the attendance of auditors at meetings of shareholders): (20) section 208(2) (which relates to the duty to prepare an annual report):

(21) section 209(7) (which relates to the obligation to make the annual report available to shareholders): (22) section 209A(5) (which relates to the obligation to send copies of annual reports or concise annual reports to shareholders on request): (22A) section 209B(3) (which relates to making annual reports and concise annual reports available by electronic means): (23) section 214(10) (which relates to the obligation to file an annual return): (24) section 215(2)(b) (which relates to public inspection of company records): (25) section 216(2)(b) (which relates to inspection of company records by shareholders): (26) section 236(5) (which relates to the approval of arrangements, amalgamations, and compromises by the court): (27) section 237(3) (which relates to the power of the court to make additional orders in connection with the approval of an arrangement or amalgamation or compromise): (28) section 333(5)(b) (which relates to name reservation by overseas companies): (29) section 334(6)(b) (which relates to the registration of overseas companies): (30) section 339(2)(b) (which relates to changes in the constitution of an overseas company): (31) section 340(6)(b) (which relates to the filing of annual returns by overseas companies). Section 374(2)(1): repealed, on 1 July 1994, by section 47 of the Companies Act 1993 Amendment Act 1994 (1994 No 6). Section 374(2)(16A): inserted, on 15 April 2004, by section 21(1) of the Companies Amendment Act (No 2) 2004 (2004 No 24). Section 374(2)(21): substituted, on 18 June 2007, by section 13 of the Companies Amendment Act (No 2) 2006 (2006 No 62). Section 374(2)(22): substituted, on 18 June 2007, by section 13 of the Companies Amendment Act (No 2) 2006 (2006 No 62). Section 374(2)(22A): inserted, on 18 June 2007, by section 13 of the Companies Amendment Act (No 2) 2006 (2006 No 62).

375 Proceedings for offences (1) The offences specified in— (a) subsections (1), (2), and (3) of section 373; and (b) section 374— are triable summarily. [page 449] (2) The offences specified in subsection (4) of section 373 are triable on indictment. (3) Notwithstanding anything to the contrary in the Summary Proceedings Act 1957, any information for an offence referred to in subsection (1) may be laid at any time within 3 years after the date of the offence. (4) Nothing in sections 377 to 380 affects the liability of any person under any other Act, but no person shall be convicted of an offence against any of those sections and a provision of any other Act in respect of the same conduct.

376 Defences (1) It is a defence to a director charged with an offence in relation to a duty imposed on the board of a company if the director proves that— (a) the board took all reasonable and proper steps to ensure that the requirements of this Act would be complied with; or (b) he or she took all reasonable and proper steps to ensure that the board complied with the requirements of this Act; or (c) in the circumstances he or she could not reasonably have been expected to take steps to ensure that the board complied with the requirements of this Act. (2) It is a defence to a director charged with an offence in relation to a duty imposed on the company if the director proves that— (a) the company took all reasonable and proper steps to ensure that the

requirements of this Act would be complied with; or (b) he or she took all reasonable steps to ensure that the company complied with the requirements of this Act; or (c) in the circumstances he or she could not reasonably have been expected to take steps to ensure that the company complied with the requirements of this Act.

377 False statements (1) Every person who, with respect to a document required by or for the purposes of this Act,— (a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or (b) omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or misleading in a material particular— commits an offence, and is liable on conviction to the penalties set out in section 373(4). (2) Every director or employee of a company who makes or furnishes, or authorises or permits the making or furnishing of, a statement or report that relates to the affairs of the company and that is false or misleading in a material particular, to— (a) a director, employee, auditor, shareholder, debenture holder, or trustee for debenture holders of the company; or (b) a liquidator, liquidation committee, or receiver or manager of property of the company; or (c) if the company is a subsidiary, a director, employee, or auditor of its holding company; or [page 450] (d) a stock exchange or an officer of a stock exchange,— knowing it to be

false or misleading, commits an offence, and is liable on conviction to the penalties set out in section 373(4). (3) For the purposes of this section, a person who voted in favour of the making of a statement at a meeting is deemed to have authorised the making of the statement. Compare: 1955 No 63 s 461; 1980 No 43 s 47

378 Fraudulent use or destruction of property Every director, employee, or shareholder of a company who— (a) fraudulently takes or applies property of the company for his or her own use or benefit, or for a use or purpose other than the use or purpose of the company; or (b) fraudulently conceals or destroys property of the company— commits an offence, and is liable on conviction to the penalties set out in section 373(4). Compare: 1955 No 63 s 461A; 1980 No 43 s 47

379 Falsification of records (1) Every director, employee, or shareholder of a company who, with intent to defraud or deceive a person,— (a) destroys, parts with, mutilates, alters, or falsifies, or is a party to the destruction, mutilation, alteration, or falsification of any register, accounting records, book, paper, or other document belonging or relating to the company; or (b) makes, or is a party to the making of, a false entry in any register, accounting records, book, paper, or other document belonging or relating to the company— commits an offence, and is liable on conviction to the penalties set out in section 373(4). (2) Every person who, in relation to a mechanical, electronic, or other device used in connection with the keeping or preparation of any register, accounting or other records, index, book, paper, or other document for the purposes of a company or this Act,—

(a) records or stores in the device, or makes available to a person from the device, matter that he or she knows to be false or misleading in a material particular; or (b) with intent to falsify or render misleading any such register, accounting or other records, index, book, paper, or other document, destroys, removes, or falsifies matter recorded or stored in the device, or fails or omits to record or store any matter in the device— commits an offence, and is liable on conviction to the penalties set out in section 373(4). Compare: 1955 No 63 s 461C; 1980 No 43 s 47

380 Carrying on business fraudulently (1) Every person who is knowingly a party to a company carrying on business with intent to defraud creditors of the company or any other person or for [page 451]

a fraudulent purpose commits an offence and is liable on conviction to the penalties set out in section 373(4).

(2) Every director of a company who,— (a) by false pretences or other fraud induces a person to give credit to the company; or (b) with intent to defraud creditors of the company,— (i)

gives, transfers, or causes a charge to be given on, property of the company to any person; or

(ii) causes property to be given or transferred to any person; or (iii) caused or was a party to execution being levied against property of the company—

commits an offence and is liable on conviction to the penalties set out in section 373(4).

(3) Every director of a company commits an offence and is liable on conviction to the penalties set out in section 373(4), who, with intent to defraud a

creditor or creditors of the company, does any thing that causes material loss to any creditor. Compare: 1955 No 63 s 461D; 1980 No 43 s 47 Section 380(3): added, on 1 November 2007, by section 33 of the Companies Amendment Act 2006 (2006 No 56).

381 Improper use of “Limited” Any person who, not being incorporated with limited liability, whether alone or with other persons, carries on business under a name or title of which “Limited” or a contraction or imitation of that word is the last word, commits an offence and is liable on conviction to the penalty set out in section 373(2). Compare: 1955 No 63 s 462

382 Persons prohibited from managing companies (1) Where— (a) a person has been convicted on indictment of any offence in connection with the promotion, formation, or management of a company; or (b) a person has been convicted of an offence under any of sections 377 to 380 or of any crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961; or (c) [Repealed]

that person shall not, during the period of 5 years after the conviction or the judgment, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company, unless that person first obtains the leave of the court which may be given on such terms and conditions as the court thinks fit.

(2) A person intending to apply for the leave of the court under this section shall give to the Registrar not less than 10 days’ notice of that person’s intention to apply. (3) The Registrar, and such other persons as the court thinks fit, may attend and be heard at the hearing of any application under this section.

A person who acts in contravention of this section, or of any order made (4) under this section, commits an offence and is liable on conviction to the penalty set out in section 373(4). [page 452] (5) In this section, the term company includes an overseas company that carries on business in New Zealand. Section 382(1)(c): repealed, on 29 February 2008, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

383 Court may disqualify directors (1) Where— (a) a person has been convicted on indictment of an offence in connection with the promotion, formation, or management of a company, or has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961; or (b) a person has committed an offence for which the person is liable (whether convicted or not) under this Part; or (c) a person has, while a director of a company and whether convicted or not,— (i)

persistently failed to comply with this Act or the Companies Act 1955, the Securities Act 1978, the Securities Markets Act 1988, the Takeovers Act 1993, or the takeovers code in force under that Act or, if the company has failed to so comply, persistently failed to take reasonable steps to obtain compliance with those Acts or the code; or

(ii) been guilty of fraud in relation to the company or of a breach of duty to the company or a shareholder; or (iii) acted in a reckless or incompetent manner in the performance of his or her duties as director; or (ca) a person has been prohibited in a country, State, or territory outside New Zealand from carrying on activities that the court is satisfied are

substantially similar to being a director or promoter of or being concerned or taking part in the management of a body corporate; or (d) [Repealed] (e) a person has become of unsound mind,— the court may make an order that the person must not, without the leave of the court, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company for such period not exceeding 10 years as may be specified in the order. (2) A person intending to apply for an order under this section must give not less than 10 days’ notice of that intention to the person against whom the order is sought, and on the hearing of the application the last-mentioned person may appear and give evidence or call witnesses. (3) An application for an order under this section may be made by the Registrar, the FMA, the Official Assignee, or by the liquidator of the company, or by a person who is, or has been, a shareholder or creditor of the company. (3A) Subsection (3B) applies on the hearing of— (a) an application for an order under this section by the Registrar, the FMA, the Official Assignee, or the liquidator; or (b) an application for leave under this section by a person against whom an order has been made on the application of the Registrar, the FMA, the Official Assignee, or the liquidator. (3B) The Registrar, the FMA, the Official Assignee, or the liquidator (as the case may be)— [page 453] (a) must appear and call the attention of the court to any matters that seem to him, her, or it to be relevant; and (b) may give evidence or call witnesses. (4) An order may be made under this section even though the person concerned may be criminally liable in respect of the matters on the ground of which

the order is to be made. (4A) If conduct by a person constitutes grounds for making an order under any 1 or more of this section, section 43F of the Securities Markets Act 1988, section 44F of the Takeovers Act 1993, and section 60A of the Securities Act 1978, proceedings may be brought against that person under any 1 or more of those provisions, but no person is liable to more than 1 order under those provisions for the same conduct. (5) The Registrar of the court must, as soon as practicable after the making of an order under this section, give notice to the Registrar that the order has been made and the Registrar must give notice in the Gazette of the name of the person against whom the order is made. (6) Every person who acts in contravention of an order under this section commits an offence and is liable on conviction to the penalties set out in section 373(4). (7) In this section, company includes an overseas company. Compare: 1955 No 63 s 189; 1988 No 236 s 4 Section 383(1)(c)(i): substituted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46). Section 383(1)(ca): inserted, on 22 November 2006, by section 14 of the Companies Amendment Act (No 2) 2006 (2006 No 62). Section 383(1)(d): repealed, on 29 February 2008, by section 25 of the Securities Amendment Act 2006 (2006 No 46). Section 383(3): substituted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 383(3A): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 383(3B): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 383(4A): inserted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

384 Liability for contravening sections 382 and 383 A person who acts as a director of a company in contravention of section 382 or an order made under section 383 is personally liable to— (a) a liquidator of the company for every unpaid debt incurred by the company; and

a creditor of the company for a debt to that creditor incurred by the (b) company— while that person was so acting.

385 Registrar or FMA may prohibit persons from managing companies (1) This section applies in relation to a company— (a) that has been put into liquidation because of its inability to pay its debts as and when they became due: (b) that has ceased to carry on business because of its inability to pay its debts as and when they became due: [page 454] (c) in respect of which execution is returned unsatisfied in whole or in part: (d) in respect of the property of which a receiver, or a receiver and manager, has been appointed by a court or pursuant to the powers contained in an instrument, whether or not the appointment has been terminated: (e) in respect of which, or the property of which, a person has been appointed as a receiver and manager, or a judicial manager, or a statutory manager, or as a manager, or to exercise control, under or pursuant to any enactment, whether or not the appointment has been terminated: (f)

that has entered into a compromise or arrangement with its creditors:

(g) that is in voluntary administration under Part 15A. (2) This section also applies in relation to a company the liquidation of which has been completed whether or not the company has been removed from the New Zealand register. (3) The Registrar or the FMA may, by notice in writing given to a person, prohibit that person from being a director or promoter of a company, or

being concerned in, or taking part, whether directly or indirectly, in the management of, a company during such period not exceeding 5 years after the date of the notice as is specified in the notice. Every notice shall be published in the Gazette. (4) The power conferred by subsection (3) may be exercised in relation to— (a) any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, a company in relation to which this section applies if the Registrar or the FMA is also satisfied that the manner in which the affairs of it were managed was wholly or partly responsible for the company being a company in relation to which this section applies; or (b) any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, 2 or more companies to which this section applies, unless that person satisfies the Registrar or the FMA— (i)

that the manner in which the affairs of all, or all but one, of those companies were managed was not wholly or partly responsible for them being companies in relation to which this section applies; or

(ii) that it would not be just or equitable for the power to be exercised. (5) The Registrar or the FMA must not exercise the power conferred by subsection (3) unless— (a) not less than 10 working days’ notice of the fact that the Registrar or the FMA intends to consider the exercise of it is given to the person; and (b) the Registrar or the FMA considers any representations made by the person. (6) No person to whom a notice under subsection (3) applies shall be a director

or promoter of a company, or be concerned or take part (whether directly or indirectly) in the management of a company. (7) Where a person to whom the Registrar or the FMA has issued a notice under subsection (3) appeals against the issue of the notice under this Act or otherwise [page 455]

seeks judicial review of the notice, the notice remains in full force and effect pending the determination of the appeal or review, as the case may be.

(8) The Registrar or the FMA may, by notice in writing to a person to whom a notice under subsection (3) has been given,— (a) revoke that notice; or (b) exempt that person from the notice in relation to a specified company or companies. Every such notice shall be published in the Gazette. (9) Every person to whom a notice under subsection (3) is given who fails to comply with the notice commits an offence and is liable on conviction to the penalties set out in section 373(4). (10) In this section, company includes an overseas company that carries on business in New Zealand. Compare: 1955 No 63 s 189A; 1988 No 236 s 5 Section 385 heading: amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(1)(g): added, on 1 November 2007, by section 34 of the Companies Amendment Act 2006 (2006 No 56). Section 385(3): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(4)(a): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(4)(b): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(5): substituted, on 3 May 2001, by section 15 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 385(5): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(5)(a): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(5)(b): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(7): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5). Section 385(8): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

385A

Appeals from FMA’s exercise of power under section 385

(1) A person who is aggrieved by the FMA’s exercise of a power under section 385 may appeal to the court within 15 working days after the date that the notice is published in the Gazette under section 385(3), or within any further time as the court may allow. (2) On hearing the appeal, the court may approve the FMA’s exercise of the power or may give any directions or make any determination in the matter that the court thinks fit. (3) Section 370 provides for appeals from the Registrar’s acts or decisions under section 385. Section 385A: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

[page 456]

386 Liability for contravening section 385 A person who acts in contravention of a notice under section 385 is personally liable to— (a) a liquidator of the company for every unpaid debt incurred by the company; and (b) a creditor of the company for a debt to that creditor incurred by the company— while that person was so acting.

386A

Director of failed company must not be director, etc, of phoenix company with same or substantially similar name

(1) Except with the permission of the court, or unless one of the exceptions in sections 386D to 386F applies, a director of a failed company must not, for a period of 5 years after the date of commencement of the liquidation of the failed company,— (a) be a director of a phoenix company; or (b) directly or indirectly be concerned in or take part in the promotion, formation, or management of a phoenix company; or (c) directly or indirectly be concerned in or take part in the carrying on of a business that has the same name as the failed company’s preliquidation name or a similar name. (2) A person who contravenes subsection (1) commits an offence and is liable on conviction on indictment to the penalty set out in section 373(4). Compare: Insolvency Act 1986 s 216 (UK) Section 386A: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386B

Definitions for purpose of phoenix company provisions

(1) In sections 386A to 386F,— director of a failed company means a person who was a director of a failed company at any time in the period of 12 months before the commencement of its liquidation, and director of the failed company has a corresponding meaning failed company means a company that was placed in liquidation at a time when it was unable to pay its due debts phoenix company means, in relation to a failed company, a company that, at any time before, or within 5 years after, the commencement of the liquidation of the failed company, is known by a name that is also— (a) a pre-liquidation name of the failed company; or (b) a similar name pre-liquidation name means any name (including any trading name) of a failed company in the 12 months before the commencement of that company’s liquidation similar name means a name that is so similar to a pre-liquidation name of a failed company as to suggest an association with that company. (2) For the purposes of sections 386A to 386F, a company is known by a name if that name is its registered name or if it carries on business, or carries on a part of its business, under that name. Compare: Insolvency Act 1986 s 216(6) (UK)

[page 457] Section 386B: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386C

Liability for debts of phoenix company

(1) A person who contravenes section 386A(1)(a) or (b) is personally liable for all of the relevant debts of the phoenix company. (2) A person (A) who is involved in the management of a phoenix company is personally liable for all of the relevant debts of the company if— (a) in the management of the company A acts or is willing to act on instructions given by another person (B); and

(b) at that time A knows that B is contravening section 386A(1)(a) or (b) in relation to the company. (3) In this section, relevant debts— (a) in subsection (1), means the debts and liabilities incurred by the phoenix company during the period when the person liable was involved in the management of the company and the phoenix company was known by a pre-liquidation name of the failed company or a similar name: (b) in subsection (2), means the debts and liabilities incurred by the phoenix company during the period when A was acting or was willing to act on the instructions of B and the phoenix company was known by a preliquidation name of the failed company or a similar name. (4) Liability under this section is joint and several. (5) For the purposes of this section, a person who, as a person involved in the management of a company, has at any time acted on instructions given by a person who he or she knew at the time to be in contravention of section 386A is presumed, unless the contrary is shown, to have been willing at any later time to act on any instructions given by that person. Compare: Insolvency Act 1986 s 217 (UK) Section 386C: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386D

Exception for person named in successor company notice

(1) Section 386A does not apply to a person named in a successor company notice. (2) A successor company is a company that acquires the whole or substantially the whole of the business of a failed company under arrangements made by a liquidator or receiver or made under a deed of company arrangement under Part 15A. (3) A successor company notice is a notice by a successor company that— (a) is sent by the successor company to all creditors of the failed company for whom the successor company has an address; and

is sent to those creditors within 20 working days after the (b) arrangements for the acquisition of the business are made under subsection (2); and (c) specifies— (i)

the name and registered number of the failed company; and

(ii) the circumstances in which the business has been acquired by the successor business; and (iii) the name that the successor company has assumed, or proposes to assume, for the purpose of carrying on that business; and [page 458] (iv) any change of name that the successor company has made, or proposes to make, for the purpose of carrying on that business; and (d) states, in respect of a person named in the notice,— (i)

his or her full name; and

(ii) the duration of his or her directorship of the failed company; and (iii) the extent of his or her involvement in the management of the failed company. Compare: Insolvency Rules 1986 rule 4.228 (UK) Section 386D: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386E

Exception for temporary period while application for exemption is made

(1) A person does not contravene a prohibition in section 386A for the temporary period set out in subsection (2) if that person applies to the court within 5 working days after the commencement of the liquidation of the failed company for an order exempting that person from the prohibition in question. (2) The temporary period in subsection (1) is the period beginning on the date

of the commencement of the liquidation of the failed company and ending on the earlier of— (a) the close of 6 weeks after the commencement of liquidation; and (b) the date on which the court makes an order of exemption. Compare: Insolvency Rules 1986 rule 4.229 (UK) Section 386E: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386F

Exception in relation to non-dormant phoenix company known by pre-liquidation name of failed company for at least 12 months before liquidation

(1) The prohibitions in section 386A(1)(a) and (b) do not apply in respect of a phoenix company that has been known by a name or names that are the same as the failed company’s preliquidation name or are similar names if— (a) it has been known by that name or those names for not less than the period of 12 months before liquidation commences; and (b) it has not been dormant during those 12 months. (2) For the purposes of subsection (1), a company has not been dormant during the 12-month period if transactions that are required by section 194(2) to be recorded in its accounting records have occurred throughout that period. Compare: Insolvency Rules 1986 rule 4.230 (UK) Section 386F: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

[page 459]

Schedule 5 ss 229(2), 230(1), 243(5), 314(4), 315(4)

Proceedings at meetings of creditors

1

Methods of holding meetings A meeting of creditors may be held— (a) by assembling together those creditors entitled to take part and who choose to attend at the place, date, and time appointed for the meeting; or (b) by means of audio, or audio and visual, communication by which all creditors participating can simultaneously hear each other throughout the meeting; or (c) by conducting a postal ballot in accordance with clause 7 of those creditors entitled to take part.

2

Notice of meeting

(1) Written notice of— (a) the time and place of every meeting to be held under clause 1(a); or (b) the time and method of communication for every meeting to be held under clause 1(b); or (c) the time and address for the return of voting papers for every meeting to be held under clause 1(a) or (b) or (c)—

must be sent to every creditor entitled to attend the meeting, and to any liquidator not less than 5 working days before the meeting.

(2) The notice must— (a) state the nature of the business to be transacted at the meeting in

sufficient detail to enable a creditor to form a reasoned judgment in relation to it; and (b) set out the text of any resolution to be submitted to the meeting; and (c) include a voting paper in respect of each such resolution and voting and mailing instructions; and (d) state that if a creditor votes by casting a postal vote in respect of a resolution that is to be submitted to the meeting and a different resolution is submitted to the meeting,— (i)

the creditor’s postal vote is invalid in respect of that different resolution; but

(ii) the creditor may vote, in respect of that different resolution, either by being present in person or by proxy. (3) An irregularity in or a failure to receive a notice of meeting of creditors does not invalidate anything done by a meeting of creditors if— (a) the irregularity or failure is not material; or (b) all the creditors entitled to attend and vote at the meeting attend the meeting without protest as to the irregularity or failure; or (c) all such creditors agree to waive the irregularity or failure. (4) If the meeting of creditors agrees, the chairperson may adjourn the meeting from time to time and from place to place. (5) An adjourned meeting must be held in the same place unless another place is specified in the resolution for the adjournment. [page 460] (6) If a meeting of creditors under clause 1(a) or (b) is adjourned for less than 30 days, it is not necessary to give notice of the time and place of the adjourned meeting other than by announcement at the meeting which is adjourned. Schedule 5 clause 2(2)(c): amended, on 3 June 1998, by section 21(1) of the Companies Amendment Act 1998 (1998 No 31). Schedule 5 clause 2(2)(d): added, on 3 June 1998, by section 21(1) of the Companies Amendment Act 1998 (1998 No 31).

3

Chairperson

(1) If a liquidator has been appointed and is present, or if the liquidator has appointed a nominee and the nominee is present, he or she must act as chairperson of a meeting held in accordance with clause 1(a) or (b). (2) At any meeting of creditors, not being a meeting held for the purposes of section 230, where neither the liquidator nor any nominee of the liquidator is present, the creditors participating must choose one of their number to act as chairperson of the meeting. (2A) At any meeting of creditors held for the purposes of section 230 where there is no liquidator or neither the liquidator nor any nominee of the liquidator is present, the proponent of the compromise or the proponent’s nominee must act as chairperson of the meeting; but if neither the proponent nor any nominee of the proponent is present, the creditors participating must choose one of their number to act as chairperson of the meeting. (3) The person convening a meeting under clause 1(c) must do everything necessary that would otherwise be done by the person chairing a meeting. Schedule 5 clause 3(2): substituted, on 3 June 1998, by section 21(2) of the Companies Amendment Act 1998 (1998 No 31). Schedule 5 clause 3(2A): inserted, on 3 June 1998, by section 21(2) of the Companies Amendment Act 1998 (1998 No 31).

4

Quorum

(1) A quorum for a meeting of creditors is present if— (a) 3 creditors who are entitled to vote or their proxies are present or have cast postal votes; or (b) if the number of creditors entitled to vote does not exceed 3, the creditors who are entitled to vote or their proxies are present or have cast postal votes. (2) If a quorum is not present within 30 minutes after the time appointed for the meeting, the meeting is adjourned to the same day in the following week at the same time and place, or to such other date, time, and place as the chairperson may appoint, and if, at the adjourned meeting, a quorum is not present within 30 minutes after the time appointed for the meeting, the

creditors present or their proxies are a quorum.

5

Voting

(1) At any meeting of creditors or a class of creditors, not being a meeting held for the purposes of section 230, a resolution is adopted if a majority in number and value of the creditors or the class of creditors voting in person or by proxy vote or by postal vote in favour of the resolution. [page 461] (2) At any meeting of creditors or a class of creditors held for the purposes of section 230, a resolution is adopted if a majority in number representing 75% in value of the creditors or class of creditors voting in person or by proxy vote or by postal vote in favour of the resolution. (3) A creditor chairing the meeting does not have a casting vote. Schedule 5 clause 5(1): amended, on 30 June 1997, by section 23(1) of the Companies Act 1993 Amendment Act 1997 (1997 No 27). Schedule 5 clause 5(2): amended, on 30 June 1997, by section 23(1) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

6

Proxies

(1) A creditor may exercise the right to vote either by being present in person or by proxy. (2) A proxy for a creditor is entitled to attend and be heard at a meeting of creditors as if the proxy were the creditor. (3) A proxy must be appointed by notice in writing signed by the creditor and the notice must state whether the appointment is for a particular meeting or a specified term not exceeding 12 months. (4) No proxy is effective in relation to a meeting unless a copy of the notice of appointment is delivered to the liquidator or, if no liquidator is acting, to the person by whom the notice convening the meeting was given, not less than 2 working days before the start of the meeting. Schedule 5 clause 6(4): amended, on 30 June 1997, by section 23(2) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

7

Postal votes

(1) A creditor entitled to vote at a meeting of creditors held in accordance with clause 1(a) or (b) or (c) may exercise the right to vote by casting a postal vote in relation to a matter to be decided at that meeting. (1A) if a creditor votes by casting a postal vote in respect of a resolution that is to be submitted to the meeting and a different resolution is submitted to the meeting,— (a) the creditor’s postal vote is invalid in respect of that different resolution; but (b) the creditor may vote, in respect of that different resolution, either by being present in person or by proxy. (2) The notice of meeting must state the name of the person authorised to receive and count postal votes in relation to that meeting. (3) If no person has been authorised to receive and count postal votes in relation to a meeting, or if no person is named as being so authorised in the notice of the meeting, every director, or if the company is in liquidation, the liquidator, is deemed to be so authorised. (4) A creditor may cast a postal vote on all or any of the matters to be voted on at the meeting by sending a marked voting paper to a person authorised to receive and count postal votes in relation to that meeting, so as to reach that person not less than 2 working days before the start of the meeting or, if the meeting is held under clause 1(c), not later than the date named for the return of the voting paper. [page 462] (5) It is the duty of a person authorised to receive and count postal votes in relation to a meeting— (a) to collect together all postal votes received by him or her; and (b) in relation to each resolution to be voted on,— (i)

to count the number of creditors or creditors belonging to a class of creditors, as the case may be, voting in favour of the resolution

and determine the total amount of the debts owed by the company to those creditors; and (ii) to count the number of creditors or creditors belonging to a class of creditors, as the case may be, voting against the resolution and determine the total amount of the debts owed by the company to those creditors; and (c) to sign a certificate— (i)

that he or she has carried out the duties set out in paragraphs (a) and (b); and

(ii) stating the results of the counts and determinations required by paragraph (b); and (d) to ensure that the certificate required by paragraph (c) is presented to the person chairing or convening the meeting. (6) If a vote is taken at a meeting held under clause 1(a) or (b) on a resolution on which postal votes have been cast, the person chairing the meeting must include the results of voting by all creditors who have sent in a voting paper duly marked as for or against the resolution. (7) A certificate given under subclause (5) in relation to the postal votes cast in respect of a meeting of creditors must be annexed to the minutes of the meeting. Schedule 5 clause 7(1A): inserted, on 3 June 1998, by section 21(3) of the Companies Amendment Act 1998 (1998 No 31). Schedule 5 clause 7(4): amended, on 30 June 1997, by section 23(3) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

8

Minutes

(1) The person chairing a meeting of creditors, or in the case of a meeting held under clause 1(c), the person convening the meeting, must ensure that minutes are kept of all proceedings. (2) Minutes which have been signed correct by the person chairing or convening the meeting are prima facie evidence of the proceedings.

9

Corporations may act by representatives

A body corporate which is a creditor may appoint a representative to attend a meeting of creditors on its behalf.

10

Other proceedings Except as provided in this schedule and in any regulations made under this Act, a meeting of creditors may regulate its own procedure. [page 463]

11

Effect of irregularity or defect

(1) An irregularity or defect in the proceedings at a meeting of creditors does not invalidate anything done by a meeting of creditors, unless the court orders otherwise. (2) The court may, on the application of the liquidator or a creditor of the company, make an order under subclause (1) if it is satisfied that substantial injustice would be caused if the order were not made. Schedule 5 clause 11: added, on 3 June 1998, by section 21(4) of the Companies Amendment Act 1998 (1998 No 31).

[page 464]

Schedule 6 s 260(2)

Powers of liquidators A liquidator of a company has power to— (a) commence, continue, discontinue, and defend legal proceedings: (b) the extent necessary for the liquidation carry on the business of the company: (c) appoint a solicitor: (d) pay any class of creditors in full: (e) make a compromise or an arrangement with creditors or persons claiming to be creditors or who have or allege the existence of a claim against the company, whether present or future, actual or contingent, or ascertained or not: (f)

compromise calls and liabilities for calls, debts, and liabilities capable of resulting in debts, and claims, present or future, actual or contingent, or ascertained or not, subsisting or supposed to subsist between the company and any person and all questions relating to or affecting the assets or the liquidation of the company, on such terms as may be agreed, and take security for the discharge of any such call, debt, liability, or claim, and give a complete discharge:

(g) sell or otherwise dispose of the property of the company: (h) act in the name and on behalf of the company and enter into deeds, contracts, and arrangements in the name and on behalf of the company: (i)

prove, rank, and claim in the bankruptcy or insolvency of a shareholder for any balance against that person’s estate, and to receive dividends in the bankruptcy or insolvency, as a separate debt due from the bankrupt or insolvent, and rateably with the other separate

creditors: (j)

draw, accept, make, and endorse a bill of exchange or promissory note in the name and on behalf of the company, with the same effect as if the bill or note had been drawn, accepted, made, or endorsed by or on behalf of the company in the course of its business:

(k) borrow money on the security of the company’s assets: (l)

take out, in his or her name as liquidator, letters of administration to a deceased shareholder, and to do in that name any other act necessary for obtaining payment of money due from a shareholder or his or her estate which cannot be conveniently done in the name of the company, and in all such cases the money due shall, for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator:

(m) call a meeting of creditors or shareholders for— (i)

the purpose of informing creditors or shareholders of progress in the liquidation:

(ii) the purpose of ascertaining the views of creditors or shareholders on any matter arising in the liquidation: (iii) such other purpose connected with the liquidation as the liquidator thinks fit: [page 465] (n) appoint an agent to do anything which the liquidator is unable to do: (o) change the registered office or address for service of the company. Schedule 6 paragraph (o): added, on 15 April 2004, by section 24 of the Companies Amendment Act (No 2) 2004 (2004 No 24).

[page 466]

Schedule 7 s 312

Preferential claims Schedule 7: substituted, on 1 November 2007, by section 40(1) of the Companies Amendment Act 2006 (2006 No 56).

1

Priority of payments to preferential creditors

(1) The liquidator must first pay, in the order of priority in which they are listed,— (a) the fees and expenses properly incurred by the liquidator in carrying out the duties and exercising the powers of the liquidator, and the remuneration of the liquidator; and (b) the fees and expenses properly incurred by the administrator in carrying out the duties and exercising the powers of the administrator and the remuneration of the administrator; and (c) the reasonable costs of a person who applied to the court for an order that the company be put into liquidation, including the reasonable costs incurred between lawyer and client in procuring the order; and (d) the actual out-of-pocket expenses necessarily incurred by a liquidation committee; and (e) to any creditor who protects, preserves the value of, or recovers assets of the company for the benefit of the company’s creditors by the payment of money or the giving of an indemnity,— (i)

the amount received by the liquidator by the realisation of those assets, up to the value of that creditor’s unsecured debt; and

(ii) the amount of the costs incurred by that creditor in protecting, preserving the value of, or recovering those assets. (2) After paying the claims referred to in subclause (1), the liquidator must next

pay, to the extent that they remain unpaid, the following claims: (a) subject to clause 3(1), all wages or salary of any employee, whether or not earned wholly or in part by way of commission, and whether payable for time or for piece work, in respect of services provided to the company during the 4 months before the commencement of the liquidation: (aa) subject to clause 3(1), all untransferred amounts of an employee’s payroll donations by an employer or PAYE intermediary under section 24Q of the Tax Administration Act 1994 during the 4 months before the commencement of the liquidation: (b) subject to clause 3(1), any holiday pay payable to an employee on the termination of his or her employment before, or because of, the commencement of the liquidation: (c) subject to clause 3(1), any compensation for redundancy owed to an employee that accrues before, or because of, the commencement of the liquidation: (d) subject to clause 3(1), amounts deducted by the company from the wages or salary of an employee in order to satisfy obligations of the employee (including amounts payable to the Commissioner of Inland Revenue in accordance with section 163(1) of the Child Support [page 467]

Act 1991 and section 167(2) of the Tax Administration Act 1994 as applied by section 70 of the Student Loan Scheme Act 2011):

(e) subject to clause 3(1), any reimbursement or payment provided for, or ordered by, the Employment Relations Authority, the Employment Court, or the Court of Appeal under section 123(1)(b) or section 128 of the Employment Relations Act 2000, to the extent that the reimbursement or payment does not relate to any matter set out in section 123(1)(c) of the Employment Relations Act 2000, in respect of wages or other money or remuneration lost during the 4 months before the commencement of the liquidation: (f)

amounts that are preferential claims under section 263(2):

(g) all amounts payable to the Commissioner of Inland Revenue in accordance with section 167(2) of the Tax Administration Act 1994 as applied by section 67 of the KiwiSaver Act 2006: (h) all sums that, by any other enactment, are required to be paid in accordance with the priority established by this subclause. (3) After paying the claims referred to in subclause (2), the liquidator must next pay all sums, for which a buyer is a creditor in the liquidation of the company under section 11 of the Layby Sales Act 1971,— (a) paid by the buyer to a seller on account of the purchase price of goods; or (b) to which the buyer is or becomes entitled to receive from a seller under section 9 of the Layby Sales Act 1971. (4) After paying the claims referred to in subclause (3), the liquidator must next pay the amount of any costs referred to in section 234(c). (5) After paying the claims referred to in subclause (4), the liquidator must next pay, to the extent that it remains unpaid to the Commissioner of Inland Revenue or to the Collector of Customs, as the case may require, the amount of— (a) tax payable by the company in the manner required by Part 3 of the Goods and Services Tax Act 1985; and (b) tax deductions made by the company under the PAYE rules of the Income Tax Act 2004; and (c) non-resident withholding tax deducted by the company under the NRWT rules of the Income Tax Act 2004; and (d) resident withholding tax deducted by the company under the RWT rules of the Income Tax Act 2004; and (e) duty payable within the meaning of section 2(1) of the Customs and Excise Act 1996. Schedule 7 clause 1(2)(aa): inserted, on 6 January 2010, by section 862 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Schedule 7 clause 1(2)(d): amended, on 1 April 2012, by section 223 of the Student Loan Scheme Act 2011 (2011 No 62).

2

Conditions to priority of payments to preferential

creditors (1) The claims listed in each of subclauses (2), (3), (4), and (5) of clause 1— (a) rank equally among themselves and, subject to any maximum payment level specified in any Act or regulations, must be paid in full, unless the assets of the company are insufficient to meet them, in which case they abate in equal proportions; and [page 468] (b) in so far as the assets of the company available for payment of those claims are insufficient to meet them,— (i)

have priority over the claims of any person under a security interest to the extent that the security interest— (A) is over all or any part of the company’s accounts receivable and inventory or all or any part of either of them; and (B) is not a purchase money security interest that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999; and (C) is not a security interest that has been perfected under the Personal Property Securities Act 1999 at the commencement of the liquidation and that arises from the transfer of an account receivable for which new value is provided by the transferee for the acquisition of that account receivable (whether or not the transfer of the account receivable secures payment or performance of an obligation); and

(ii) must be paid accordingly out of any accounts receivable or inventory subject to that security interest (or their proceeds). (2) For the purposes of subclause (1)(b), the terms account receivable, inventory, new value, proceeds, purchase money security interest, and security interest have the same meanings as in the Personal Property Securities Act 1999. (3) To the extent that the claims to which subclause (1) applies are paid out of assets referred to in paragraph (b) of that subclause, the amount so paid is

an unsecured debt due by the company to the secured party. (4) Clause 9 of this schedule, as was in force immediately before the commencement of the Personal Property Securities Act 1999, continues to apply in respect of a company whose property was subject to a floating charge that, before the commencement of that Act, became a fixed or specific charge.

3

Provisions concerning preferential payments to employees

(1) The total sum to which priority is to be given under any, or all, of paragraphs (a) to (e) of clause 1(2) must not, in the case of any one employee, exceed $20,340 or any greater amount that is prescribed under subclause (2) at the commencement of the liquidation. (2) The sum stated in subclause (1) must be adjusted as follows: (a) subject to paragraph (d), an adjustment must be made, by the Governor-General by Order in Council, after the 3-year period starting on 1 July 2006 and ending on 30 June 2009 and after every 3-year period following that (an adjustment period): (b) subject to paragraph (d), the Order in Council must be made within 3 months of the end of an adjustment period: (c) each adjustment must reflect any overall percentage increase, over the relevant adjustment period, in average weekly earnings (total, private sector), calculated by reference to the last Quarterly Employment Survey published by Statistics New Zealand (or, if that survey ceases to be published, a survey certified by the Government Statistician as an equivalent to that survey) within the relevant adjustment period: [page 469] (d) if, in an adjustment period, there is no change, or an overall decrease, in the percentage movement in average weekly earnings (total, private sector), as so calculated, no adjustment may be made for that adjustment period:

(e)

(f)

if, in accordance with paragraph (d), no adjustment is made, the next adjustment made for any succeeding adjustment period must reflect any overall percentage increase in average weekly earnings (total, private sector) between the date of the last adjustment and the end of the relevant adjustment period for which the adjustment is to be made: all adjustments are cumulative and must be rounded to the nearest $20:

(g) any correction to the Quarterly Employment Survey on which an adjustment is based must be disregarded until the adjustment that takes effect in the following adjustment period, which must reflect the corrected information in the calculation of that adjustment and must otherwise be made in accordance with this subclause. (3) The sum stated in subclause (1), or any greater amount prescribed under subclause (2) that applies on the date of commencement of a liquidation, continues to apply to that liquidation regardless of any change to that sum that is prescribed after the date of commencement of the liquidation. (4) For the purposes of this clause and clause 1,— (a) remuneration in respect of a period of holiday or of absence from work through sickness or other good cause is to be treated as wages in respect of services rendered to the company during that period: (b) employee means any person of any age employed by an employer to do any work for hire or reward under a contract of service (including a homeworker as defined in section 5 of the Employment Relations Act 2000); but does not include a person who is, or was at any time during the 12 months before the commencement of the liquidation, a director of the company in liquidation, or a nominee or relative of, or a trustee for, a director of the company: (c) holiday pay, in relation to a person, means all sums payable to that person by the company under subpart 1 of Part 2 of the Holidays Act 2003, and includes all sums that by or under any other enactment or any award, agreement, or contract of service are payable to that person by the company as holiday pay. Schedule 7 clause 3(1): amended, on 28 September 2012, by clause 3 of the Companies (Maximum Priority Amount) Order 2012 (SR 2012/252).

4

Subrogation of persons if payment has been

made If a payment has been made to a person (A) on account of any preferential claim set out in this schedule out of money advanced by another person (B) for that purpose, then B has, in a liquidation, the same right of priority in respect of the money so advanced as A would have if the payment had not been made.

5

Priority given to person who distrains on goods If a person has distrained on goods or effects of the company during the 20 working days before the commencement of the liquidation, the preferential claims set out in this schedule are a first charge on the goods or effects so [page 470] distrained, or the proceeds from their sale; but if any money is paid to a claimant under that charge, the person has the same rights of priority as that claimant.

Schedule 7 clause 5: amended, on 1 January 2008, by section 370(2) of the Property Law Act 2007 (2007 No 91).

6

Saving provision for liquidation that has commenced If a liquidation of a company commenced before the Companies Amendment Act 2006 came into force, that company’s property must be applied in accordance with the priorities stated in this schedule on the date the liquidation commenced as if the Companies Amendment Act 2006 had not come into force.

[page 471]

Schedule 8 s 315(3)

Proceedings at meetings of liquidation committees

1

Frequency of meetings The committee must meet at such times as it from time to time appoints, and the liquidator or a member of the committee may also call a meeting of the committee as and when necessary.

2

Majorities The committee may act by a majority of its members present at a meeting, but may not act unless a majority of the committee are present.

3

Resignation A member of the committee may resign by notice in writing signed by him or her and delivered to the liquidator.

4

Office becoming vacant If a member of the committee becomes bankrupt, or compounds or arranges with his or her creditors, or is absent from 3 consecutive meetings of the committee without the leave of those members who together with that member represent the creditors or shareholders, as the case may be, the office of that member becomes vacant.

5

Removal of a member A member of the committee may be removed by a resolution carried at a meeting of creditors if the member represents creditors, or of shareholders

if the member represents shareholders, of which 5 working days’ notice has been given, stating the object of the meeting.

6

Vacancy filled A vacancy in the committee may be filled by the appointment by the committee of— (a) the same or another creditor or shareholder, as the case may be; or (b) a person holding a general power of attorney from, or being an authorised director or representative of, a company which is a creditor or shareholder, as the case may be.

Schedule 8 clause 6(b): amended, on 1 July 1994, by section 50 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

7

Committee with vacancy may act The continuing members of the committee, if not less than 2, may act even though a vacancy exists in the committee.

[page 473]

Receiverships Act 1993 1993 No 122 Contents 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Short Title and commencement Interpretation Public notice Application Qualifications of receivers Appointment of receivers under deeds and agreements Extent of power to appoint receiver Notice of appointment Application of section 92 of Property Law Act 1952 to receivers [Repealed] Notice of receivership Vacancy in office of receiver Obligations of grantor Execution of documents Powers of receivers Power to make calls on shares Validity of acts of receivers Consent of mortgagee to sale of property General duties of receivers Duty of receiver selling property

20 21 22 23 24 25 26 27 28 29 30 30A 30B 30C 30D 31 32 33 34 35 36 37 38 39 40 40A 40B 40C 40D

No defence or indemnity Duty in relation to money Accounting records First report by receiver Further reports by receiver Extension of time for preparing reports Persons entitled to receive reports Persons entitled to inspect reports Duty to notify suspected offences against other Acts Notice of end of receivership Preferential claims Extinguishment of subordinate security interests Priorities on distribution by receiver of surplus representing proceeds of personal property Surplus may be paid into court Meaning of surplus and net proceeds Powers of receiver on liquidation or bankruptcy Liabilities of receiver Relief from liability Court supervision of receivers Court may terminate or limit receivership Meaning of failure to comply Orders to enforce receiver’s duties Special provisions relating to evidence Orders protecting property in receivership Refusal to supply essential services prohibited Local authorities Instrument may provide for appointment of receiver Power of court to appoint receiver Powers and duties of receivers Constraints on receiver

40E

Protection for receiver

41 42

Repeals Act subject to application of Cape Town Convention and Aircraft Protocol

[page 474] Schedule Modifications and exceptions that apply in relation to receivers of assets of local authorities

An Act to reform the law relating to receivers

1

Short Title and commencement

(1) This Act may be cited as the Receiverships Act 1993. (2) This Act shall come into force on 1 July 1994.

2

Interpretation

(1) In this Act, unless the context otherwise requires,— account receivable has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 company has the same meaning as in— (a) section 2 of the Companies Act 1955; or (b) section 2 of the Companies Act 1993,— as the case may be; and includes an overseas company court means the High Court creditor includes a person to whom the grantor owes a debt or is under a liability, whether present or future, certain or contingent, and whether an ascertained debt or liability or a liability in damages director, in relation to— (a) a company within the meaning of section 2 of the Companies Act 1955 or a company within the meaning of section 2 of the Companies Act 1993, as the case may be, includes—

(i)

any person occupying the position of director of the company by whatever name called; and

(ii) a person in accordance with whose directions or instructions a person referred to in subparagraph (i) may be required or is accustomed to act; and (iii) a person in accordance with whose directions or instructions the board of the company may be required or is accustomed to act: (b) an overseas company, includes an agent, officer, or employee responsible in New Zealand for the business of the overseas company: (c) any other body corporate, means a person having functions similar to those of a director of a company;— but does not include a receiver document means a document in any form; and includes— (a) any writing on material; and (b) information recorded or stored by means of a tape recorder, computer, or other device; and material subsequently derived from information so recorded or stored; and (c) a book, graph, or drawing; and (d) a photograph, film, negative, tape, or other device in which 1 or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced [page 475] grantor means the person in respect of whose property a receiver is, or may be, appointed inventory has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 liquidator means a liquidator appointed under Part 6 of the Companies Act 1955 or under Part 16 of the Companies Act 1993, as the case may be; and liquidation has a corresponding meaning local authority means a local authority within the meaning of the Local

Government Act 2002 mortgage includes a charge on property for securing money or money’s worth mortgagee includes a person from time to time deriving title under the original mortgagee; but does not include a receiver new value has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 Official Assignee means, in relation to the estate of a bankrupt, any Official Assignee or Deputy Assignee appointed under the Insolvency Act 2006 and having charge of that estate overseas company means a company incorporated outside New Zealand preferential claims means the claims referred to in Schedule 7 of the Companies Act 1993 (except clause 1(1) of that schedule) proceeds has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 property includes— (a) real and personal property: (b) an estate or interest in real or personal property: (c) a debt: (d) any thing in action: (e) any other right or interest property in receivership means property in respect of which a receiver is appointed purchase money security interest has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 receiver means a receiver, or a manager, or a receiver and manager in respect of any property appointed— (a) by or under any deed or agreement; or (b) by the court in the exercise of a power conferred on the court or in the exercise of its inherent jurisdiction— whether or not the person appointed is empowered to sell any of the

property in receivership; but does not include— (c) a mortgagee who, whether personally or through an agent, exercises a power to— (i)

enter into possession of mortgaged property in a manner referred to in section 137 of the Property Law Act 2007; or

(ii) sell or otherwise alienate mortgaged property; or (d) an agent of any such mortgagee [page 476] Registrar, in relation to— (a) a company, has the same meaning as in section 2 of the Companies Act 1955 or section 2 of the Companies Act 1993, as the case may be: (b) a society registered under the Industrial and Provident Societies Act 1908, means the Registrar of Industrial and Provident Societies: (c) a society registered under the Incorporated Societies Act 1908, means the Registrar of Incorporated Societies: (d) a friendly society or a credit union registered under the Friendly Societies and Credit Unions Act 1982, means the Registrar of Friendly Societies and Credit Unions: (e) any other body corporate registered under any enactment, means any person discharging the powers, functions, and duties of a registrar under that enactment security agreement has the same meaning as in section 16(1) of the Personal Property Securities Act 1999 security interest has the same meaning as in section 17 of the Personal Property Securities Act 1999. (2) In this Act, unless the context otherwise requires, a reference to a person by whom, or in whose interests, a receiver was appointed, as the case may be, includes a reference to a person to whom the rights and interests under any deed or agreement by or under which the receiver was appointed have been transferred or assigned.

Section 2(1) account receivable: inserted, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24). Section 2(1) inventory: inserted, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24). Section 2(1) local authority: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84). Section 2(1) new value: inserted, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24). Section 2(1) Official Assignee: amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55). Section 2(1) preferential claims: amended, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 2(1) proceeds: inserted, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24). Section 2(1) purchase money security interest: inserted, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24). Section 2(1) receiver paragraph (c): substituted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91). Section 2(1) security agreement: added, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24). Section 2(1) security interest: added, on 1 May 2002, by section 3 of the Receiverships Amendment Act 2001 (2001 No 24).

[page 477]

3

Public notice

(1) Where, pursuant to this Act, public notice must be given of any matter affecting a grantor, not being a grantor that is an overseas company, that notice must be given by publishing notice of the matter— (a) in at least 1 issue of the Gazette; and (b) in at least 1 issue of a newspaper circulating in the area in New Zealand in which is situated— (i)

the grantor’s place of business; or

(ii) if the grantor has more than 1 place of business, the grantor’s principal place of business; or (iii) if the grantor has no place of business or neither its place of

business nor its principal place of business is known, the grantor’s registered office in the case of a body corporate, or the residence of the grantor in the case of an individual. (2) Where, pursuant to this Act, public notice must be given of any matter affecting a grantor that is an overseas company, that notice must be given by publishing notice of the matter— (a) in at least 1 issue of the Gazette; and (b) in at least 1 issue of a newspaper circulating in the area in which is situated— (i)

the place of business in New Zealand of the grantor; or

(ii) if the grantor has more than 1 place of business in New Zealand, the principal place of business in New Zealand of the grantor.

4

Application

(1) This Act applies— (a) to a receiver appointed after the coming into force of this Act; and (b) with the exceptions and modifications specified in subsection (2), to a receiver holding office on the coming into force of this Act. (2) In the application of this Act to a receiver holding office on the coming into force of this Act,— (a) section 5 (except subsections (1)(e) and (2)) does not apply: (b) section 23 does not apply: (c) section 24(1)(a) does not require a receiver to prepare a report in relation to the period of 12 months specified in section 348(2) of the Companies Act 1955 that expires before the coming into force of this Act or that first expires after the commencement of this Act and the provisions of section 348(2) of that Act continue in force in relation to that period notwithstanding the repeal of Part 7 of that Act: (d) section 24(1)(b) does not require a receiver to give a report in respect of a receivership that ended before the commencement of this Act and the provisions of section 348(2) of the Companies Act 1955 shall continue in force notwithstanding the repeal of Part 7 of that Act:

(e) section 29 does not apply in respect of a receivership that ended before the commencement of this Act: (f)

paragraphs (b) and (c) of subsection (1) and subsections (5) and (6) of section 32 do not apply.

Section 4(2)(d): amended, on 1 July 1994, by section 2 of the Receiverships Amendment Act 1994 (1994 No 14).

[page 478]

5

Qualifications of receivers

(1) Unless the court orders otherwise, none of the following persons may be appointed or act as a receiver: (a) a person who is under 18 years of age: (b) a mortgagee of the property in receivership: (c) a person who is, or who has within the period of 2 years immediately preceding the commencement of the receivership been,— (i)

a director of the grantor; or

(ii) a director of the mortgagee of the property in receivership: (d) a person who has, or who has had within the period of 2 years preceding the commencement of the receivership, an interest, whether direct or indirect, in— (i)

a share issued by the grantor; or

(ii) 5% or more of any class of shares issued by the mortgagee of the property in receivership: (e) an undischarged bankrupt: (f)

a person who is, or is deemed to be, subject to a compulsory treatment order made under Part 2 of the Mental Health (Compulsory Assessment and Treatment) Act 1992:

(g) a person in respect of whom an order has been made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988:

(h) a person in respect of whom an order has been made under section 286(5) of the Companies Act 1993: (i)

a person in respect of whom an order has been made under section 37(6):

(ia) a person who would, but for the repeal of section 188A or section 189 or section 189A of the Companies Act 1955, be prohibited from being a director or promoter of, or being concerned in the management of, a company within the meaning of that Act: (j)

[Repealed]

(k) a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Companies Act 1993, or the Securities Act 1978, or the Securities Markets Act 1988, or the Takeovers Act 1993: (l)

a person who is prohibited under section 299(1)(b) of the Insolvency Act 2006 from acting as a director or taking part directly or indirectly in the management of any company or class of company:

(m) a person who is disqualified from acting as a receiver by the instrument that confers the power to appoint a receiver. (2) A body corporate must not be appointed or act as a receiver. (3) A person who contravenes subsection (1) or subsection (2) commits an offence and is liable on summary conviction to a fine not exceeding $10,000. Section 5(1)(ia): inserted, on 1 July 1994, by section 3(1) of the Receiverships Amendment Act 1994 (1994 No 14). Section 5(1)(j): repealed, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46). Section 5(1)(k): substituted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46). Section 5(1)(l): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

[page 479]

6

Appointment of receivers under deeds and

agreements (1) A receiver may be appointed in respect of the property of a person by, or in the exercise of a power conferred by, a deed or agreement to which that person is a party. (2) The appointment of a receiver in the exercise of a power referred to in subsection (1) must be in writing. (3) A receiver appointed by, or under a power conferred by, a deed or agreement is the agent of the grantor unless it is expressly provided otherwise in the deed or agreement or the instrument by or under which the receiver was appointed.

7

Extent of power to appoint receiver

(1) A power conferred by a deed or an agreement to appoint a receiver includes the power to appoint— (a) 2 or more receivers: (b) a receiver additional to 1 or more presently in office: (c) a receiver to succeed a receiver whose office has become vacant—

unless the deed or agreement expressly provides otherwise.

(2) Two or more receivers may act jointly or severally to the extent that they have the same powers unless the deed or agreement under which, or the order of the court by which, they are appointed expressly provides otherwise.

8

Notice of appointment

(1) A receiver must, forthwith after being appointed,— (a) give written notice of his or her appointment to the grantor; and (b) give public notice of his or her appointment, including— (i)

the receiver’s full name:

(ii) the date of the appointment: (iii) the receiver’s office address:

(iv) a brief description of the property in receivership. (2) Where the appointment of the receiver is in addition to a receiver who already holds office or is in place of a person who has vacated office as receiver, as the case may be, every notice under this section must state that fact. (3) If the grantor is a body corporate, the receiver must, within 7 days after being appointed, send a copy of the public notice to the Registrar. (4) Every receiver who contravenes this section commits an offence and is liable on summary conviction to a fine not exceeding $10,000.

9

Application of section 92 of Property Law Act 1952 to receivers [Repealed]

Section 9: repealed, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

10 Notice of receivership (1) Where a receiver is appointed in relation to a specific asset or specific assets, every deed or agreement entered into, and every document issued, by or on behalf of the grantor or the receiver that relates to the asset or assets and on which the name of the grantor appears must state that a receiver has been appointed. (2) Where a receiver is appointed in any other case, every deed or agreement entered into, and every document issued, by or on behalf of the grantor or [page 480]

the receiver and on which the name of the grantor appears must state that a receiver has been appointed.

(3) A failure to comply with subsection (1) or subsection (2) does not affect the validity of the deed or agreement or document. (4) Every person who— (a) contravenes subsection (1) or subsection (2); or (b) knowingly or wilfully authorises or permits a contravention of subsection (1) or subsection (2)— commits an offence and is liable on summary conviction to a fine not exceeding $5,000. Compare: 1955 No 63 s 346(2); 1980 No 43 s 40(1)

11 Vacancy in office of receiver (1) The office of receiver becomes vacant if the person holding office resigns,

dies, or becomes disqualified under section 5. (2) A receiver may resign office by giving not less than 7 days’ written notice of his or her intention to resign to the person by whom the receiver was appointed. (3) Where a vacancy in the office of receiver occurs as a result of the disqualification of the person holding office as receiver, that person must forthwith give written notice of the vacancy to the person by whom the receiver was appointed. (4) Where a vacancy in the office of receiver occurs as the result of the resignation or disqualification of the person holding office as receiver, that person must— (a) forthwith give public notice of the vacancy; and (b) if the receiver held office in relation to the property of a company, within 7 days of the vacancy occurring, give written notice of the vacancy to the Registrar for registration in the register of charges. (5) A receiver appointed by the court may resign office by giving not less than 7 days’ notice of his or her intention to resign to the Registrar of the court that made the appointment. (6) A person vacating the office of receiver must, where practicable, provide such information and give such assistance in the conduct of the receivership to his or her successor as that person reasonably requires. (7) On the application of a person appointed to fill a vacancy in the office of receiver, the court may make any order that it considers necessary or desirable to facilitate the performance of the receiver’s duties. (8) Every person who fails to comply with subsection (3) or subsection (4) commits an offence and is liable on summary conviction to a fine not exceeding $5,000.

12 Obligations of grantor (1) A grantor and, in the case of a grantor that is a body corporate, every director of the grantor, must— (a) make available to the receiver all books, documents, and information relating to the property in receivership in the grantor’s possession or

under the grantor’s control: (b) if required to do so by the receiver, verify, by statutory declaration, that the books, documents, and information are complete and correct: [page 481] (c) give the receiver such assistance as he or she may reasonably require: (d) if the grantor is a body corporate that has a common seal, make the common seal available for use by the receiver. (2) On the application of the receiver, the court may make an order requiring the grantor, or if the grantor is a body corporate, a director of the grantor to comply with subsection (1).

13 Execution of documents (1) A receiver may execute in the name and on behalf of the grantor all documents necessary or incidental to the exercise of the receiver’s powers. (2) A document signed on behalf of a grantor that is a company within the meaning of section 2 of the Companies Act 1955 by a receiver shall be deemed to have been properly executed for the purposes of section 42 of that Act. (3) A document signed on behalf of a grantor that is a company within the meaning of section 2 of the Companies Act 1993 by a receiver shall be deemed to have been properly executed for the purposes of section 180 of that Act. (4) Notwithstanding any other enactment or rule of law, or any memorandum or articles of association or other document defining the constitution of a grantor that is a body corporate, where the instrument under which a receiver is appointed empowers the receiver to execute documents and to use the grantor’s common seal for that purpose, the receiver may execute the documents in the name and on behalf of the grantor by affixing the grantor’s common seal to the documents and attesting the affixing of the common seal. (5) A document executed in the manner prescribed by subsection (4) is deemed

to have been properly executed by the grantor.

14 Powers of receivers (1) A receiver has the powers and authorities expressly or impliedly conferred by the deed or agreement or the order of the court by or under which the appointment was made. (2) Subject to the deed or agreement or the order of the court by or under which the appointment was made, a receiver may— (a) demand and recover, by action or otherwise, income of the property in receivership: (b) issue receipts for income recovered: (c) manage the property in receivership: (d) insure the property in receivership: (e) repair and maintain the property in receivership: (f)

inspect at any reasonable time books or documents that relate to the property in receivership and that are in the possession or under the control of the grantor:

(g) exercise, on behalf of the grantor, a right to inspect books or documents that relate to the property in receivership and that are in the possession or under the control of a person other than the grantor: (h) in a case where the receiver is appointed in respect of all or substantially all of the assets and undertaking of a grantor that is a body corporate, change the registered office or address for service of the body corporate. [page 482]

15 Power to make calls on shares (1) A receiver has the same powers as the directors of a grantor that is a company have or, if the grantor is being wound up or in liquidation, as the directors would have if it was not being wound up or in liquidation, to make

calls on the members or shareholders of the company in respect of uncalled capital that is charged under the deed or agreement by or under which the receiver was appointed and to charge interest on, and enforce payment of, calls. (2) For the purposes of subsection (1), the expression uncalled capital includes the amount of any unpaid premium payable in respect of the issue of shares. (3) The making of a call or the exercise of a power under subsection (1) is, as between the members or shareholders of the company affected and the company, deemed to be a proper call or power made or exercised by the directors of the company.

16 Validity of acts of receivers (1) Subject to subsection (2), no act of a receiver is invalid merely because the receiver was not validly appointed or is disqualified from acting as a receiver or is not authorised to do the act. (2) No transaction entered into by a receiver is invalid merely because the receiver was not validly appointed or is disqualified from acting as a receiver or is not authorised to enter into the transaction unless the person dealing with the receiver has, or ought to have, by reason of his or her relationship with the receiver or the person by whom the receiver was appointed, knowledge that the receiver was not validly appointed or was disqualified from acting as a receiver or did not have authority to enter into the transaction.

17 Consent of mortgagee to sale of property (1) Where the consent of a mortgagee is required to the sale of property in receivership and the receiver is unable to obtain that consent, the receiver may apply to the court for an order authorising the sale of the property, either by itself or together with other assets. (2) The court may, on an application under subsection (1), make such order as it thinks fit authorising the sale of the property by the receiver if satisfied that— (a) the receiver has made reasonable efforts to obtain the mortgagee’s consent; and

(b) the sale— (i)

is in the interests of the grantor and the grantor’s creditors; and

(ii) will not substantially prejudice the interests of the mortgagee. (3) An order under this section may be made on such terms and conditions as the court thinks fit.

18 General duties of receivers (1) A receiver must exercise his or her powers in good faith and for a proper purpose. (2) A receiver must exercise his or her powers in a manner he or she believes on reasonable grounds to be in the best interests of the person in whose interests he or she was appointed. (3) To the extent consistent with subsections (1) and (2), a receiver must exercise his or her powers with reasonable regard to the interests of— [page 483] (a) the grantor; and (b) persons claiming, through the grantor, interests in the property in receivership; and (c) unsecured creditors of the grantor; and (d) sureties who may be called upon to fulfil obligations of the grantor. (4) Where a receiver appointed under a deed or agreement acts or refrains from acting in accordance with any directions given by the person in whose interests he or she was appointed, the receiver— (a) is not in breach of the duty referred to in subsection (2); but (b) is still liable for any breach of the duty referred to in subsection (1) and the duty referred to in subsection (3). (5) Nothing in this section limits or affects section 19.

19 Duty of receiver selling property A receiver who exercises a power of sale of property in receivership owes a duty to— (a) the grantor; and (b) persons claiming, through the grantor, interests in the property in receivership; and (c) unsecured creditors of the grantor; and (d) sureties who may be called upon to fulfil obligations of the grantor— to obtain the best price reasonably obtainable as at the time of sale.

20 No defence or indemnity Notwithstanding any enactment or rule of law or anything contained in the deed or agreement by or under which a receiver is appointed,— (a) it is not a defence to proceedings against a receiver for a breach of the duty imposed by section 19 that the receiver was acting as the grantor’s agent or under a power of attorney from the grantor: (b) a receiver is not entitled to compensation or indemnity from the property in receivership or the grantor in respect of any liability incurred by the receiver arising from a breach of the duty imposed by section 19.

21 Duty in relation to money A receiver must keep money relating to the property in receivership separate from other money received in the course of, but not relating to, the receivership and from other money held by or under the control of the receiver.

22 Accounting records (1) A receiver must at all times keep accounting records that correctly record and explain the receipts, expenditure, and other transactions relating to the property in receivership.

(2) The accounting records must be retained for not less than 6 years after the receivership ends.

23 First report by receiver (1) Not later than 2 months after his or her appointment, a receiver must prepare a report on the state of affairs with respect to the property in receivership including— (a) particulars of the assets comprising the property in receivership; and [page 484] (b) particulars of the debts and liabilities to be satisfied from the property in receivership; and (c) the names and addresses of the creditors with an interest in the property in receivership; and (d) particulars of any encumbrance over the property in receivership held by any creditor including the date on which it was created; and (e) particulars of any default by the grantor in making relevant information available; and (f)

such other information as may be prescribed.

(2) The report must also include details of— (a) the events leading up to the appointment of the receiver, so far as the receiver is aware of them; and (b) property disposed of and any proposals for the disposal of property in receivership; and (c) amounts owing, as at the date of appointment, to any person in whose interests the receiver was appointed; and (d) amounts owing, as at the date of appointment, to creditors of the grantor having preferential claims; and (e) amounts likely to be available for payment to creditors other than those referred to in paragraph (c) or paragraph (d).

(3) A receiver may omit from the report details of any proposals for disposal of the property in receivership if he or she considers that their inclusion would materially prejudice the exercise of his or her functions. (4) A receiver who fails to comply with this section commits an offence and is liable on summary conviction to a fine not exceeding $10,000.

24 Further reports by receiver (1) Not later than 2 months after— (a) the end of each period of 6 months after his or her appointment as receiver; and (b) the date on which the receivership ends,— a receiver or a person who was a receiver at the end of the receivership, as the case may be, must prepare a further report summarising the state of affairs with respect to the property in receivership as at those dates, and the conduct of the receivership, including all amounts received and paid, during the period to which the report relates. (2) The report must include details of— (a) property disposed of since the date of any previous report and any proposals for the disposal of property in receivership; and (b) amounts owing, as at the date of the report, to any person in whose interests the receiver was appointed; and (c) amounts owing, as at the date of the report, to creditors of the grantor having preferential claims; and (d) amounts likely to be available as at the date of the report for payment to creditors other than those referred to in paragraph (b) or paragraph (c). (3) A receiver may omit from the report required to be prepared in accordance with subsection (1)(a) details of any proposals for disposal of property in [page 485]

receivership if he or she considers that their inclusion would materially

prejudice the exercise of his or her functions. (4) Every person who fails to comply with this section commits an offence and is liable on summary conviction to a fine not exceeding $10,000.

25 Extension of time for preparing reports A period of time within which a person must prepare a report referred to in section 23 or section 24 may be extended, on the application of that person, by— (a) the court, where the person was appointed a receiver by the court: (b) the Registrar, where the person was appointed a receiver by or under a deed or agreement.

26 Persons entitled to receive reports (1) A copy of every report prepared under section 23 or section 24 must be sent by the person required to prepare it to— (a) the grantor; and (b) every person in whose interests the receiver was appointed. (2) If the person was appointed a receiver by the court, he or she must file a copy of every report prepared under section 23 or section 24 in the office of the court. (3) Not later than 21 days after receiving a written request for a copy of any report prepared under section 23 or section 24 from— (a) a creditor, director, or surety of the grantor; or (b) any other person with an interest in any of the property in receivership; or (c) the authorised agent of any of them—

and on payment of the reasonable costs of making and sending the copy, the person who prepared the report must send a copy of the report to the person requesting it.

(4) Within 7 days after preparing a report under section 23 or section 24 in relation to a grantor that is a body corporate, the person who prepared the

report must send or deliver a copy of the report to the Registrar. (5) Every person who fails to comply with this section commits an offence and is liable on summary conviction to a fine not exceeding $10,000.

27 Persons entitled to inspect reports A person to whom a report must be sent in accordance with section 26 is entitled to inspect the report during normal office hours at the office of the person required to send it.

28 Duty to notify suspected offences against other Acts (1) A receiver of a grantor that is a company and who considers that the grantor or any director of the grantor has committed an offence that is material to the receivership against— (a) the Companies Act 1955; or (aa) the Crimes Act 1961; or (b) the Securities Act 1978; or (c) the Companies Act 1993; or (d) the Financial Reporting Act 1993; or [page 486] (e) the Takeovers Act 1993—

must report that fact to the Registrar.

(1A) A report made under subsection (1), and any communications between the receiver and Registrar relating to that report, are protected by absolute privilege. (2) A receiver who fails to comply with subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding $10,000. Section 28: substituted, on 1 July 1994, by section 4 of the Receiverships Amendment Act 1994 (1994 No 14).

Section 28(1): amended, on 1 May 2002, by section 4(1) of the Receiverships Amendment Act 2001 (2001 No 24). Section 28(1)(aa): inserted, on 1 May 2002, by section 4(2) of the Receiverships Amendment Act 2001 (2001 No 24). Section 28(1A): inserted, on 1 May 2002, by section 4(3) of the Receiverships Amendment Act 2001 (2001 No 24).

29 Notice of end of receivership (1) Not later than 7 days after the receivership of a grantor that is a body corporate ceases, the person who held office as receiver at the end of the receivership must send or deliver to the Registrar notice in writing of the fact that the receivership has ceased. (2) Every person who fails to comply with subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding $10,000.

30 Preferential claims (1) This section applies to a receiver of the property of a grantor that is a company, other than a company in liquidation at the time of the receiver’s appointment, and who was appointed under a security agreement that created or provided for a security interest that— (a) is over all or any part of the company’s accounts receivable and inventory or all or any part of either of them; and (b) is not a purchase money security interest that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999; and (c) is not a security interest that has been perfected under the Personal Property Securities Act 1999 at the time of the receiver’s appointment and that arises from the transfer of an account receivable for which new value is provided by the transferee for the acquisition of that account receivable (whether or not the transfer of the account receivable secures payment or performance of an obligation). (2) A receiver to whom this section applies must apply accounts receivable and inventory that are subject to the security interest or their proceeds— (a) first, to reimburse the receiver for his or her expenses and remuneration; and

(b) secondly, to pay the claims of any person who has— (i)

a purchase money security interest over all or any of those assets, that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999: [page 487]

(ii) a security interest over all or any of those assets, that has been perfected under the Personal Property Securities Act 1999 at the time of the receiver’s appointment and that arises from the transfer of an account receivable for which new value is provided by the transferee for the acquisition of that account receivable (whether or not the transfer of the account receivable secures payment or performance of an obligation); and (c) thirdly, to pay preferential claims to the extent and in the order of priority specified in Schedule 7 (except clauses 1(1) and 2(1)(b)) of the Companies Act 1993. (2A) The receiver must apply the accounts receivable and inventory as set out in subsection (2) before paying the claims of any person under a security interest, other than a security interest referred to in subsection (2)(b). (2B) For the purposes of subsection (2)(a), if an amount of an expense or of remuneration— (a) is payable partly in relation to the accounts receivable or inventory concerned and partly in relation to other property,— (i)

the amount must be fairly and equitably apportioned between the accounts receivable or inventory and the other property; and

(ii) the proportion relating to the accounts receivable or inventory must be taken into account; and (iii) the proportion relating to the other property must be disregarded: (b) is payable only in relation to property other than the accounts receivable or inventory concerned, the amount must be disregarded: (c) is not payable in relation to any particular property, only a fair and equitable proportion of the amount must be taken into account.

(3) In the application of Schedule 7 of the Companies Act 1993 in accordance with subsection (2),— (a) references to a liquidator are to be read as references to a receiver: (b) references to the commencement of the liquidation are to be read as references to the appointment of the receiver: (c) references to a company being put into or being in liquidation are to be read as references to the company being put into or being in receivership: (d) the reference to a period of 4 months before the commencement of the liquidation in clause 1(2)(a) is to be read as a reference to a period beginning 4 months before the date of appointment of the receiver and ending either— (i)

14 days after the date of appointment of the receiver; or

(ii) if notice of the termination of that employee’s employment is lawfully given to the employee within 14 days after the date of appointment of the receiver or by any later date to which the period for giving notice is extended under section 32(3) of the Receiverships Act 1993, on the day on which the contract of employment is terminated: (e) the reference to before, or because of, the commencement of the liquidation in clause 1(2)(b) and (c) is to be read as a reference to before the expiry of 14 days after the date of appointment of the receiver, or because notice of the termination of that employee’s employment is lawfully given to the employee within 14 days after the date of appointment of the receiver [page 488]

or by any later date to which the period for giving notice is extended under section 32(3) of the Receiverships Act 1993.

(4) Nothing in this section applies in relation to a grantor in respect of whose property a receiver was appointed before the commencement of this Act and the provisions of section 101 of the Companies Act 1955 shall continue to apply in relation to that grantor notwithstanding the repeal of that section

by this Act. (5) The provisions of this section, as in force immediately before the commencement of the Personal Property Securities Act 1999, continue to apply in respect of a company whose property was subject to a floating charge that, before the commencement of that Act, became a fixed or specific charge. Section 30(1): substituted, on 1 May 2002, by section 5(1) of the Receiverships Amendment Act 2001 (2001 No 24). Section 30(1)(b): amended, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 30(1)(c): amended, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 30(2): substituted, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 30(2A): inserted, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 30(2B): inserted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91). Section 30(3)(d): added, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 30(3)(e): added, on 1 November 2007, by section 41 of the Companies Amendment Act 2006 (2006 No 56). Section 30(5): added, on 1 May 2002, by section 5(3) of the Receiverships Amendment Act 2001 (2001 No 24).

30A Extinguishment of subordinate security interests (1) If property has been disposed of by a receiver, all security interests in the property and its proceeds that are subordinate to the security interest of the person in whose interests the receiver was appointed are extinguished on the disposition of the property. (2) If there is a surplus left after the receiver has disposed of personal property, that surplus must be distributed according to the priorities set out in section 30B(1) and (2) unless otherwise required by any other law. Compare: 1999 No 126 s 115 Section 30A: inserted, on 1 May 2002, by section 6 of the Receiverships Amendment Act 2001 (2001 No 24). Section 30A(2): added, on 15 December 2005 (applying to any surplus referred to in this provision that has not been distributed on that date), by section 3 of the Receiverships Amendment Act 2005 (2005 No 112).

30B

Priorities on distribution by receiver of surplus representing proceeds of personal property

(1) A surplus representing the proceeds of personal property must be distributed in the following order: [page 489] (a) to any person who has registered a financing statement under the Personal Property Securities Act 1999, or a security interest under any other Act, in the name of the grantor over the property, if— (i)

the registration was effective immediately before the receiver disposed of the property; and

(ii) the security interest relating to that registration was subordinate to the security interest of the person in whose interests the receiver was appointed: (b) to any other person (A), if the receiver has notice that A had an interest in the property when it was disposed of, and the receiver is satisfied that A’s interest was legally enforceable: (c) to the grantor. (2) Priority as between persons referred to in subsection (1)(a), and as between persons referred to in subsection (1)(b), must be determined according to the applicable law (including Part 7 or Part 8 of the Personal Property Securities Act 1999) as if, in the case of persons referred to in subsection (1)(a), their security interests had not been extinguished. (3) If, in the case of a distribution of the surplus to a grantor, the grantor cannot be found after reasonable inquiry by the receiver, the provisions of section 186(2) to (5) of the Property Law Act 2007 apply with all necessary modifications as if references in that section to “the mortgagee” and “the mortgagor” were references to “the receiver” and “the grantor” respectively. Section 30B: inserted, on 15 December 2005 (applying to any surplus referred to in this provision that has not been distributed on that date), by section 4 of the Receiverships Amendment Act 2005 (2005 No 112). Section 30B(3): amended, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

30C Surplus may be paid into court (1) A receiver may pay a surplus referred to in section 30A(2) into court if there is a question as to who is entitled to receive payment according to the priorities in section 30B(1) or (2). (2) The surplus may only be paid out on an application by the receiver or by a person claiming an entitlement to the surplus. Section 30C: inserted, on 15 December 2005 (applying to any surplus referred to in this provision that has not been distributed on that date), by section 4 of the Receiverships Amendment Act 2005 (2005 No 112).

30D Meaning of surplus and net proceeds (1) For the purposes of sections 30A to 30C, there is a surplus if the receiver has disposed of personal property in receivership, and the net proceeds exceed— (a) the amount of the debt owed by the grantor to the person in whose interests the receiver was appointed (where the property secures payment of that debt); or (b) the monetary value of the obligation owed by the grantor to the person in whose interests the receiver was appointed (where the property secures performance of that obligation). [page 490] (2) In subsection (1), net proceeds, in relation to the disposal of personal property in receivership, means the net proceeds of the disposal after deducting— (a) the receiver’s expenses and remuneration; and (b) any amount or the monetary value of any obligation, as the case may be, secured by any security interest that ranks in priority to the security interest granted to the person in whose interests the receiver was appointed; and (c) any other preferential claims or priority claims according to law. Section 30D: inserted, on 15 December 2005 (applying to any surplus referred to in this provision that has not been distributed on that date), by section 4 of the Receiverships Amendment Act 2005 (2005 No 112).

31 Powers of receiver on liquidation or bankruptcy (1) Subject to subsection (2), a receiver may be appointed or continue to act as a receiver and exercise all the powers of a receiver in respect of property of — (a) a company that is being wound up or that has been put into liquidation; or (b) a debtor who has been adjudged bankrupt under the Insolvency Act 2006—

unless the court orders otherwise.

(2) A receiver holding office in respect of property referred to in subsection (1) may act as the agent of the grantor only— (a) with the approval of the court; or (b) with the written consent of the liquidator or the Official Assignee, as the case may be. (3) A receiver who, by reason of subsection (2), is not able to act as the agent of the grantor does not, by reason only of that fact, become the agent of a person by whom or in whose interests the receiver was appointed. (4) A debt or liability incurred by a grantor through the acts of a receiver who is acting as the agent of the grantor in accordance with subsection (2) is not a cost, charge or expense of the liquidation or the administration of the bankrupt’s estate. Section 31(1)(b): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

32 Liabilities of receiver (1) Subject to subsections (2) and (3), a receiver is personally liable— (a) on a contract entered into by the receiver in the exercise of any of the receiver’s powers; and (b) for payment of wages or salary that, during the receivership, accrue under a contract of employment relating to the property in receivership and entered into before the appointment of the receiver if notice of the termination of the contract is not lawfully given within 14 days after the date of appointment; and

(c) for payment of remuneration under any contract with— (i)

a director of a grantor that is a body corporate; or [page 491]

(ii) a person who, in relation to a grantor that is not a body corporate, occupies a position equivalent to that of a director of a body corporate—

if the receiver has expressly confirmed the contract.

(2) The terms of a contract referred to in paragraph (a) of subsection (1) may exclude or limit the personal liability of a receiver other than a receiver appointed by the court. (3) The court may, on the application of a receiver, extend the period within which notice of the termination of a contract is required to be given under paragraph (b) of subsection (1) and may extend that period on such terms and conditions as the court thinks fit. (4) Every application under subsection (3) must be made before the expiry of the period referred to. (5) Subject to subsection (7), a receiver is personally liable, to the extent specified in subsection (6), for rent and any other payments becoming due under an agreement subsisting at the date of the appointment of the receiver relating to the use, possession, or occupation by the grantor of property in receivership. (6) The liability of a receiver under subsection (5) is limited to that portion of the rent or other payments which accrue in the period commencing 14 days after the date of the appointment of the receiver and ending on— (a) the date on which the receivership ends; or (b) the date on which the grantor ceases to use, possess, or occupy the property,—

whichever is the earlier.

(7) The court may, on the application of a receiver,— (a) limit the liability of the receiver to a greater extent than that specified

in subsection (6): (b) excuse the receiver from liability under subsection (5). (8) Nothing in subsection (5) or subsection (6)— (a) is to be taken as giving rise to an adoption by a receiver of an agreement referred to in subsection (5); or (b) renders a receiver liable to perform any other obligation under the agreement. (9) A receiver is entitled to an indemnity out of the property in receivership in respect of personal liability under this section. (10) Nothing in this section— (a) limits any other right of indemnity to which a receiver may be entitled; or (b) limits the liability of a receiver on a contract entered into without authority; or (c) confers on a receiver a right to an indemnity in respect of liability on a contract entered into without authority.

33 Relief from liability (1) The court may relieve a person who has acted as a receiver from all or any personal liability incurred in the course of the receivership if it is satisfied that— (a) the liability was incurred solely by reason of a defect in the appointment of the receiver or in the deed or agreement or order of the court by or under which the receiver was appointed; and [page 492] (b) the receiver acted honestly and reasonably and ought, in the circumstances, to be excused. (2) The court may exercise its powers under subsection (1) subject to such terms and conditions as it thinks fit.

(3) A person in whose interests a receiver was appointed is liable, subject to such terms and conditions as the court thinks fit, to the extent to which the receiver is relieved from liability. (4) The court may give such directions as it thinks fit for the purposes of subsection (3). Compare: 1955 No 63 s 345A; 1980 No 43 s 39

34 Court supervision of receivers (1) The court may, on the application of a receiver,— (a) give directions in relation to any matter arising in connection with the performance of the functions of the receiver: (b) revoke or vary any such directions. (2) The court may, on the application of a person referred to in subsection (3), — (a) in respect of any period, review or fix the remuneration of a receiver at a level which is reasonable in the circumstances: (b) to the extent that an amount retained by a receiver as remuneration is found by the court to be unreasonable in the circumstances, order the receiver to refund the amount: (c) declare whether or not a receiver was validly appointed in respect of any property or validly entered into possession or assumed control of any property. (3) Any of the following persons may apply to the court under subsection (2): (a) the receiver: (b) the grantor: (c) a creditor of the grantor: (d) a person claiming, through the grantor, an interest in the property in receivership: (e) the board of directors of the grantor or, in the case of a grantor that is in liquidation, the board of the grantor at the time the liquidator was appointed:

(f)

if the grantor is a company, a liquidator:

(g) if the grantor is a person who has been adjudged bankrupt, the Official Assignee of the estate of the grantor. (4) The powers given by subsections (1) and (2)— (a) are in addition to any other powers the court may exercise under this Act, any other Act, or in its inherent jurisdiction; and (b) may be exercised in relation to a matter occurring either before or after the commencement of this Act and whether or not the receiver has ceased to act as receiver when the application is made. (5) The court may, on the application of a person referred to in subsection (3), revoke or vary an order made under subsection (2). (6) Subject to subsection (7), it is a defence to a claim against a receiver in relation to any act or omission by the receiver that he or she acted or omitted to act in accordance with a direction given under subsection (1). [page 493] (7) The court may, on the application of a person referred to in subsection (3), order that, by reason of the circumstances in which a direction was obtained under subsection (1), a receiver is not entitled to the protection given by subsection (6).

35 Court may terminate or limit receivership (1) The court may, on the application of a person referred to in subsection (2), — (a) order that a receiver must cease to act as such as from a specified date, and prohibit the appointment of any other receiver in respect of the property in receivership: (b) order that a receiver must, as from a specified date, act only in respect of specified assets forming part of the property in receivership. (2) Any of the following persons may apply to the court under subsection (1): (a) the grantor:

(b) if the grantor is a company, a liquidator: (c) if the grantor is a person who has been adjudged bankrupt, the Official Assignee of the estate of the grantor. (3) An order may be made under subsection (1) only if the court is satisfied that — (a) the purpose of the receivership has been satisfied so far as possible; or (b) circumstances no longer justify its continuation. (4) Unless the court orders otherwise, a copy of an application under this section must be served on the receiver not less than 7 days before the hearing of the application, and the receiver may appear and be heard at the hearing. (5) An order under subsection (1) may be made on such terms and conditions as the court thinks fit. (6) In making an order under subsection (1), the court may prohibit a person in whose interests the receiver was appointed from taking possession or assuming control of the property in receivership. (7) Except as provided by subsection (6), an order under this section does not affect a security or charge over the property in respect of which the order is made. (8) The court may, on the application of any person who applied for or is affected by the order, rescind or amend an order made under this section. Compare: 1955 No 63 s 346A; 1980 No 43 s 41

36 Meaning of failure to comply In section 37, failure to comply in relation to a receiver means a failure by a receiver to comply with a relevant duty arising— (a) under the deed or agreement or the order of the court by or under which the receiver was appointed; or (b) under this or any other Act or rule of law or rules of court; or (c) under any order or direction of the court other than an order to comply made under that section; and comply, compliance, and failed to comply have corresponding meanings.

[page 494]

37 Orders to enforce receiver’s duties (1) An application for an order under this section may be made by— (a) the Registrar: (b) a receiver: (c) a person seeking appointment as a receiver: (d) the grantor: (e) a person with an interest in the property in receivership: (f)

a creditor of the grantor:

(g) a guarantor of an obligation of the grantor: (h) if the grantor is a company, a liquidator of the grantor: (i)

if the receiver is a chartered accountant, the President of the New Zealand Institute of Chartered Accountants:

(j)

if the receiver is a barrister and solicitor or a solicitor, the President of the New Zealand Law Society:

(k) if the grantor is a person who has been adjudged bankrupt, the Official Assignee of the estate of the grantor. (2) An application for an order under this section may be made by a receiver of the property of a grantor in relation to a failure to comply by another receiver of the property of the grantor. (3) No application may be made to the court in relation to a failure to comply unless notice of the failure to comply has been served on the receiver not less than 7 days before the date of the application and, as at the date of the application, there is a continuing failure to comply. (4) If the court is satisfied that there is, or has been, a failure to comply, the court may— (a) relieve the receiver of the duty to comply, wholly or in part; or (b) without prejudice to any other remedy that may be available in relation to a breach of duty by the receiver, order the receiver to comply to the

extent specified in the order. (5) The court may, in respect of a person who fails to comply with an order made under subsection (4)(b), or is or becomes disqualified under section 5 to become or remain a receiver,— (a) remove the receiver from office; or (b) order that the person may be appointed and act or may continue to act as a receiver, notwithstanding the provisions of section 5. (6) If it is shown to the satisfaction of the court that a person is unfit to act as a receiver by reason of— (a) persistent failures to comply; or (b) the seriousness of a failure to comply,—

the court must make, in relation to that person, a prohibition order for a period not exceeding 5 years.

(7) A person to whom a prohibition order applies must not— (a) act as a receiver in any current or other receivership; or (b) act as a liquidator in any current or other liquidation. (8) In making an order under this section the court may, if it thinks fit,— (a) make an order extending the time for compliance: (b) impose a term or condition: (c) make an ancillary order. [page 495] (9) A copy of every order made under subsection (6) must, within 14 days of the order being made, be delivered by the applicant to the Official Assignee for New Zealand who must keep it on a public file indexed by reference to the name of the receiver concerned. Section 37(1)(i): amended, on 7 July 2010, by section 10 of the New Zealand Institute of Chartered Accountants Amendment Act 2010 (2010 No 74).

38 Special provisions relating to evidence

(1) Evidence that, within the preceding 5 years while a person was acting as a receiver or as a liquidator, as the case may be,— (a) the court has, in relation to that person, on 2 or more occasions made an order to comply under section 37; or (b) the court has, in relation to that person, on 2 or more occasions made an order to comply under section 286 of the Companies Act 1993; or (c) the court has, in relation to that person, made 1 or more orders to comply under section 37 and has also made 1 or more orders to comply under section 286 of the Companies Act 1993,— is, in the absence of special reasons to the contrary, evidence of persistent failures to comply for the purposes of section 37(6)(a). (2) Evidence that, within the preceding 5 years while a person was acting as a receiver or as a liquidator, as the case may be,— (a) 2 or more applications for an order to comply under section 37 were made in relation to that person; or (b) 2 or more applications for an order to comply under section 286 of the Companies Act 1993 were made in relation to that person; or (c) 1 or more applications for an order to comply under section 37 and 1 or more applications for an order to comply under section 286 of the Companies Act 1993 were made in relation to that person— and, in each case, the person has complied after the making of the application and before the hearing is, in the absence of special reasons to the contrary, evidence of persistent failures to comply for the purposes of section 37(6)(a).

39 Orders protecting property in receivership The court may, on making an order that removes, or has the effect of removing, a receiver from office, make such orders as it thinks fit— (a) for preserving property in receivership: (b) requiring the receiver for that purpose to make available to any person specified in the order any information and documents in the possession or under the control of the receiver.

40 Refusal to supply essential services prohibited (1) For the purposes of this section, an essential service means— (a) the retail supply of gas: (b) the retail supply of electricity: (c) the supply of water: (d) telecommunications services. (2) For the purposes of this section, telecommunications services means the conveyance from one device to another by any line, radio frequency or other medium of any sign, signal, impulse, writing, image, sound, instruction, [page 496]

information, or intelligence of any nature, whether or not for the information of a person using the device.

(3) Notwithstanding the provisions of any other Act or any contract, a supplier of an essential service must not— (a) refuse to supply the service to a receiver or to the owner of property in receivership by reason of the grantor’s default in paying charges due for the service in relation to a period before the date of the appointment of the receiver; or (b) make it a condition of the further supply of the service to a receiver or to the owner of property in receivership that payment be made of outstanding charges due for the service in relation to a period before the date of the appointment of the receiver; or (c) [Repealed] Section 40(3)(c): repealed, on 1 July 1994, by section 5 of the Receiverships Amendment Act 1994 (1994 No 14).

Local authorities Heading: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84).

Instrument may provide for appointment of 40A receiver Subject to the Personal Property Securities Act 1999, and without limiting any other rights or remedies of the holder of a charge over any asset of a local authority, an instrument creating or evidencing the terms and conditions of the charge may provide for the appointment of a receiver of such assets in such terms as the parties may agree and the holder of that charge may exercise any such other rights or use any such other remedies. Compare: 1974 No 123 s 122ZL(1) Section 40A: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84).

40B Power of court to appoint receiver (1) Subject to sections 40D and 40E and to subsections (2) and (3), the High Court may, on the application of any creditor of the local authority, appoint a receiver of any asset of a local authority or appoint a receiver for the purposes of section 115 of the Local Government Act 2002. (2) An appointment under subsection (1) must be for such period, with such rights, powers, and duties, and on such terms and conditions, including as to security and remuneration, as the court considers appropriate in all the circumstances. (3) When considering, in accordance with subsection (2), the terms and conditions upon which a receiver can be appointed by a court pursuant to subsection (1), the court must— (a) take account of the interests of both the secured and non-secured creditors of the local authority, as against— (i)

the interests of the local authority itself; and

(ii) the requirement of the local authority to provide those services that are essential for the maintenance of public health and safety; and (iii) the interests of the ratepayers with property within the area of the local authority; and

[page 497] (iv) the interests of the general public living within the area of the local authority; and (b) take account of the interests of secured creditors as against the interests of non-secured creditors of the local authority. Compare: 1974 No 123 s 122ZL(2), (3) Section 40B: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84).

40C Powers and duties of receivers (1) A receiver of any asset of a local authority is, as the circumstances and the context permit, affected by the restrictions and responsibilities which by law affect a receiver of a company or of an asset or property or rights of a company as if the local authority were a company. (2) The provisions of this Act are, in their application to a receiver of an asset of a local authority, subject to the modifications and exceptions set out in the Schedule. (3) If the assets subject to a charge to which this section applies comprise rates or other revenues, then, for the purposes of this section, from the date of the appointment of the receiver and until such time as the appointment terminates,— (a) the rates or other revenues so charged vest in the receiver; and (b) all powers necessary for the recovery of rates levied under section 115 of the Local Government Act 2002 or other revenues are conferred on, and may be exercised by, the receiver. Compare: 1974 No 66 s 122ZM Section 40C: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84).

40D Constraints on receiver (1) Despite anything in this Act or in any instrument providing for or governing the appointment of a receiver, a receiver of any asset of a local authority must ensure that no action of the receiver prevents the provision of those services of the local authority that are essential for the maintenance of

public health and safety requirements. (2) For the purposes of this section,— (a) an action of a receiver is deemed not to prevent provision of the services specified in subsection (1) unless— (i)

that action necessarily results in that outcome; and

(ii) the outcome is not more fairly attributable to the act, or omission to act, of persons outside the control of the receiver; and (b) receiver includes both a receiver and a manager and includes, if persons are appointed jointly or severally as receivers and managers or both jointly and severally as receivers or managers, each of those persons. (3) A receiver must distribute the proceeds of collection of the money and assets the receiver is entitled to collect in the following order of priority: (a) first, the receiver’s remuneration, and costs incurred by the receiver and reimbursement of the costs of obtaining appointment of the receiver to any person who has incurred them: (b) second, any amounts payable in respect of claims by law to be preferred to claims under any charge over those assets: [page 498] (c) third, any amounts required to be paid out of the proceeds of collection of the money and assets to enable the receiver to provide the services specified in subsection (1): (d) fourth, the amounts secured by any charges over those assets in the order of priority accorded those charges, so as to preserve the respective entitlements of the holders of those charges: (e) fifth, if the receiver was appointed on the application of an unsecured creditor or unsecured creditors, to those creditors or, as the court may direct, any amounts payable to them,— and any residue must be paid to, or applied for the benefit of, the local authority, as it may direct.

(4) A receiver appointed under section 40A or section 40B(1), in exercising any powers (including those of a manager), is not entitled to control, dispose of, or otherwise interfere with the local authority’s ability to exercise or perform its rights, powers, and duties in relation to assets not charged in favour of the appointor of a receiver. (5) Subject to subsection (6), if any land vested in a local authority is— (a) a reserve under the Reserves Act 1977; or (b) land over which the local authority has no power of disposition; or (c) land in respect of which the local authority’s power of disposition is conditional,— the power of disposition that a receiver of that local authority has in respect of that land is limited to a power of disposition by way of lease or licence for a term or terms not exceeding in the aggregate 9 years. (6) The powers of disposition that a receiver has in respect of any land of the kind described in subsection (5)(c) comprise, in addition to the power specified in subsection (5), the same conditional power of disposition as the local authority. Compare: 1974 No 123 s 122ZN Section 40D: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84).

40E Protection for receiver (1) Subject to subsection (4), no proceedings lie against any receiver of a local authority for breach of section 40D(1)— (a) by the receiver; or (b) by any adviser or delegate of the receiver (being an adviser or delegate who has been reasonably selected and reasonably supervised). (2) Subject to subsection (4), no proceedings lie against any adviser or delegate of any receiver of a local authority for a breach of section 40D other than at the instance of the receiver. (3) Subject to subsection (4), a receiver (and any adviser or delegate who has been reasonably selected and reasonably supervised, as the case requires), must, in respect of any liability relating to the exercise or purported exercise or omission to exercise any right or power of the receiver by the

receiver or the adviser of the receiver or the delegate of the receiver, be indemnified— [page 499] (a) by the local authority, in the case of a receiver appointed by the High Court under section 40B(1): (b) out of the assets subject to receivership, in the case of any other receiver but subject to any contrary terms of appointment. (4) No person is exempted from liability under subsection (1) or is entitled to be indemnified under subsection (3) for any act or omission to act which constitutes bad faith or gross negligence on the part of that person. (5) Nothing in this section limits or affects the provisions of sections 19 and 20. Compare: 1974 No 123 s 122ZO Section 40E: inserted, on 1 July 2003, by section 262 of the Local Government Act 2002 (2002 No 84).

41 Repeals (1) Section 101 and Part 7 of the Companies Act 1955 are hereby repealed. (2) Sections 6 and 39 to 43 of the Companies Amendment Act 1980 are hereby consequentially repealed. Section 41: substituted, on 1 July 1994, by section 6 of the Receiverships Amendment Act 1994 (1994 No 14).

42 Act subject to application of Cape Town Convention and Aircraft Protocol (1) Sections 17 and 30 and all other provisions of this Act are subject to section 106 of the Civil Aviation Act 1990 (which provides for the primacy of the provisions of the Cape Town Convention and the Aircraft Protocol) and the rest of Part 12 of the Civil Aviation Act 1990 (which implements the Cape Town Convention and the Aircraft Protocol). (2) In this section,— Aircraft Protocol has the same meaning as in section 104(1) of the Civil

Aviation Act 1990 Cape Town Convention has the same meaning as in section 104(1) of the Civil Aviation Act 1990. Section 42: added, on 1 November 2010, by section 14(1) of the Civil Aviation (Cape Town Convention and Other Matters) Amendment Act 2010 (2010 No 42).

[page 500]

Schedule s 40C(2)

Modifications and exceptions that apply in relation to receivers of assets of local authorities Schedule: added, on 1 July 2003, by section 265 of the Local Government Act 2002 (2002 No 84).

1

Application of modifications and exceptions The modifications and exceptions to the provisions of this Act that are set out in this schedule are the modifications and exceptions referred to in section 40C(2).

2

References to directors Every reference to a director or the directors must be read as if it were a reference to a member or the members of the local authority.

Compare: 1974 No 123 s 122ZM(2)(a)

3

References to liquidator Every reference to a liquidator, except the reference in section 30(3), must be read as if it were a reference to a Commissioner appointed under section 255 or section 258 of the Local Government Act 2002 or to a commission appointed under clause 14 of Schedule 15 of that Act.

Compare: 1974 No 123 s 122ZM(2)(b)

4

References to liquidation Every reference to a liquidation, except the references in section 30(3), must be read as if it were a reference to the appointment of a Commissioner under section 255 or section 258 of the Local Government Act 2002 or to a

commission appointed under clause 14 of Schedule 15 of that Act. Compare: 1974 No 123 s 122ZM(2)(c)

5

References to Registrar Every reference to the Registrar must be read as if it were a reference to the Registrar of Companies.

Compare: 1974 No 123 s 122ZM(2)(d)

6

Persons disqualified for appointment Unless the court orders otherwise, none of the following persons may be appointed or act as a receiver: (a) any person specified in section 5(1): (b) any person disqualified by section 3 of the Local Authorities (Members’ Interests) Act 1968 or clause 1 of Schedule 7 of the Local Government Act 2002 from holding office as a member of the local authority.

Compare: 1974 No 123 s 122ZM(2)(e)

7

Exception in relation to obligations of grantor The obligation of a local authority to comply with section 12 is subject to section 40D(4), in that a local authority may only be required to comply with [page 501] section 12 to the extent that any such compliance will not, in the reasonable opinion of the local authority, interfere with the local authority’s ability to exercise or perform its rights, powers, and duties in relation to those assets not charged in favour of the appointor of the receiver or not the subject of the receivership.

Compare: 1974 No 123 s 122ZM(2)(f)

8

Exception in relation to execution of documents Section 13 is subject to section 40D(4), in that the power of the receiver to execute documents in the name of and on behalf of a local authority, and to use any common seal of a local authority, may be exercised only in relation to assets charged in favour of the appointor of the receiver.

Compare: 1974 No 123 s 122ZM(2)(g)

9

Section 15 (which relates to power to make calls on shares) not to apply Section 15 does not apply.

Compare: 1974 No 123 s 122ZM(2)(h)

10 Modification of general duties imposed by section 18 The general duties imposed on receivers by section 18 are subject to the constraints imposed on receivers by section 40D(1). Compare: 1974 No 123 s 122ZM(2)(i)

11 Modifications in relation to reports by receiver (1) Nothing in sections 23 and 24 requires a receiver to include in any report any information that could be properly withheld if the Local Government Official Information and Meetings Act 1987 applied to that report. (2) If the receiver prepares a report under section 23 or section 24, the receiver must make that report available for public inspection at the offices and libraries of the relevant local authority and must make copies of any such report available to the public free of charge or at a reasonable charge. (3) Section 26(1) applies as if it required the receiver to send a copy of every report prepared under section 23 or section 24 to the Secretary for Local Government, the Controller and Auditor-General, and the Parliamentary Library. Compare: 1974 No 123 s 122ZM(2)(j)–(l)

12 Reporting of offences The obligation imposed on a receiver by section 28 to report any offence that the receiver considers has been committed against any of the Acts specified in that section includes, in addition, an obligation to report any offence that the receiver considers has been committed against the Local Government Act 2002 or the Local Authorities (Members’ Interests) Act 1968. Compare: 1974 No 123 s 122ZM(2)(m)

13 Exceptions in relation to preferential claims (1) Section 30(2)(b) applies only to those preferential claims that are applicable to the local authority.

[page 502] (2) Section 30(4) does not apply. Compare: 1974 No 123 s 122ZM(2)(n), (o)

14 Section 31 (which relates to liquidation or bankruptcy) does not apply Section 31 does not apply. Compare: 1974 No 123 s 122ZM(2)(p)

15 Exception in relation to Commissioners and commission If a Commissioner of a local authority is or has been appointed under section 255 or section 258 of the Local Government Act 2002 or if a commission has been appointed under clause 14 of Schedule 15 of that Act (either before or after the appointment of a receiver in respect of some or all of the assets or rates of that local authority under section 40A or section 40B(1)), the High Court may order that any receiver so appointed may not, until the High Court so orders, exercise any of the rights, powers, and duties of a receiver. Compare: 1974 No 123 s 122ZM(2)(q)

16 Power of Secretary for Local Government and Controller and Auditor-General to make certain applications Sections 34(3), 35(2), and 37(1) apply as if the Secretary for Local Government and the Controller and Auditor-General were specified in those sections as persons entitled to make applications under those sections. Compare: 1974 No 123 s 122ZM(2)(r)

17 Section 41 (which relates to repeals) not to apply Section 41 does not apply. Compare: 1974 No 123 s 122ZM(2)(s)

18 Copies of documents Copies of the documents required by sections 8(3), 11(4), 28(1), and 29(1) to be sent to the Registrar must be sent to the Secretary for Local Government and to the Controller and Auditor-General. Compare: 1974 No 123 s 122ZM(2)(t)

[page 503]

Insolvency (Cross-border) Act 2006 2006 No 57 Contents 1 2 3 4 5 6 7 8 9 10 11 12 13

Title Commencement Purpose Interpretation Further provision relating to interpretation Act binds the Crown Application of Model Law on Cross-Border Insolvency in New Zealand High Court to act in aid of overseas courts Power to make rules Regulations may prescribe specified insolvency proceedings Regulations Transitional provisions for this Act Consequential amendments to other enactments Schedule 1 Rules applying to cross-border insolvency proceedings Schedule 2 Consequential amendments

1

Title This Act is the Insolvency (Cross-border) Act 2006.

2

Commencement This Act comes into force on a date to be appointed by the GovernorGeneral by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.

Section 2: Insolvency (Cross-border) Act 2006 brought into force, on 24 July 2008, by the Insolvency (Cross-border) Act Commencement Order 2008 (SR 2008/171).

3

Purpose The purpose of this Act is to— (a) implement the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law on 30 May 1997, and approved by the General Assembly of the United Nations on 15 December 1997, (amended and supplemented in order to apply to New Zealand) in New Zealand; and (b) provide a framework for facilitating insolvency proceedings when— (i)

a person is subject to insolvency administration (whether personal or corporate) in 1 country, but has assets or debts in another country; or

(ii) more than 1 insolvency administration has commenced in more than 1 country in relation to a person.

4

Interpretation In this Act,—

insolvency proceeding means a collective judicial or administrative proceeding, including an interim proceeding, pursuant to a law relating to insolvency (whether personal or corporate) in which the assets and affairs of a debtor are subject to

[page 504] control or supervision by a judicial or other authority competent to control or supervise that proceeding, for the purpose of reorganisation or liquidation Minister means the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act.

5

Further provision relating to interpretation

(1) In interpreting this Act, reference may be made to— (a) the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law on 30 May 1997, and approved by the General Assembly of the United Nations on 15 December 1997; and (b) any document that relates to the Model Law on Cross-Border Insolvency that originates from the United Nations Commission on International Trade Law, or its working group for the preparation of the Model Law on Cross-Border Insolvency. (2) Subsection (1) does not limit article 8 of Schedule 1.

6

Act binds the crown This Act binds the Crown.

7

Application of Model Law on cross-border insolvency in New Zealand Schedule 1 applies in the circumstances set out in article 1 of that schedule.

8

High Court to act in aid of overseas courts

(1) This section applies to a person referred to in article 1(1) of Schedule 1. (2) If a court of a country other than New Zealand has jurisdiction in an

insolvency proceeding and makes an order requesting the aid of the High Court in relation to the insolvency proceeding of a person to whom this section applies, the High Court may, if it thinks fit, act in aid of and be auxiliary to that court in relation to that insolvency proceeding. (3) In acting in aid of and being auxiliary to a court in accordance with subsection (2), the High Court may exercise the powers that it could exercise in respect of the matter if it had arisen within its own jurisdiction.

9

Power to make rules Rules may be made under section 51C of the Judicature Act 1908— (a) relating to the procedure of the High Court under this Act; and (b) relating to the manner in which an application under Schedule 1 must be made to the High Court; and (c) to give effect to this Act.

10 Regulations may prescribe specified insolvency proceedings (1) On the recommendation of the Minister, the Governor-General may, by Order in Council, make regulations designating a class of insolvency proceeding, in a designated country other than New Zealand (referred to in this section as the foreign country), to be a specified insolvency proceeding. (2) The Minister must not recommend the making of regulations under subsection (1) unless the Minister is satisfied that— (a) New Zealand and the foreign country are both parties to an agreement for the mutual recognition of insolvency proceedings; and [page 505] (b) the level of recognition given to the interests of New Zealand debtors and creditors in an insolvency proceeding in the foreign country and the terms of the agreement referred to in paragraph (a) provide

appropriate protection for the interests of New Zealand debtors and creditors. (3) A regulation made under subsection (1) may specifically modify or vary Schedule 1 in its application to a specified insolvency proceeding. (4) Subsection (3) prevails over section 7.

11 Regulations The Governor-General may, by Order in Council, make regulations prescribing forms to be used for the purposes of this Act, and the matters to be specified in the forms.

12 Transitional provisions for this Act (1) If an insolvency proceeding has started before the commencement of this Act, the law governing that insolvency proceeding is the law that would have applied if this Act had not been passed. (2) For the purposes of subsection (1), an insolvency proceeding is taken to have started on the date upon which the judicial manager, Official Assignee, statutory manager, receiver, liquidator, or administrator was appointed.

13 Consequential amendments to other enactments The enactments specified in Schedule 2 are amended in the manner indicated in that schedule.

[page 506]

Schedule 1 s 7

Rules applying to cross-border insolvency proceedings [The provisions of this schedule correspond, for the most part, to the provisions of the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law on 30 May 1997, and approved by the General Assembly of the United Nations on 15 December 1997 (General Assembly Resolution 52/158). Certain changes have been made to amend or supplement the provisions of the Model Law in its application to New Zealand.]

Preamble The purpose of this Schedule is to provide effective mechanisms for dealing with cases of cross-border insolvency so as to promote the objectives of: (a) co-operation between the courts and other competent authorities of New Zealand and foreign States involved in cases of cross-border insolvency; (b) greater legal certainty for trade and investment; (c) fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor; (d) protection and maximisation of the value of the debtor’s assets; and (e) facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

Chapter I. General provisions Article 1. Scope of application (1) Except as provided in paragraph (2) of this article, this Schedule applies where:

(a) assistance is sought in New Zealand by a foreign court or a foreign representative in connection with a foreign proceeding; or (b) assistance is sought in a foreign State in connection with a New Zealand insolvency proceeding; or (c) a foreign proceeding and a New Zealand insolvency proceeding in respect of the same debtor are taking place concurrently; or (d) creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participation in, a New Zealand insolvency proceeding. (2) This Schedule does not apply to a registered bank within the meaning of section 2(1) of the Reserve Bank of New Zealand Act 1989 that is subject to statutory management under that Act.

Article 2. Definitions For the purposes of this Schedule: (a) foreign proceeding means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant [page 507]

to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation;

(b) foreign main proceeding means a foreign proceeding taking place in the State where the debtor has the centre of its main interests; (c) foreign non-main proceeding means a foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor has an establishment within the meaning of subparagraph (f) of this article; (d) foreign representative means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor’s assets or

affairs or to act as a representative of the foreign proceeding; (e) foreign court means a judicial or other authority competent to control or supervise a foreign proceeding; (f)

establishment means any place of operations where the debtor carries out a non-transitory economic activity with human means and goods or services;

(g) High Court or Court means the High Court of New Zealand; (h) insolvency administrator means— (i)

a statutory manager appointed under subpart 4 of Part 4 of the Insurance (Prudential Supervision) Act 2010; or

(ii) the Official Assignee within the meaning of section 3 of the Insolvency Act 2006; or (iii) a statutory manager appointed under section 38 of the Corporations (Investigation and Management) Act 1989; or (iv) a receiver within the meaning of section 2(1) of the Receiverships Act 1993; or (v) a liquidator appointed under Part 16 of the Companies Act 1993 or under any other Act; or (vi) an administrator within the meaning of section 239B of the Companies Act 1993; (i)

New Zealand insolvency proceeding means a collective judicial or administrative proceeding pursuant to the law in New Zealand relating to the bankruptcy, liquidation, receivership, judicial management, statutory management, or voluntary administration of a debtor, or the reorganisation of the debtor’s affairs, under which the assets and affairs of the debtor are administered, or the assets of the debtor are or will be realised, for the benefit of secured or unsecured creditors.

Schedule 1 article 2 paragraph (h)(i): substituted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

Article 3. International obligations of New Zealand No action may be taken under this Schedule that conflicts with an obligation of New Zealand arising out of any treaty or other form of

agreement to which New Zealand is a party with one or more other States. [page 508]

Article 4. High Court to have jurisdiction The functions referred to in this Schedule relating to recognition of foreign proceedings and co-operation with foreign courts shall be performed by the High Court.

Article 5. Authorisation of insolvency administrator to act in a foreign State An insolvency administrator is authorised to act in a foreign State on behalf of a New Zealand insolvency proceeding, as permitted by the applicable foreign law.

Article 6. Public policy exception (1) Nothing in this Schedule prevents the High Court from refusing to take an action governed by this Schedule if the action would be manifestly contrary to the public policy of New Zealand. (2) Before the Court refuses to take an action under paragraph (1) of this article, the Court shall consider whether it is necessary for the SolicitorGeneral to appear and be heard on the question of the public policy of New Zealand.

Article 7. Additional assistance under other laws Nothing in this Schedule limits the power of a court or an insolvency administrator to provide additional assistance to a foreign representative under other laws of New Zealand.

Article 8. Interpretation In the interpretation of this Schedule, regard is to be had to its international

origin and to the need to promote uniformity in its application and the observance of good faith.

Chapter II. Access of foreign representatives and creditors to courts in New Zealand Article 9. Right of direct access A foreign representative is entitled to apply directly to the High Court.

Article 10. Limited jurisdiction The sole fact that an application pursuant to this Schedule is made to the High Court by a foreign representative does not subject the foreign representative or the foreign assets and affairs of the debtor to the jurisdiction of the Court for any purpose other than the application.

Article 11. Application by a foreign representative to commence a New Zealand insolvency proceeding A foreign representative is entitled to apply to commence a New Zealand insolvency proceeding if the conditions for commencing such a proceeding are otherwise met. [page 509]

Article 12. Participation of a foreign representative in a New Zealand insolvency proceeding Upon recognition by the High Court of a foreign proceeding, the foreign representative is entitled to participate in a New Zealand insolvency proceeding regarding the debtor.

Article 13. Access of foreign creditors to a New Zealand insolvency proceeding

Subject to paragraph (2) of this article, foreign creditors have the same (1) rights regarding the commencement of, and participation in, a New Zealand insolvency proceeding as creditors in New Zealand. (2) Paragraph (1) of this article does not affect the ranking of claims in a New Zealand insolvency proceeding or the exclusion of foreign tax and social security claims from such a proceeding.

Article 14. Notification to foreign creditors of a New Zealand insolvency proceeding (1) Whenever, under a New Zealand insolvency proceeding, notification is to be given to creditors in New Zealand, such notification shall also be given to the known creditors that do not have addresses in New Zealand. The High Court may order that appropriate steps be taken with a view to notifying any creditor whose address is not yet known. (2) Such notification shall be made to the foreign creditors individually, unless the Court considers that, under the circumstances, some other form of notification would be more appropriate. No letters rogatory or other, similar formality are required. (3) When a notification of commencement of a proceeding is to be given to foreign creditors, the notification shall: (a) indicate a reasonable time period for filing claims and specify the place for their filing; (b) indicate whether secured creditors need to file their secured claims; and (c) contain any other information required to be included in such a notification to creditors pursuant to the law of New Zealand and the orders of the Court.

Chapter III. Recognition of a foreign proceeding and relief Article 15. Application for recognition of a foreign proceeding (1) A foreign representative may apply to the High Court for recognition of the foreign proceeding in which the foreign representative has been appointed.

(2) An application for recognition shall be accompanied by: (a) a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or (b) a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or [page 510] (c) in the absence of evidence referred to in subparagraphs (a) and (b), any other evidence acceptable to the Court of the existence of the foreign proceeding and of the appointment of the foreign representative. (3) An application for recognition shall also be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative. (4) The Court may require a translation of documents supplied in support of the application for recognition into an official language of New Zealand.

Article 16. Presumptions concerning recognition (1) If the decision or certificate referred to in paragraph (2) of article 15 indicates that the foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2 and that the foreign representative is a person or body within the meaning of subparagraph (d) of article 2, the High Court is entitled to so presume. (2) The Court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised. (3) In the absence of proof to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor’s main interests.

Article 17. Decision to recognise a foreign proceeding

(1) Subject to article 6, a foreign proceeding shall be recognised if: (a) the foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2; (b) the foreign representative applying for recognition is a person or body within the meaning of subparagraph (d) of article 2; (c) the application meets the requirements of paragraph (2) of article 15; and (d) the application has been submitted to the High Court. (2) The foreign proceeding shall be recognised: (a) as a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or (b) as a foreign non-main proceeding if the debtor has an establishment within the meaning of subparagraph (f) of article 2 in the foreign State. (3) An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time. (4) As soon as practicable, after the Court recognises the foreign proceeding under paragraph (1) of this article, the foreign representative shall notify the debtor, in the prescribed form, that the application has been recognised. (5) The provisions of articles 15, 16, 17, and 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have ceased to exist. [page 511]

Article 18. Subsequent information From the time of filing the application for recognition of the foreign proceeding, the foreign representative shall inform the High Court promptly of: (a) any substantial change in the status of the recognised foreign proceeding or the status of the foreign representative’s appointment; and

any other foreign proceeding regarding the same debtor that becomes (b) known to the foreign representative.

Article 19. Relief that may be granted upon application for recognition of a foreign proceeding (1) From the time of filing an application for recognition until the application is decided upon, the High Court may, at the request of the foreign representative, where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a provisional nature, including: (a) staying execution against the debtor’s assets; (b) entrusting the administration or realisation of all or part of the debtor’s assets located in New Zealand to the foreign representative or another person designated by the Court, in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; and (c) any relief mentioned in paragraph (1)(c) and (d) of article 21. (2) As soon as practicable, after the Court grants relief under paragraph (1) of this article, the foreign representative shall notify the debtor, in the prescribed form, of the relief that has been granted. (3) Unless extended under paragraph (1)(f) of article 21, the relief granted under this article terminates when the application for recognition is decided upon. (4) The Court may refuse to grant relief under this article if such relief would interfere with the administration of a foreign main proceeding.

Article 20. Effects of recognition of a foreign main proceeding (1) Upon recognition by the High Court of a foreign proceeding that is a foreign main proceeding, (a) commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations, or liabilities is stayed;

(b) execution against the debtor’s assets is stayed; and (c) the right to transfer, encumber, or otherwise dispose of any assets of the debtor is suspended. (2) Paragraph (1) of this article does not prevent the Court, on the application of any creditor or interested person, from making an order, subject to such conditions as the Court thinks fit, that the stay or suspension does not apply in respect of any particular action or proceeding, execution, or disposal of assets. (3) Paragraph (1)(a) of this article does not affect the right to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor. [page 512] (4) Paragraph (1) of this article does not affect the right to request the commencement of a New Zealand insolvency proceeding or the right to file claims in such a proceeding.

Article 21. Relief that may be granted upon recognition of a foreign proceeding (1) Upon recognition by the High Court of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the Court may, at the request of the foreign representative, grant any appropriate relief, including: (a) staying the commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations, or liabilities, to the extent they have not been stayed under paragraph (1)(a) of article 20; (b) staying execution against the debtor’s assets to the extent it has not been stayed under paragraph (1)(b) of article 20; (c) suspending the right to transfer, encumber, or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph (1)(c) of article 20;

(d) providing for the examination of witnesses, the taking of evidence, or the delivery of information concerning the debtor’s assets, affairs, rights, obligations, or liabilities; (e) entrusting the administration or realisation of all or part of the debtor’s assets located in New Zealand to the foreign representative or another person designated by the Court; and (f)

extending relief granted under paragraph (1) of article 19.

(2) Upon recognition by the High Court of a foreign proceeding, whether main or non-main, the Court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in New Zealand to the foreign representative or another person designated by the Court, provided that the Court is satisfied that the interests of creditors in New Zealand are adequately protected. (3) In granting relief under this article to a representative of a foreign non-main proceeding, the Court must be satisfied that the relief relates to assets that, under the law of New Zealand, should be administered in the foreign nonmain proceeding or concerns information required in that proceeding.

Article 22. Protection of creditors and other interested persons (1) In granting or denying relief under article 19 or article 21, or in modifying or terminating relief under paragraph (3) of this article, the High Court must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected. (2) The Court may subject relief granted under article 19 or article 21 to conditions it considers appropriate. (3) The Court may, at the request of the foreign representative or a person affected by relief granted under article 19 or article 21, or at its own motion, modify or terminate such relief. (4) The Court must, on application of the statutory manager, terminate the relief granted under article 19 or article 21 if— [page 513]

(a) an application for recognition has been made in respect of a debtor that is a registered bank within the meaning of section 2(1) of the Reserve Bank of New Zealand Act 1989; (b) the Court has granted that application or the Court has granted relief under article 19; and (c) the debtor is placed in statutory management after that application or relief has been granted.

Article 23. Actions to avoid acts detrimental to creditors (1) Upon recognition by the High Court of a foreign proceeding, the foreign representative has standing to initiate any action that an insolvency administrator may take in respect of a New Zealand insolvency proceeding that relates to a transaction (including any gifts or improvement of property or otherwise), security, or charge that is voidable or may be set aside or altered. (2) When the foreign proceeding is a foreign non-main proceeding, the Court must be satisfied that the action relates to assets that, under the law of New Zealand, should be administered in the foreign non-main proceeding. (3) To avoid any doubt, nothing in paragraph (1) of this article affects the doctrine of relation back as it is applied in New Zealand.

Article 24. Intervention by a foreign representative in New Zealand insolvency proceeding Upon recognition by the High Court of a foreign proceeding, the foreign representative may, provided the requirements of the law of New Zealand are met, intervene in any proceeding in which the debtor is a party.

Chapter IV. Co-operation with foreign courts and foreign representatives Article 25. Co-operation and direct communication between the High Court and foreign courts or foreign representatives (1) In matters referred to in paragraph (1) of article 1, the High Court shall co-

operate to the maximum extent possible with foreign courts or foreign representatives, either directly or through an insolvency administrator. (2) The Court is entitled to communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives.

Article 26. Co-operation and direct communication between the insolvency administrator and foreign courts or foreign representatives (1) In matters referred to in paragraph (1) of article 1, an insolvency administrator shall, in the exercise of its functions and subject to the supervision of the High Court, co-operate to the maximum extent possible with foreign courts or foreign representatives. (2) The insolvency administrator is entitled, in the exercise of its functions and subject to the supervision of the Court, to communicate directly with foreign courts or foreign representatives. [page 514]

Article 27. Forms of co-operation Co-operation referred to in articles 25 and 26 may be implemented by any appropriate means, including: (a) appointment of a person or body to act at the direction of the High Court; (b) communication of information by any means considered appropriate by the Court; (c) co-ordination of the administration and supervision of the debtor’s assets and affairs; (d) approval or implementation by courts of agreements concerning the co-ordination of proceedings; and (e) co-ordination of concurrent proceedings regarding the same debtor.

Chapter V. Concurrent proceedings

Article 28. Commencement of a New Zealand insolvency proceeding after recognition of a foreign main proceeding After recognition by the High Court of a foreign main proceeding, a New Zealand insolvency proceeding may be commenced only if the debtor has assets in New Zealand; the effects of that proceeding shall be restricted to the assets of the debtor that are located in New Zealand and, to the extent necessary to implement co-operation and co-ordination under articles 25, 26, and 27, to other assets of the debtor that, under the law of New Zealand, should be administered in that proceeding.

Article 29. Co-ordination of a New Zealand insolvency proceeding and a foreign proceeding Where a foreign proceeding and a New Zealand insolvency proceeding are taking place concurrently regarding the same debtor, the High Court shall seek co-operation and co-ordination under articles 25, 26, and 27, and the following shall apply: (a) when the New Zealand insolvency proceeding is taking place at the time the application for recognition of the foreign proceeding is filed, (i)

any relief granted under article 19 or article 21 must be consistent with the New Zealand insolvency proceeding;

(ii) if the foreign proceeding is recognised in New Zealand as a foreign main proceeding, article 20 does not apply; (b) when the New Zealand insolvency proceeding commences after recognition, or after the filing of the application for recognition, of the foreign proceeding, (i)

any relief in effect under article 19 or article 21 shall be reviewed by the Court and shall be modified or terminated if inconsistent with the New Zealand insolvency proceeding; and

(ii) if the foreign proceeding is a foreign main proceeding, the stay and suspension referred to in paragraph (1) of article 20 shall be [page 515]



modified or terminated pursuant to paragraph (2) of article 20 if inconsistent with the New Zealand insolvency proceeding;

(c) in granting, extending, or modifying relief granted to a representative of a foreign non-main proceeding, the Court must be satisfied that the relief relates to assets that, under the law of New Zealand, should be administered in the foreign non-main proceeding or concerns information required in that proceeding.

Article 30. Co-ordination of more than one foreign proceeding In matters referred to in paragraph (1) of article 1, in respect of more than one foreign proceeding regarding the same debtor, the High Court shall seek cooperation and co-ordination under articles 25, 26, and 27, and the following shall apply: (a) any relief granted under article 19 or article 21 to a representative of a foreign non-main proceeding after recognition of a foreign main proceeding must be consistent with the foreign main proceeding; (b) if a foreign main proceeding is recognised after recognition, or after the filing of an application for recognition, of a foreign non-main proceeding, any relief in effect under article 19 or article 21 shall be reviewed by the Court and shall be modified or terminated if inconsistent with the foreign main proceeding; and (c) if, after recognition of a foreign non-main proceeding, another foreign non-main proceeding is recognised, the Court shall grant, modify, or terminate relief for the purpose of facilitating co-ordination of the proceedings.

Article 31. Presumption of insolvency based on recognition of a foreign main proceeding In the absence of evidence to the contrary, recognition of a foreign main proceeding is, for the purpose of commencing a New Zealand insolvency proceeding, proof that the debtor is insolvent.

Article 32. Rule of payment in concurrent proceedings

Without prejudice to secured claims or rights in rem, a creditor who has received part payment in respect of its claim in a proceeding pursuant to a law relating to insolvency in a foreign State may not receive a payment for the same claim in a New Zealand insolvency proceeding regarding the same debtor, so long as the payment to the other creditors of the same class is proportionately less than the payment the creditor has already received.

[page 516]

Schedule 2 s 13

Consequential amendments Omitted

[page 517]

Appendix: Insolvency Law Reform Consultation and Discussion Documents Law commission reports1 —

—

—

“Cross Border Insolvency: Should New Zealand Adopt the UNCITRAL Model Law on Cross-Border Insolvency?”, Wellington: Report 52, February 1999. “Priority Debts in the Distribution of Insolvent Estates”, Wellington: Study Paper 2, An Advisory Report to the Ministry of Commerce, October 1999. “Insolvency Law Reform: Promoting Trust and Confidence”, Wellington: Study Paper 11, An Advisory Report to the Ministry of Economic Development, May 2001.

Ministry of economic development2 — —

— — —

David Brown Corporate Rescue Report for the Ministry of Economic Development, November 2000. The Insolvency Law Review: Tier One Discussion Documents Wellington, Competition and Enterprise Branch, Ministry of Economic Development, January 2001. Bankruptcy Administration Wellington: Competition and Enterprise Branch, Ministry of Economic Development, January 2001. Phoenix Companies Wellington, Competition and Enterprise Branch, Ministry of Economic Development, January 2001. Priority Debts in the Distribution of Insolvent Estates Wellington, Competition and Enterprise Branch, Ministry of Economic Development, January 2001.

Voidable Transactions Wellington: Competition and Enterprise — Branch, Ministry of Economic Development, January 2001. — Charles River Associates (Asia Pacific) Ltd Review of the Law Commission Report “Insolvency Law Reform: Promoting [page 518] —

—

— — —

Trust and Confidence” Wellington: Ministry of Economic Development, June 2001. Insolvency Law Review: Tier Two Consultation Points Wellington, Competition and Enterprise Branch, Ministry of Economic Development, May 2001. Business Rehabilitation: Discussion Document Wellington, Regulatory and Competition Branch, Ministry of Economic Development, May 2002. No Asset Procedure Paper Wellington, Ministry of Economic Development, April 2002. Draft Insolvency Reform Bill Discussion Document Wellington, Ministry of Economic Development, April 2004. Insolvency Practitioner Regulation: Options for Change Wellington, Competition, Trade and Investment Branch, Ministry of Economic Development, October 2006.

1.

2.

Index References are to paragraph numbers and legislation sections The key to legislation and sections are as follows: CA IA06 ICB RA

Companies Act 1993 Insolvency Act 2006 Insolvency (Cross-border) Act 2006 Receiverships Act 1993

A Account receivable definition …. RA 2 Accounting period definition …. CA 2 Accounting records assignee auditor-general may audit …. IA06 229 delivery to …. IA06 142 destruction of records by …. IA06 230 final statement of receipts and payments …. IA06 228 requirement to keep …. IA06 227 return of records by …. IA06 230 liability if proper records not kept …. CA 300 receiver to keep …. RA 22 Accounts deed administrator must file …. CA 239ACZ

liquidator, duties of …. CA 256 Acts of bankruptcy avoidance of creditors …. IA06 21 bankruptcy notice, failure to comply with …. IA06 17 categorisation of …. II.4 concealment of property …. IA06 27 creditors admission of insolvency to …. IA06 23 avoidance of …. IA06 21 disposition of property to trustee for benefit of …. IA06 18 intent to prefer …. IA06 19 departure from New Zealand …. IA06 20 disposition of property to trustee for benefit of creditors …. IA06 18 order that disposition not act of bankruptcy …. IA06 41 execution process possession under …. IA06 24 return that sufficient goods not found under …. IA06 26 fraud …. IA06 19 intent to prefer a creditor …. IA06 19 notice of suspension of debts …. IA06 22 possession under execution process …. IA06 24 removal of property …. IA06 27 requirement for …. IA06 16 trust money unsatisfied judgment for non-payment …. IA06 28 writ of sale …. IA06 25 Address for service definition …. CA 2

Adjournment creditors’ meeting, of …. IA06 84 liquidation application, of …. CA 239ABV watershed meeting, of …. CA 239AZ Adjudication act of bankruptcy, requirement for …. IA06 16 advertising …. IA06 65 annulment application …. IA06 66 appeal pending …. IA06 66 execution process must not be begun or continued …. IA06 77 annulment see Annulment bankrupt death of …. IA06 78 debtor adjudicated as …. IA06 36, IA06 63 bankruptcy commences on …. IA06 55 court, by …. IA06 11 options of court …. IA06 36 refusal to adjudicate …. IA06 37 creditor’s application …. IA06 14 court may halt …. IA06 38 halting judgment under appeal …. IA06 42 power of court …. IA06 38 underlying debt, to determine …. IA06 43 more than one application, orders where …. IA06 39 more than one debtor, orders where …. IA06 40 options of court …. IA06 36

substitution of creditor …. IA06 44 when application may be made …. IA06 13 withdrawal of application …. IA06 15 creditor’s claim payable after …. IA06 253 date of …. IA06 56 debtor’s application, IA06 12 automatic adjudication …. IA06 47 joint, by two or more debtors …. IA06 48 statement of affairs to be filed …. IA06 46 steps for filing …. IA06 49 when debtor may file …. IA06 45 execution process advertising of adjudication …. IA06 77 another court, issue by …. IA06 33 application, effect of filing …. IA06 31 other creditors, by …. IA06 32 withdrawal of dismissal of application …. IA06 34 final and binding …. IA06 61 lawyers’ costs …. IA06 191 meaning of, IA06 35 nature of …. IA06 10 official assignee, notification of …. IA06 58 persons jointly adjudicated bankrupt application of joint and separate estates …. IA06 137 second accounts …. IA06 136 presumption that act or transaction entered into after …. IA06 60 proceedings, effect on …. IA06 76

recording date and time of …. IA06 57 second bankruptcy …. IA06 135 sheriff, notice to …. IA06 109 setting aside rights conferred on assignee …. IA06 112 transaction in good faith and for value after …. IA06 113 what happens on …. IA06 64 Administration bankrupt’s property see Administration of bankrupt’s property insolvent deceased estates see Insolvent deceased estates voluntary see Voluntary administration Administration of bankrupt’s property committee to assist assignee …. IA06 99 discretion of assignee …. IA06 224 expert to assist assignee …. IA06 99 land subject to mortgage …. IA06 122 priority of payments see Priority of payments shares see Shares undistributed money see Undistributed money Administrator insolvent deceased estates see Insolvent deceased estates voluntary administration see Voluntary administration Advertisement adjudication, of …. IA06 65 annulment application …. IA06 66 appeal pending …. IA06 66 execution process must not be begun or continued …. IA06 77 receiver, appointment of …. IA06 52

Amalgamation approval of …. CA 236 court additional orders …. CA 237 powers …. CA 236 Annual meeting definition …. CA 2 Annual report concise, definition …. CA 2 definition …. CA 2 Annulment assignee, power of …. IA06 310 court, power of …. IA06 309 effect of …. IA06 311 overview …. II.4 power assignee, of …. IA06 310 court, of …. IA06 309 Appeal assignee’s decision, from …. IA06 226 court, power of …. IA06 414 proceedings not halted pending …. IA06 415 suspension of adjudication pending …. IA06 416 Application adjudication, for see Adjudication court, to, regarding creditor’s claim see Creditors’ claims (bankruptcy) discharge from bankruptcy see Discharge from bankruptcy

summary instalment order see Summary instalment order Appointee insolvent deceased estates see Insolvent deceased estates Appointment administrator, in voluntary administration see Voluntary administration deed administrator, of see Deed of company arrangement director, of see Director liquidator, of see Liquidator Arrangement approval, CA 236 court additional orders …. CA 237 powers …. CA 236 definition …. CA 235 Assets bankrupt my retain …. IA06 158 charge or hire purchase agreement, not affecting rights under …. IA06 160 consent of creditors …. IA06 159 exercise of right by relative or dependant …. IA06 162 rights to other assets not conferred …. IA06 161 distribution …. II.4 priority of payments see Priority of payments Assignee accounting records see Accounting records additional rights and remedies …. IA06 402 annulment of adjudication …. IA06 310

another assignee, acting on behalf of …. IA06 400 appeal from decision of …. IA06 226 assignment of right to sue …. IA06 221 bank accounts …. IA06 220 committee to assist …. IA06 99 creditor’s claim see Creditors’ claims (bankruptcy) debt, power to obtain evidence of …. IA06 236 definition …. IA06 3 deputy …. IA06 300 directions, application to court for …. IA06 225 discharged bankrupt must assist …. IA06 307 disclaimer of onerous property see Disclaimer of onerous property discretion of …. IA06 224 disqualification …. IA06 403 documents, bankrupt to deliver …. IA06 142 expert to assist …. IA06 99 information, duties of bankrupt regarding …. IA06 142 financial information …. IA06 146 income and expenditure …. IA06 144 personal information, changes in …. IA06 145 property, information about …. IA06 143 insolvent deceased estate, court order for administration …. IA06 385 investment power …. IA06 220 name …. IA06 401 nomination of, by official assignee …. IA06 59 notice to creditors …. IA06 223 officer of court …. IA06 399

order of release assignee must apply for …. IA06 408 effect of …. IA06 409 subsequent order …. IA06 410 order that money due to bankrupt assigned to …. IA06 106 powers …. IA06 217, IA06 Sch 1 proceedings by, when bankrupt is partner …. IA06 222 property vesting in …. II.4 protection of …. IA06 405 receiver, appointment as see Receiver remuneration …. IA06 406 rates of …. IA06 407 replacement, property vesting in …. IA06 103 rights and remedies, additional …. IA06 402 seal, use of …. IA06 401 title of purchaser from …. IA06 219 vacation of office by …. IA06 404 Assignment right to sue, of assignee, by …. IA06 221 liquidator, by …. III.6, CA 260A Associate investigation of company controlled by …. IA06 182 meaning of …. IA06 183 Attachment good faith, in …. IA06 114 completion of attachment …. IA06 115

Automatic discharge see Discharge from bankruptcy

B Balance date definition …. CA 2 Bank accounts assignee, obligations of …. IA06 220 bankrupt, of assignee may require bank to search account records …. IA06 157 bank must notify assignee of …. IA06 156 Bankrupt adjudication of debtor as …. IA06 36, IA06 63 administration of estate see Administration of bankrupt’s property allowance to …. IA06 163 assets, retention of see Assets consequences of bankruptcy …. IA06 7 control of, during bankruptcy …. IA06 147 creditors’ meetings see Creditors’ meetings death, effect on adjudication …. IA06 78 definition …. IA06 3 documents, right to inspect …. IA06 153 duties see Duties of bankrupt entry into business prohibited …. IA06 149 money, retaining …. IA06 164 motor vehicle …. II.4 offences by see Offences payment of debts see Payment of debts

property of see Property protected income …. II.4 provision for …. IA06 158 register of discharged and undischarged …. IA06 62, IA06 308 surplus, payment to …. IA06 281 transactions in good faith and for value after adjudication …. IA06 113 vacation of land or buildings …. IA06 152 validity of property transactions with …. IA06 113 Bankruptcy acts of see Acts of bankruptcy adjudication see Adjudication administration of estate see Administration of bankrupt’s property alternatives to …. IA06 8 basic structure of …. II.4 commencement on adjudication …. IA06 55 consequences …. IA06 7 control of bankrupt during …. IA06 147 cost of filing …. II.4 discharge from see Discharge from bankruptcy nature of …. IA06 7 notice see Bankruptcy notice objective of …. II.4 persons jointly adjudicated bankrupt application of joint and separate estates …. IA06 137 second accounts …. IA06 136 process …. IA06 9 second …. IA06 134

notice to assignee of application for adjudication …. IA06 135 Bankruptcy notice failure to comply with …. IA06 17 act of bankruptcy …. IA06 17 form …. IA06 17, IA06 29 overstatement of amount owing …. IA06 30 requirements …. II.4 service …. IA06 17 time for compliance …. II.4 Bankruptcy surplus account application of money held in …. IA06 286 matters concerning …. IA06 289 payment from approval of official assignee …. IA06 288 requisition of minister, requirement for …. IA06 287 public trust to pay to …. IA06 285 Beneficiary insolvent deceased estates see Insolvent deceased estates Board of directors definition …. CA 2, CA 127 delegation of powers …. CA 130 management powers …. CA 128 meaning of …. CA 127 powers delegation of …. CA 130 management, of …. CA 128 proceedings …. CA 160

Buildings vacation of, by bankrupt …. IA06 153 Business discharge from bankruptcy, restriction following …. IA06 299 fraudulently carrying on …. III.7, CA 380 prohibition of bankrupt entering …. IA06 149

C Calls receiver’s power to make …. RA 15 unpaid, company may prove for …. IA06 128, IA06 271 Charge court may set aside …. CA 299 definition …. IA06 3, CA 2 insolvent see Insolvent charges void, proof where …. IA06 269 voidable by liquidator …. CA 293 additional provisions …. CA 296 defence …. III.6 other orders by court …. CA 295 overview …. II.4 partial repayment, order for …. III.6, CA 295 procedure for setting aside …. III.6, CA 294 voluntary administration see Voluntary administration Child support deductions legislative reforms …. III.8 Class

definition …. CA 2 Companies Act 1993 amendment to …. III.2 directors’ compliance with …. CA 134 interpretation …. III.3, CA 2 offences …. CA 373 defences …. CA 376 penalties for offences …. CA 373 non-compliance by board or company, CA 374 proceedings for offences …. CA 375 structure …. III.4 Companies Amendment Act 2006 commencement …. III.1 effect …. III.2 history …. III.1 interpretation …. III.3 objectives …. I.1 overview …. I.1 Company definition …. IA06 3, CA 2, CA 235, CA 239C, RA 2 exempt, definition …. CA 2 existing, definition …. CA 2 investigation, where controlled by bankrupt and associate …. IA06 182 meaning of associate …. IA06 183 management, offences in relation to …. IA06 436 penalties …. IA06 437 persons prohibited from managing companies …. CA 382

appeals …. CA 385A contravention, liability for …. CA 384 registrar, by …. CA 385, CA 386 phoenix see Phoenix companies Composition approval court, by …. IA06 315 procedure following …. IA06 321 procedure for …. IA06 320 deadlines for steps for …. IA06 320 confirming resolution …. IA06 313 court approval, requirement for …. IA06 315 procedure following …. IA06 321 procedure for …. IA06 316 exclusive jurisdiction …. IA06 323 deed of …. IA06 317 effect of …. IA06 318 execution, steps for …. IA06 320 law and practice in bankruptcy, application of …. IA06 324 enforcement …. IA06 322 exclusive jurisdiction of court …. IA06 323 order that proposal not act of bankruptcy …. IA06 41 partnership members, with …. IA06 314 preliminary resolution, acceptance by passing …. IA06 312 resolution confirming …. IA06 313

preliminary …. IA06 312 unpaid balances, liability of bankrupt for …. IA06 319 Compromise approval of …. CA 236 costs of …. CA 234 court additional orders …. CA 237 powers …. CA 232, CA 236 definition …. CA 227 effect …. CA 230 liquidation, effect in …. CA 233 application …. CA 239 nature of …. III.4 powers of court …. CA 232 procedure …. III.4 proponent, definition …. CA 227 proposal …. CA 228 notice of …. CA 229 variation …. CA 231 Consent creditors, of, offences in relation to obtaining …. IA06 425 Constitution definition …. CA 2 directors’ compliance with …. CA 134 Consumer goods hire purchase see Hire purchase consumer goods Contract

co-contractor of bankrupt …. IA06 190 entry into prior to adjudication assignee may continue or disclaim …. IA06 187 termination by other contracting party …. IA06 188 joint contractual liability …. IA06 190 transaction in ignorance of adjudication good discharge by payment of money or delivery of property …. IA06 189 Corporations Insolvency Act 2006, not subject to …. IA06 6 Costs compromise, of …. CA 234 creditor’s claim, application to court …. IA06 242 filing for bankruptcy …. II.4 judgment creditor may prove for …. IA06 270 recovery by assignee …. IA06 191 Court annulment of adjudication …. IA06 309 appeals …. IA06 414 proceedings not halted pending …. IA06 415 application to, regarding creditor’s claim see Creditors’ claims (bankruptcy) composition, approval of …. IA06 315 procedure following …. IA06 321 procedure for …. IA06 316 definition …. IA06 3, CA 2, RA 2 discharge from bankruptcy see Discharge from bankruptcy disqualification of directors by …. CA 383 liability for contravention …. CA 384

extension of time …. IA06 417 filing of proposal in …. IA06 328 jurisdiction …. IA06 411 District Court judge exercising …. IA06 413 exclusive …. IA06 323 registrar exercising …. IA06 413 powers of …. IA06 411 District Court judge exercising …. IA06 413 registrar exercising …. IA06 413 proposals approval by …. IA06 333 effect …. IA06 334 enforcement steps, permission for …. IA06 335 filing of …. IA06 328 real nature of transactions, looking at …. IA06 412 rehearings …. IA06 414 Credit defences to summary offences of obtaining …. IA06 434 no-asset procedure offence of obtaining …. IA06 371 restrictions on obtaining …. IA06 366 offence of obtaining defences …. IA06 434 no-asset procedure …. IA06 371 summary instalment order …. IA06 360 offences in relation to …. IA06 424 summary instalment order, offence of obtaining …. IA06 360

Creditor acts of bankruptcy see Acts of bankruptcy admission of insolvency to …. IA06 23 application for adjudication see Adjudication compromises with see Compromise consent of, offences in relation to obtaining …. IA06 425 definition …. CA 227, CA 235, CA 239C, CA 240, RA 2 disposition of property to trustee for benefit of …. IA06 18 order that disposition not act of bankruptcy …. IA06 41 documents, right to inspect …. IA06 100 intent to prefer …. IA06 19 judgment see Judgment creditor meetings see Creditors’ meetings preferential see Preferential creditors proposal to, alternative to bankruptcy …. IA06 8 role in bankruptcy …. IA06 79 secured see Secured creditor written statement to, offence in relation to …. IA06 421 Creditors’ claims (bankruptcy) adjudication, payable after …. IA06 253 application to court costs orders …. IA06 242 parties to …. IA06 240 which court may hear …. IA06 241 cancellation by court …. IA06 238 form assignee

examination by …. IA06 234 notice of grounds of rejection by …. IA06 235 creditor must submit …. IA06 233 definition …. IA06 231 formalities, compliance with …. IA06 233 procedure for proving debt …. IA06 233 notice to assignee to admit or reject …. IA06 237 rejection court’s power to modify or reverse …. IA06 239 grounds of, notice of …. IA06 235 notice to assignee to admit or reject …. IA06 237 summary instalment order …. IA06 356 trade discounts, deduction of …. IA06 268 uncertainty application to court to determine amount of claim …. IA06 252 estimation of amount of, by assignee …. IA06 251 Creditors’ claims (liquidation) admissible claims …. CA 303 amount ascertaining …. CA 306 claim not of ascertained amount …. CA 307 bankruptcy rules, application …. CA 302 debts payable after commencement of liquidation …. CA 309 fines and penalties, not effect on …. CA 308 interest on …. CA 311 mutual credit and set-off …. CA 310 preferential claims …. CA 312, CA Sch 7

secured creditors duties …. CA 305 priority of payments to …. CA Sch 7 rights …. CA 305 surplus assets …. CA 313 unsecured creditors …. CA 304 Creditors’ meetings audio-visual links …. II.4 bankruptcy adjournment by chairperson …. IA06 84 assignee duty to call …. IA06 71 report to meeting by …. IA06 85 attendance …. IA06 86 bankrupt, by …. IA06 87 non-creditors, by …. IA06 88 bankrupt attendance by …. IA06 86 questioning …. IA06 87 who may represent …. IA06 91 chairperson …. IA06 83 adjournment by …. IA06 84 conduct of …. IA06 83 first …. IA06 80 assignee must not sell bankrupt’s property before …. IA06 218 dispensing with …. IA06 73 notice of dispensing with …. IA06 74

time for …. IA06 72 minutes …. IA06 89 non-creditors, attendance by …. IA06 88 notice of documents to be sent …. IA06 75 lack of, meeting not defective …. IA06 82 number of persons for valid meeting …. IA06 90 procedure at …. IA06 331 provisional trustee must call …. IA06 330 who may represent creditors …. IA06 332 record of …. IA06 89 subsequent …. IA06 81 types …. IA06 80 valid, number of persons for …. IA06 90 voting at …. IA06 92 creditor under bill of exchange or promissory note …. IA06 96 disqualification through preferential effect …. IA06 97 electronic votes …. IA06 93 entitlement to vote …. IA06 94 partner, creditor of …. IA06 98 postal votes …. IA06 93 secured creditor, by …. IA06 95 who may represent creditor or bankrupt …. IA06 91 liquidation calling …. III.6, CA 314 chairperson …. CA Sch 5 corporations may act by representatives …. CA Sch 5

dispensing with meetings of creditors …. III.6, CA 245 irregularity or defect, effect of …. CA Sch 5 liquidator to summon …. CA 243, CA 244 methods of holding …. CA Sch 5 notice of …. CA Sch 5 postal votes …. CA Sch 5 proceedings at …. CA Sch 5 proxies …. CA Sch 5 quorum …. CA Sch 5 voting …. CA Sch 5 voting outcome determined by related entity, power of court …. III.6, CA 245A modernisation …. II.4 voluntary administration administrator must call meetings …. CA 239AJ first meeting …. CA 239AN conduct of meetings …. CA 239AK first meeting …. III.4, CA 239AN interests statement to be tabled …. III.4, CA 239AP notice of first and subsequent meetings …. CA 239AO related companies, joint meetings …. III.5, CA 239AL voting …. III.4 casting vote of administrator …. III.4 outcome determined by related entity, power of court …. CA 239AM Criminal proceedings admissibility of statement made in examination …. IA06 185 Cross-border insolvency proceedings

access of foreign representatives and creditors to courts …. ICB Sch 1 concurrent proceedings …. ICB Sch 1 definitions …. ICB Sch 1 foreign courts and representatives, cooperation with …. ICB Sch 1 High Court jurisdiction …. ICB Sch 1 international obligations of New Zealand …. ICB Sch 1 model law see Model Law on Cross-Border Insolvency recognition of foreign proceedings …. ICB Sch 1 rules applying …. ICB Sch 1 Crown, priority of claims …. III.8 Current summary instalment order definition …. IA06 3

D Date adjudication, of …. IA06 56 record of …. IA06 57 Death administrator, of …. CA 239P bankrupt, of, effect on adjudication …. IA06 78 Debtor adjudication, application for see Adjudication bankrupt, adjudication as …. IA06 36, IA06 63 Debts deed of company arrangement see Deed of company arrangement evidence, assignee’s power to obtain …. IA06 236 notice of suspension …. IA06 22

offences in relation to …. IA06 419 payment of see Payment of debts provable see Provable debts Deceased estates insolvent see Insolvent deceased estates Deed of company arrangement (DOCA) accounts, administrator to file …. CA 239ACZ approval …. III.4 binding …. III.4 contents …. III.5, CA 239ACN creditor extent to which deed binds …. CA 239ACT no acting inconsistently with, before execution …. CA 239ACQ termination by …. CA 239ADE cut-off day …. III.5 debts effect on …. CA 239ACW general debts …. CA 239ADH liability of administrator for …. CA 239ADG deed administrator accounts, filing …. CA 239ACZ administrator, references to …. CA 239ACY appointment consent in writing …. CA 239ACE disqualification from …. CA 239ACH no revocation of …. CA 239ACF two or more, of …. CA 239ACG

consent in writing to appointment …. CA 239ACE default, order to remedy …. CA 239ADT definition …. CA 239B prohibition order …. CA 239ADV removal …. CA 239ACH, CA 239ACJ remuneration …. CA 239ACK resignation …. CA 239ACH, CA 239ACI sale of shares by …. CA 239ACL supervision by court …. CA 239ADS two or more, appointment of …. CA 239ACG vacation of office …. CA 239ACH court’s power …. CA 239ADU who is …. CA 239ACC who may be appointed …. CA 239ACD definition …. CA 239B effect of …. III.5 enforcement, court may restrain …. CA 239ACV execution of …. CA 239E, CA 239ACO notice …. CA 239ADY failure to execute …. CA 239ACR notice …. CA 239ADZ indemnity of administrator …. CA 239ADL lien to secure …. CA 239ADN priority over other debts …. CA 239ADM liability of administrator debts, for …. CA 239ADG general debts …. CA 239ADH

rent, for …. CA 239ADI persons bound must not take steps to liquidate …. CA 239ACU pool companies …. CA 239AEW preparation …. CA 239ACN recovery of property, court may restrain …. CA 239ACV rent, administrator’s liability for …. CA 239ADI court may exempt administrator …. CA 239ADK non-use notice in force …. CA 239ADJ subpart 13, application …. CA 239ACM termination …. III.5, CA 239ADC court, by …. CA 239ADD creditors, by …. CA 239ADE notice …. CA 239AEA creditors’ meeting to consider …. CA 239ADF validity, court may rule on …. CA 239ACX variation by creditors …. III.5, CA 239ADA cancellation by court …. CA 239ADB creditors’ meeting to consider …. CA 239ADF watershed meeting, not fully approved at …. CA 239ABB, CA 239ACP who is bound by …. CA 239ACS Deed of composition see Composition Defences absence of intent …. IA06 427 Companies Act 1993, offences against …. CA 376 credit, offence of obtaining …. IA06 434 Directions application by assignee to court …. IA06 225

Director acts, validity of …. CA 158 administrator, effect of appointment …. CA 239X advice, use of …. CA 138 appointment consent …. CA 152 court, by …. CA 154 first directors …. CA 153 shareholders’ vote on …. CA 155 subsequent directors …. CA 153 benefits …. CA 161 ceasing to hold office …. CA 157 change of, notice of …. CA 159 Companies Act 1993 compliance with …. CA 134 penalties for non-compliance …. CA 374 constitution, compliance with …. CA 134 court, disqualification by …. CA 383 liability for contravention …. CA 384 definition …. CA 2, CA 126, RA 2 disclosure interest, of …. CA 140 application …. CA 143 share dealing, of …. CA 148 disqualification by court …. CA 383 liability for contravention …. CA 384 duties …. CA 131

obligations, regarding …. CA 136 duty of care …. CA 137 duty to act in good faith and in best interests of company …. CA 131 employees, exercise of powers in relation to …. CA 132 indemnity …. CA 162 information, use of …. CA 138 company information …. CA 145 insurance …. CA 162 interested avoidance of transactions …. CA 141 application …. CA 143 third parties, effect on …. CA 142 definition …. CA 2, CA 139 disclosure of interest …. CA 140 voting by …. CA 144 meaning of …. CA 126 number of …. CA 150 obligations, incurring …. CA 136 offences under Companies Act 1993 defences …. CA 376 penalties …. CA 374 proceedings for …. CA 375 penalties for non-compliance …. CA 374 powers, exercise of employees, in relation to …. CA 132 proper purpose, for …. CA 133 proper purpose, exercise of powers for …. CA 133 qualifications …. CA 151

reckless trading …. CA 135 removal …. CA 156 remuneration …. CA 161 resignation …. CA 157 share dealing disclosure …. CA 148 relevant interest disregarding in certain cases …. CA 147 meaning of …. CA 146 vacation of office …. CA 157 validity of acts …. CA 158 voluntary administration of company see Voluntary administration Discharge from bankruptcy absolute, application by bankrupt if conditions too onerous …. IA06 303 application bankrupt may apply for …. IA06 294 assignee, discharged bankrupt must assist …. IA06 307 automatic …. II.4 effect …. IA06 291 objection to …. IA06 292 withdrawal of …. IA06 293 time for …. IA06 290 court grant or refusal by …. IA06 298 powers of …. IA06 298 restriction on engagement in business following …. IA06 299 reversal of order of discharge by …. IA06 300

debts from which bankrupt released …. IA06 304 engagement in business following …. IA06 299 evidence of bankruptcy …. IA06 305 examination concerning report by assignee …. IA06 296 when bankrupt must be examined …. IA06 295 grant by court …. IA06 298 opposition to, when creditor must give notice of …. IA06 297 order of discharge, court may reverse …. IA06 300 partners and others not released by …. IA06 306 public register …. IA06 62, IA06 308 refusal by court …. IA06 298 reversal effect of …. IA06 302 grounds for …. IA06 301 power of court …. IA06 300 structure of …. II.4 Disclaimer of onerous property assignee election whether to disclaim …. IA06 120 power to disclaim …. IA06 117 definition of onerous property …. IA06 117 effect …. IA06 118 liquidator election …. CA 270 power of …. CA 269 netting agreements …. IA06 263

person suffering loss or damage …. IA06 119 rentcharge, liability for …. IA06 121 simplification of procedure …. II.4 Disclosure director, by see Director Distribution definition …. CA 2 priority of payments see Priority of payments Dividend definition …. CA 2 Doctrine of relation back abolition …. II.4 meaning of …. II.4 Document administrator’s right to …. CA 239AG bankrupt assignee, to give documents to …. IA06 142 right to inspect …. IA06 153 creditor’s right to inspect …. IA06 100 definition …. IA06 3, CA 2, RA 2 liquidator delivery, where document creates charge over property …. CA 264 lien over documents, restriction on enforcement …. CA 263 power to obtain …. CA 261 powers of court …. CA 266 offence in relation to …. IA06 422 receiver, in possession of …. CA 262

Duties of administrator see Voluntary administration Duties of bankrupt general duty …. IA06 138 information, regarding …. IA06 142 property delivery to assignee on demand …. IA06 140 disclosure of property acquired before discharge …. IA06 139 duties in regard to …. IA06 139 taking all required steps …. IA06 141 Duties of director duties …. CA 131 obligations, regarding …. CA 136 duty of care …. CA 137 duty to act in good faith and in best interests of company …. CA 131 obligations, duty in relation to …. CA 136 Duties of liquidator accounts, in relation to …. CA 256 creditors, views of …. CA 258 failure to comply …. CA 285 final report …. CA 257 no requirement to act in certain circumstances …. CA 254 orders to enforce …. CA 286 evidence, provisions relating to …. RA 38 principal duty …. CA 253 other duties …. CA 255 shareholders, views of …. CA 258 suspected offences, notifying …. CA 258A

report to FMA …. CA 258B

E Employees administrator, effect of appointment …. III.4, CA 239Y directors, exercise of powers in relation to …. CA 132 holiday pay …. III.8 indemnity …. CA 162 insurance …. CA 162 preferential payments to …. IA06 276, CA Sch 7 legislative reforms …. III.8 receivership, effect of …. IV.1 redundancy pay …. III.8 Enforcement composition, of …. IA06 322 no-asset procedure, no enforcement of debts where …. IA06 369 process definition …. CA 239C voluntary administration, halt during …. CA 239ABG proposal, of, permission of court …. IA06 335 voluntary administration, halt during …. CA 239ABG Entitled person definition …. CA 2 Estate insolvent deceased estates see Insolvent deceased estates Evidence debt, of, assignee’s power to obtain …. IA06 236

discharge as conclusive evidence of bankruptcy …. IA06 305 statutory demand, failure to comply …. CA 288 Examination admissibility of statements in criminal proceedings …. IA06 185 discharge from bankruptcy see Discharge from bankruptcy legal representation …. IA06 186 liquidator, by …. CA 265 self-incrimination …. CA 267 persons summoned by assignee assignee appointed receiver and manager of debtor’s property …. IA06 170 conduct of examination …. IA06 166 creditor may inspect record of examination …. IA06 168 documents, power of assignee to obtain …. IA06 171 expenses of person summoned …. IA06 167 no lien over bankrupt’s documents or records …. IA06 172 power of assignee …. IA06 165 publication of report …. IA06 169 privilege against self-incrimination …. IA06 184 public see Public examination Execution good faith, in …. IA06 114 completion of execution …. IA06 115 insolvent deceased estate, against appointee may cancel …. IA06 397 Execution process acts of bankruptcy possession under execution process …. IA06 24

return that sufficient goods not found …. IA06 26 adjudication and see Adjudication definition …. IA06 24 execution creditor retaining execution proceeds …. IA06 108 completion of execution or attachment …. IA06 115 liquidation duties of officer in …. CA 252 prior, restrictions on …. CA 251 possession under, act of bankruptcy …. IA06 24 receiver, halting where appointment of …. IA06 53 effect …. IA06 54 sheriff see Sheriff Expense fictitious …. IA06 423 Extension of time power of court …. IA06 417

F False or misleading statements offence …. IA06 440, CA 377 Falsification of records …. CA 379 Financial statements definition …. CA 2 group, definition …. CA 2 First creditors’ meeting see Creditors’ meetings Floating charge abolition of …. III.8

Fraud acts of bankruptcy …. IA06 19 Fraudulent use of property offence …. CA 378 Fraudulently carrying on business offence …. III.7, CA 380

G Gifts insolvent see Insolvent gifts Goods definition …. IA06 3 Group of companies definition …. CA 2 Guarantee voluntary administration not to trigger enforcement …. CA 239ABJ Guarantor when guarantor for bankrupt may prove …. IA06 272

H Hire purchase consumer goods assignee assignment by creditor to …. IA06 133 powers …. IA06 131 creditor assignment to assignee …. IA06 133 possession, in, proving in bankruptcy …. IA06 132

restrictions on dealing by …. IA06 130 hire purchase terms, meaning of …. IA06 129 restrictions on creditor dealing with …. IA06 130 Holding company definition …. CA 2

I Income protected, of bankrupt …. II.4 Indemnity deed administrator, of …. CA 239ADL lien to secure …. CA 239ADN priority over other debts …. CA 239ADM directors and employees …. CA 162 Indictable offences see Offences Information directors’ use of …. CA 138 company information …. CA 145 duties of bankrupt regarding …. IA06 142 financial information …. IA06 146 income and expenditure …. IA06 144 personal information, changes in …. IA06 145 property, information about …. IA06 143 liquidator’s power to obtain …. CA 261 powers of court …. CA 266 Insolvency Act 2006 Cape Town Convention and Aircraft Protocol, subject to …. IA06 445A

changes effected by …. I.1 commencement …. IA06 2 consequential amendments …. IA06 445 corporations not subject to …. IA06 6 Crown, binding …. IA06 5 drafting style …. II.1 interpretation …. IA06 3 new policy direction …. II.1 objectives …. I.1 overview …. II.1 procedures available under …. II.3 regulations …. IA06 441 repeal and revocation …. IA06 443 rights and powers under other Acts not affected …. IA06 4 rules …. IA06 442 scope …. IA06 3’6 title …. IA06 1 transitional provisions …. IA06 444 Insolvency (Cross-border) Act 2006 commencement …. ICB 2 consequential amendments …. ICB 13 Crown, binding of …. ICB 6 definitions …. V.4 history …. V.1 insolvency proceeding definition …. V.4 New Zealand, definition …. V.4 specified …. V.6

interpretation …. V.3, ICB 4, ICB 5 Model Law on Cross-Border Insolvency see Model Law on Cross-Border Insolvency objectives …. I.1 overview …. V.4 procedures …. V.5 purpose …. V.2, ICB 3 regulations …. ICB 11 specified insolvency proceedings …. ICB 10 relief …. V.5 rules, power to make …. ICB 9 scope …. V.2 title …. ICB 1 transitional provisions …. ICB 12 Insolvency law dual regime …. II.2 personal and corporate …. II.2 Insolvency practitioners licensing …. VI.1 professional membership …. VI.2 proposed register …. VI.2 qualifications …. VI.2 regulation …. VI.1 Insolvency Practitioners Bill history …. VI.1 legislative reforms …. VI.3 overview …. VI.1

Insolvency proceeding definition …. V.4 New Zealand, definition …. V.4 specified …. V.6 Insolvent charges see also Irregular transactions cancellation …. IA06 198 Land Transfer Act 1952, application of …. IA06 210 procedure …. IA06 206 limits on recovery …. IA06 208 recovery by appointee …. IA06 209 retransfer, court may order …. IA06 207 charge agreed to before specified period …. IA06 203 charge for new consideration …. IA06 199 charge in substitution …. IA06 199 defences …. II.4 presumption that bankrupt unable to pay due debts …. IA06 200 secured creditor, appropriation of payments by bankrupt to …. IA06 202 unpaid purchase price, charge given after sale of property …. IA06 201 Insolvent company definition …. CA 239C voluntary administration see Voluntary administration Insolvent deceased estates administration, definition …. IA06 378 administrator application by …. IA06 380 creditor’s notice to …. IA06 395 definition …. IA06 378

validity of acts before notice …. IA06 398 application administrator, by …. IA06 380 beneficiary, by …. IA06 381 costs of …. IA06 384 creditor, by …. IA06 381 notice of …. IA06 382 when registrar may hear …. IA06 383 appointee authority …. IA06 392 cancellation of execution against estate …. IA06 397 definition …. IA06 378 estate vesting in …. IA06 387 functions …. IA06 392 powers …. IA06 392 realisation, administration and distribution of estate …. IA06 388 assignee, court may order administration by …. IA06 385 beneficiary application by …. IA06 381 definition …. IA06 378 costs of application …. IA06 384 court order for administration …. IA06 379 assignee, by …. IA06 385 public trust, by …. IA06 385 creditor administrator, notice to …. IA06 395 application by …. IA06 381

distribution of estate …. IA06 393 estate appointee, vesting in …. IA06 387 definition …. IA06 378 execution against estate, appointee may cancel …. IA06 397 interpretation …. IA06 378 irregular transactions …. IA06 396 Māori Trustee, effect of certificate filed by …. IA06 386 notice of application …. IA06 382 public trust certificate filed by, effect of …. IA06 386 court may order administration by …. IA06 385 surplus, payment of …. IA06 394 surviving spouse, allowance to …. IA06 390 Insolvent gifts see also Irregular transactions cancellation …. IA06 204 Land Transfer Act 1952, application of …. IA06 210 procedure …. IA06 206 limits on recovery …. IA06 208 recovery by appointee …. IA06 209 retransfer, court may order …. IA06 207 defences …. II.4 overview …. II.4 presumption of …. IA06 205 Insolvent transactions see also Irregular transactions cancellation …. IA06 194 Land Transfer Act 1952, application of …. IA06 210

procedure …. IA06 206 limits on recovery …. IA06 208 recovery by appointee …. IA06 209 retransfer, court may order …. IA06 207 defences …. II.4 harmonisation of corporate and personal preference provisions …. II.4 Insolvency Act 2006, under …. II.4 meaning …. IA06 195 netting agreements, under …. IA06 261 nomenclature …. III.6 overview …. II.4 preferential effect of transactions …. III.6 presumption of …. IA06 196 running accounts …. III.6 series of, regarded as single …. IA06 197 transaction, definition …. IA06 195 transitional provision …. III.6 voidable by liquidator …. CA 292 additional provisions …. CA 296 defence …. III.6 other orders by court …. CA 295 partial repayment, order for …. III.6, CA 295 procedure for setting aside …. III.6, CA 294 voidable charges …. II.4 Insurance directors and employees …. CA 162 liquidation of licensed insurers …. CA 240A

voluntary administration of licensed insurers …. CA 239EA Interest creditors’ claims, on …. CA 311 post-adjudication, surplus remaining additional interest on contract or judgment debt …. IA06 266 prescribed rate of interest …. IA06 265 pre-adjudication …. IA06 264 prescribed rate, definition …. IA06 267 Interested director see Director Inventory definition …. RA 2 Investigation company controlled by bankrupt …. IA06 182 Investment assignee’s power of …. IA06 220 Irregular transactions cancellation, procedure for …. IA06 206 Land Transfer Act 1952, application of …. IA06 210 recovery by appointee …. IA06 209 categories …. IA06 192 defences …. II.4 definition …. II.4 extension of two-year and six-month periods …. IA06 193 insolvent charges see Insolvent charges insolvent deceased estates …. IA06 396 insolvent gifts see Insolvent gifts insolvent transactions see Insolvent transactions

Land Transfer Act 1952, application of …. IA06 210 overview …. II.4 retransfer, court may order …. IA06 207 limits on recovery …. IA06 208 subpart 7, overview …. IA06 192 what are …. IA06 192

J Judge definition …. IA06 3 Judgment creditor costs, proving for …. IA06 270 Jurisdiction court, of …. IA06 411 District Court judge exercising …. IA06 413 exclusive jurisdiction …. IA06 323 registrar exercising …. IA06 413

K Kiwisaver scheme employee deductions …. III.8

L Land mortgage, subject to see Mortgage vacation of, by bankrupt …. IA06 152 Lawyer

definition …. IA06 3 Legal representation examination, during …. IA06 186 “Limited” improper use of …. CA 381 Liquidation administrator, effect of appointment …. CA 239AC commencement …. CA 241 effect …. CA 248 record of …. CA 241A completion …. CA 249 liquidator ceases to hold office …. CA 279 compromise, effect of …. CA 233 application …. CA 239 court supervision of …. CA 284 creditors’ claims see Creditors’ claims (liquidation) creditors’ meeting see Creditors’ meeting delivery of property …. CA 274 documents to state company in …. CA 259 essential services, prohibition of refusal to supply …. CA 275 execution process duties of officer in …. CA 252 prior, restrictions on …. CA 251 fees, expenses and remuneration …. III.8 identification of property …. CA 274 licensed insurers …. CA 240A overseas company …. CA 342

overview …. III.6 pooling of assets of related companies application for …. CA 271 notice of …. CA 271A court, power to order …. CA 271 guidelines for orders …. CA 272 prior execution process, restrictions on …. CA 251 priority of fees, expenses and remuneration …. III.8 process of …. CA 240 prohibited conduct …. CA 273 repayment of money, power of court …. III.4 CA 301 return of property, power of court …. III.4, CA 301 statutory demand see Statutory demand termination by court …. CA 250 voidable transactions …. CA 239ACB transitional provision …. CA 316A voluntary administration adjournment of application for liquidation …. CA 239ABV administrator’s act in good faith must not be set aside …. CA 239ACA effect of liquidation on …. CA 239AC interface of liquidation with …. CA 239ABU relationship with …. III.4, III.5, III.6 voidable transactions …. CA 239ACB Liquidation committee constitution …. CA 315 definition …. CA 240 majorities …. CA Sch 8 meetings …. CA 315

frequency …. CA Sch 8 proceedings …. CA Sch 8 power …. CA 315 removal of member …. CA Sch 8 resignation …. CA Sch 8 vacancy in office …. CA Sch 8 Liquidation surplus account establishment …. CA 316 investment of money in …. CA 316 payments from …. CA 316 transitional provision …. CA 316B Liquidator accounts, duties in regard to …. CA 256 appointment …. CA 241 consent to …. CA 282 restriction on, after application filed for court appointment …. CA 241AA assignment of right to sue …. III.6, CA 260A completion of liquidation …. CA 279 consent to appointment …. CA 282 creditors reporting to …. III.6 views of …. CA 258 definition …. RA 2 disclaimer litigation rights, of …. III.6, CA 269 onerous property, of …. CA 269

election regarding …. CA 270 documents delivery, where document creates charge over property …. CA 264 lien over documents, restriction on enforcement …. CA 263 power to obtain …. CA 261 court, powers of …. CA 266 duties see Duties of liquidator examination by …. CA 265 self-incrimination …. CA 267 failure to comply with duties …. CA 285 final report …. CA 257 information, power to obtain …. CA 261 powers of court …. CA 266 interim …. CA 246 joint action, where two or more liquidators …. CA 242 litigation rights, disclaimer of …. III.6, CA 269 powers …. CA 260, CA Sch 6 proceedings against company, staying or restraining …. CA 247 prohibition orders …. III.6 qualifications …. III.6, CA 280 recovery by transactions at undervalue …. CA 297 transactions for inadequate or excessive consideration …. CA 298 remuneration …. CA 276 assets of company, payable out of …. CA 278 rates of …. CA 277 shareholders

consideration of views of …. CA 258 enforcement of liability of …. CA 268 supervision of …. III.6 suspected offences, notifying …. CA 258A report to FMA …. CA 258B vacancies in office of …. CA 283 validity of acts of …. CA 281 voidable charges …. CA 293 additional provisions …. CA 296 defence …. III.6 other orders by court …. CA 295 partial repayment, order for …. III.6, CA 295 procedure for setting aside …. III.6, CA 294 voidable transactions …. CA 292 additional provisions …. CA 296 defence …. III.6 other orders by court …. CA 295 partial repayment, order for …. III.6, CA 295 procedure for setting aside …. III.6, CA 294 voluntary administration appointment where company in …. CA 239ABU, CA 239J effect of appointment …. CA 239ABX former administrator …. CA 239ABY interim liquidator, court must not appoint …. CA 239ABW Local authority definition …. RA 2 receivers

appointment of …. RA 40A power of court …. RA 40B constraints on …. RA 40D powers and duties of …. RA 40C, RA Sch 1 protection for …. RA 40E Loss fictitious …. IA06 423

M Major transactions definition …. CA 129 special resolution, approval by …. CA 129 Management offences in relation to …. IA06 436 penalties …. IA06 437 persons prohibited from managing companies …. CA 382 appeals …. CA 385A contravention, liability for …. CA 384 registrar, by …. CA 385, CA 386 Māori Trustee insolvent deceased estate certificate filed, effect of …. IA06 385 Meeting creditors see Creditors’ meetings Ministry definition …. IA06 3 Model Law on Cross-Border Insolvency

Act, purpose of …. ICB 3 application in New Zealand …. V.2, ICB 7 domestic law, incorporated in …. V.1 group companies …. V.4 interpretation …. V.2 overview …. …. V.1 purpose …. V.2 scope …. V.2 Money bankrupt retaining …. IA06 164 receiver’s duty in relation to …. RA 21 undistributed see Undistributed money Mortgage definition …. RA 2 land subject to bankrupt remaining in possession until discharge …. IA06 123 transmission of interest in …. IA06 122 Mortgagee consent to sale in receivership …. RA 17 definition …. RA 2 Motor vehicles exempt property …. II.4 Multiple insolvency events information to be held indefinitely on public register …. IA06 449A

N Netting agreement

bankruptcy bilateral definition …. IA06 255 mutuality for transactions under …. IA06 258 clearing house definition …. IA06 255 recognised, definition …. IA06 255 definition …. IA06 255 disclaimer by assignee not permitted …. IA06 263 insolvent transactions …. IA06 261 multilateral definition …. IA06 255 netted balance calculation …. IA06 257 definition …. IA06 255 recognised multilateral netting agreement definition …. IA06 255 when mutuality required …. IA06 259 set-off under …. IA06 256, IA06 260 notice …. IA06 262 termination by assignee not permitted …. IA06 263 transactions under …. IA06 261 liquidation application of set-off under netting agreement …. CA 310B, CA 310F bilateral netting agreement court may set aside …. CA 310J definition …. CA 310A mutuality required …. CA 310D

clearing house certain persons may be declared to be …. CA 310K–CA 310O definition …. CA 310A recognised, definition …. CA 310A commencement of liquidation, rights not affected by …. CA 310H definitions …. CA 310A interest on claims …. CA 311 netted balance calculation …. CA 310C definition …. CA 310A recognised multilateral netting agreement definition …. CA 310A mutuality required …. CA 310E set-off under netting agreement application of …. CA 310B, CA 310F notice under s 294, not affected by …. CA 310I transactions under netting agreement …. CA 310G voluntary administration mutuality, requirement for bilateral netting agreements …. CA 239AEJ recognised multilateral netting agreements …. CA 239AEK netted balance, calculation …. CA 239AEI recognised clearing house, declaration of person as …. CA 239AEO recognised multilateral netting agreements agreements mutuality …. CA 239AEK transactions under …. CA 239AEP

rights under netting agreement …. CA 239AEN set-off under …. CA 239AEH transactions under netting agreement …. CA 239AEM New value definition …. RA 2 New Zealand appointment of Official Assignee for …. IA06 399 departure from, act of bankruptcy …. IA06 20 offence in relation to leaving …. IA06 426 No-asset procedure alternative to bankruptcy …. IA06 8 credit offence of obtaining …. IA06 371 restrictions on obtaining …. IA06 366 creditors, effect on …. II.5 debtor duties …. IA06 370 effect of procedure on …. II.5 discharge …. II.5 effect …. IA06 377A release of partners and others, and …. IA06 377B time …. IA06 377 effect of entry to …. IA06 369 enforcement of debts by creditors …. IA06 369 entry to application for …. IA06 362 criteria …. IA06 363

disqualification of debtor …. IA06 364 effect of …. IA06 369 limitations on …. II.5 notification of creditors …. IA06 365 introduction …. II.5 order that proposal not act of bankruptcy …. IA06 41 overview …. II.5 preservation order, application by assignee …. IA06 374 public register …. IA06 368 student loans …. II.5 subpart, introduction to …. IA06 361 termination …. IA06 372 application to assignee for …. IA06 376 assignee, by …. IA06 373 effect …. IA06 375 when debtor admitted to …. IA06 367 Notice assignee by, to creditors …. IA06 223 creditors’ meeting see Creditors’ meetings watershed meetings, of …. CA 239AU

O Objection automatic discharge, to …. IA06 292 withdrawal of objection …. IA06 293 Offences Companies Act 1993, under …. CA 373

debts, in relation to …. IA06 419 defences of absence of intent …. IA06 427 documents, in relation to …. IA06 422 false or misleading statements …. IA06 440 fictitious losses or expenses …. IA06 423 indictable …. IA06 419 penalties …. IA06 428 management of companies, in relation to …. IA06 436 penalties …. IA06 437 New Zealand, leaving …. IA06 426 property, in relation to …. IA06 420 prosecution by assignee certification of reasonable grounds by Crown Solicitor …. IA06 438 immunity …. IA06 439 record of transactions bankrupt deemed not to have kept or preserved …. IA06 432 failure to keep and preserve …. IA06 429 failure to keep proper, with intent to conceal …. IA06 430 penalties …. IA06 431 refusal to answer questions …. IA06 440 summary offences …. IA06 433 defences to offence of obtaining credit …. IA06 434 penalty …. IA06 435 suspected, liquidator’s duty to notify …. CA 258A report to FMA …. CA 258B written statement to creditor, in relation to …. IA06 421 Official assignee

administration by …. II.1 appointment of …. IA06 399 definition …. IA06 3, CA 240, RA 2 deputy …. IA06 399 nomination of assignee by …. IA06 58 notification of adjudication …. IA06 58 property of bankrupt vesting in …. IA06 7 role of …. I.1 Onerous property disclaimer of see Disclaimer of onerous property Ordinary resolution definition …. IA06 3, CA 2 Overseas company definition …. IA06 3, RA 2 liquidation …. CA 342 Overseas courts High Court to act in aid of …. ICB 8

P Partner bankrupt as, proceedings by assignee against …. IA06 222 Partnership composition with members …. IA06 314 Payment of debts contribution by bankrupt to …. IA06 147 default, onus of proof …. IA06 148 priority of payments see Priority of payments

Penalties Companies Act 1993 non-compliance by board of company …. CA 374 offences against …. CA 373 directors, non-compliance by …. CA 374 indictable offences …. IA06 428 records, offences relating to …. IA06 431 summary offences …. IA06 435 Personal representative definition …. CA 2 Phoenix companies abuse of arrangements …. III.7 debts, liability for …. CA 386C definition …. III.7, CA 386B director of failed company must not be director of …. CA 386A exceptions non-dormant phoenix company known by pre-liquidation name of failed company for at least 12 months …. CA 386F person named in successor company notice, for …. CA 386D temporary, while exemption application made …. CA 386E involvement in …. III.7 meaning …. III.7 overview …. III.7 Preferential creditors preferential claims …. CA 312, CA Sch 7 definition …. RA 2 receivership, in …. RA 30

priority of payments to …. IA06 274, CA Sch 7 application of payments by assignee …. IA06 107 conditions …. IA06 275, CA Sch 7 subrogation of persons if payment made …. IA06 277 Prescribed definition …. IA06 3 Priority of payments distribution of bankrupt’s assets …. IA06 273 general creditors …. IA06 280 preferential claims …. IA06 274, CA Sch 7 application of payments by assignee …. IA06 107 conditions …. IA06 275, CA Sch 7 creditors to have priority over creditors of joint bankrupt …. IA06 279 Crown claims …. III.8 distraining on goods …. IA06 278, CA Sch 7 employees, preferential payments to …. IA06 276, CA Sch 7 fees, expenses and remuneration …. III.8 layby sales …. III.8 policy grounds …. III.8 residual category …. III.8 subordination of secured debt to …. III.8, IV.3 subrogation of persons if payment made …. IA06 277, CA Sch 7 transitional provisions …. III.8 surplus, payment to bankrupt …. IA06 281 Proceedings adjudication, effect of …. IA06 76 assignee, by, when bankrupt is partner …. IA06 222

Companies Act 1993, offences against …. CA 375 defects in …. IA06 418 liquidation, staying or restraining proceedings …. CA 247 voluntary administration proceeding must not be begun or continued …. CA 239ABE Proceeds definition …. RA 2 Property acquisition after adjudication execution and attachments in good faith …. IA06 114 passing of assignee’s interest in property …. IA06 116 transaction in good faith and for value …. IA06 113 acquisition during bankruptcy …. IA06 102 after-acquired property …. II.4 assignee bankrupt must give assignee information about …. IA06 143 delivery of property on demand to …. IA06 140 order that money due to bankrupt assigned to …. IA06 106 property not passing to …. II.4 replacement, property vesting in …. IA06 103 vesting of property in …. II.4 bankrupt, of …. II.4 acquisition during bankruptcy …. IA06 102 adjudication, status on …. IA06 101 after-acquired property …. II.4 disclaimer of onerous property …. II.4

doctrine of relation back …. II.4 exempt property …. IA06 158 other laws, effect of …. IA06 105 protected income …. II.4 warrant to search and seize …. IA06 150 concealment of, act of bankruptcy …. IA06 27 contribution by bankrupt to recipient’s property Assignee, payment of value to …. IA06 213 Land Transfer Act 1952, effect of …. IA06 216 powers of court …. IA06 214 use of repayment by assignee …. IA06 215 definition …. IA06 3, CA 2, RA 2 destruction of, offence …. CA 378 disclaimer of onerous property see Disclaimer of onerous property disclosure of property acquired before discharge …. IA06 139 duties of bankrupt delivery to assignee on demand …. IA06 140 disclosure of property acquired before discharge …. IA06 139 duties in regard to …. IA06 139 taking all required steps …. IA06 141 fraudulent use of …. CA 378 offences in relation to …. IA06 420, CA 378 receivership, in, definition …. RA 2 removal of, act of bankruptcy …. IA06 27 replacement assignee, vesting in …. IA06 103 restrictions on bankrupt dealing with …. IA06 154 no power to recover property or give release or discharge …. IA06 154

no steps to defeat beneficial interest …. IA06 155 return of, power of court …. III.4, CA 301 sale of see Sale seizure of see Seizure of property transaction in good faith and for value after adjudication …. IA06 113 trust, held by bankrupt in …. IA06 104 validity of property transactions with bankrupt …. IA06 113 warrant to search and seize …. IA06 150 Proposal alternative to bankruptcy …. II.5 cancellation …. IA06 339 court approval by …. IA06 333 effect …. IA06 334 enforcement steps, permission for …. IA06 335 debt, meaning of …. IA06 325 expediency …. II.5 filing in court …. IA06 328 form of …. IA06 327 insolvent definition …. IA06 325 duty of …. IA06 336 proposal by …. IA06 326 meeting of creditors procedure at …. IA06 331 provision trustee must call …. IA06 330 who may represent creditors …. IA06 332

order that proposal not act of bankruptcy …. IA06 41 provisional trustee …. IA06 329 meeting of creditors, calling …. IA06 330 reasonableness test …. II.5 statement of affairs …. IA06 327 trustee duties of …. IA06 337 summary of receipts and payments, filing …. IA06 338 variation …. IA06 339 Provable debts creditor’s claim see Creditors’ claims (bankruptcy) definition …. IA06 3, IA06 231 what debts are …. IA06 232 Public examination bankrupt, of conduct of …. IA06 177 end of examination …. IA06 179 expenses in attending …. IA06 181 failure to attend …. IA06 180 legal representation …. IA06 186 notice …. IA06 174 privilege against self-incrimination …. IA06 184 record of …. IA06 178 report to be filed before …. IA06 176 requirement of assignee or creditors …. IA06 173 time for holding …. IA06 175 Public registers

accessibility …. IA06 447 amendment of information …. IA06 451 assignee not liable …. IA06 457 bankrupts, discharged and undischarged …. IA06 62, IA06 308 Crown not liable …. IA06 457 general information that must be held in …. IA06 449 information to be held …. II.6 indefinitely …. IA06 449A no asset procedure, persons admitted to …. IA06 368 omission of information …. IA06 451 overview …. II.6 purposes …. IA06 448 removal of information …. IA06 451 restricted access …. IA06 451 restricted information that may be held in …. IA06 450 search of …. IA06 452 criteria …. IA06 453 information privacy principle, breaching …. IA06 456 purposes …. IA06 454 statistical or research purposes …. IA06 455 summary instalment order, debtors subject to …. IA06 354 Public trust insolvent deceased estate certificate filed, effect of …. IA06 385 court order for administration …. IA06 385 undistributed money see Undistributed money

Purchase money security interest definition …. RA 2 introduction of concept …. III.8 Purchaser bankrupt’s property, of, title …. IA06 219

Q Questions refusal to answer, offence …. IA06 440

R Receiver accounting records …. RA 22 appointment deeds and agreements, under …. RA 6 extent of power to appoint …. RA 7 notice of …. RA 8 assignee, appointment as additional orders …. IA06 51 advertising …. IA06 52 application …. IA06 50 halting of execution process …. IA06 53 effect …. IA06 54 bankruptcy, powers of receiver on …. RA 31 calls on shares, power to make …. RA 15 court supervision of …. RA 34 definition …. RA 2

documents documents in possession of …. CA 262 execution of …. RA 13 duties of …. RA 18 orders to enforce …. RA 37 failure to comply, meaning of …. RA 36 first report by …. RA 23 grantor definition …. RA 2 obligations of …. RA 12 liabilities …. RA 32 relief from …. RA 33 liquidation, powers of receiver on …. RA 31 money, duty in relation to …. RA 21 offences against other Acts, duty to notify …. RA 28 orders to enforce duties of …. RA 37 evidence, provisions as to …. RA 38 powers …. RA 14 Property Law Act 1952 s 92, application of …. RA 9 qualifications …. IV.5, RA 5 relief from liability …. RA 33 reports extension of time for preparing, RA 25 first …. RA 23 further …. RA 24 inspection, persons entitled …. RA 27 persons entitled to receive …. RA 26

vacancy in office of …. RA 11 validity of acts of …. RA 16 voidable transactions by …. IV.4 Receivership administrator, effect of appointment …. CA 239AD court, powers of …. RA 35 end of, notice of …. RA 29 essential services, prohibition of refusal to supply …. RA 40 limitation by court …. RA 35 local authorities appointment of receiver …. RA 40A power of court …. RA 40B constraints on receiver …. RA 40D powers and duties of receiver …. RA 40C …. RA Sch 1 protection for receiver …. RA 40E notice of …. RA 10 preferential claims …. RA 30 property in, orders protecting …. RA 39 sale see Sale surplus meaning of …. RA 30D payment into court …. RA 30C priorities on distribution of …. RA 30B termination by court …. RA 35 voluntary administration, relationship with …. III.4 Receiverships Act 1993 application …. RA 4

Cape Town Convention and Aircraft Protocol, subject to …. RA 42 commencement …. RA 1 interpretation …. RA 2 overview …. IV.1 public notice …. RA 3 repeals …. RA 41 short title …. RA 1 Record of transactions bankrupt deemed not to have kept or preserved …. IA06 432 failure to keep and preserve …. IA06 429 failure to keep proper, with intent to conceal …. IA06 430 penalties for offences …. IA06 431 Records definition …. CA 2 falsification …. CA 379 Redundancy pay legislative reforms …. III.8 Register New Zealand, definition …. CA 2 overseas, definition …. CA 2 public see Public registers Registrar administrator may lodge report with …. CA 239AH definition …. IA06 3, CA 2, RA 2 voluntary administrator administrator may lodge report …. CA 239AH Relative

definition …. IA06 3 Release order of assignee must apply for …. IA06 408 effect of …. IA06 409 subsequent order …. IA06 410 Remuneration administrator, of …. III.4, CA 239O assignee, of …. IA06 406 rates of …. IA06 407 deed administrator, of …. CA 239ACK director, of …. CA 161 liquidator, of …. CA 276 assets of company, payable out of …. CA 278 rates of …. CA 277 Rent administrator’s liability for …. CA 239ADI court may exempt administrator …. CA 239ADK non-use notice in force …. CA 239ADJ Rentcharge liability for, after disclaimer …. IA06 121 Repayment court, power of …. III.4, CA 301 Resignation administrator …. CA 239P, CA 239Q deed administrator …. CA 239ACH, CA 239ACI director …. CA 157

Resolution special see Special resolution Rules definition …. IA06 3

S Sale assignee’s power of …. IA06 217, IA06 Sch 1 bankrupt’s property, of assignee must not sell before first creditors’ meeting …. IA06 218 title of purchaser …. IA06 219 receivership, in consent of mortgagee …. RA 17 duty of receiver …. RA 19 no defence or indemnity …. RA 20 writ of see Writ of sale Scheme of arrangement court-approved …. III.4 nature of …. III.4 Search warrant bankrupt’s property …. IA06 150 Secured creditor administrator, appointment of …. CA 239K notice …. CA 239ADX appropriation of payments by bankrupt to …. IA06 202 definition …. IA06 3, CA 2 property subject to charge

assignee may require choice of option …. IA06 244 proof for balance due …. IA06 247 assignee not required to act in relation to …. IA06 245 false claim by secured creditor …. IA06 248 options regarding …. IA06 243 assignee’s powers …. IA06 249 realisation of …. IA06 246 surrender of charge submission of new creditor’s claim …. IA06 250 withdrawal of …. IA06 250 valuation of charge …. IA06 247 voluntary administration see Voluntary administration voting at creditors’ meeting …. IA06 95 Securities assignee disclaimer of liability under …. IA06 125 election whether to disclaim …. IA06 126 transfer by …. IA06 124 disclaimer, after …. IA06 127 court may set aside …. CA 299 definition …. CA 2 transfer by assignee …. IA06 124 disclaimer, after …. IA06 127 Security agreement definition …. RA 2 Security interest definition …. RA 2

subordinate, extinguishment of …. RA 30A Seizure of property bankrupt’s property …. IA06 151 warrant to search and seize …. IA06 150 Self-incrimination, privilege against examination or questioning of person …. IA06 184 liquidator, examination by …. CA 267 Set-off mutual credit and set-off bankruptcy …. IA06 254 liquidation …. CA 310 voluntary administration …. CA 239AEG, CA 239AEL netting agreement, under see Netting agreement Setting aside securities and charges …. CA 299 statutory demand …. CA 290 powers of court on application …. CA 291 Shares assignee disclaimer of liability under …. IA06 125 election whether to disclaim …. IA06 126 transfer by …. IA06 124 disclaimer, after …. IA06 127 deed administrator, sale by …. CA 239ACL definition …. IA06 3, CA 2 directors, share dealing by disclosure …. CA 148

relevant interest disregarding in certain cases …. CA 147 meaning of …. CA 146 transfer of assignee, by …. IA06 124 disclaimer, after …. IA06 127 voluntary administration, company in …. CA 239AB unpaid calls, company may prove for …. IA06 128, IA06 271 Sheriff definition …. IA06 3 notice of adjudication to …. IA06 109 setting aside rights conferred on assignee …. IA06 112 proceeds of execution, retaining …. IA06 110 setting aside rights conferred on assignee …. IA06 112 sale by, good title of purchaser …. IA06 111 Special resolution definition …. IA06 3, CA 2 major transactions, approval of …. CA 128 Spouse definition …. IA06 3 surviving allowance to …. IA06 390 entitlement to household furniture and effects …. IA06 389 Statement of affairs additional or amended …. IA06 70 adjudication, debtor’s application for …. IA06 46 bankrupt must file …. IA06 67

notice …. IA06 68 prescribed form …. II.4 proposal, where …. IA06 327 time for filing …. IA06 69 Statutory demand definition …. CA 240, CA 289 evidence of failure to comply …. CA 288 inability to pay debts …. CA 287 requirements for …. CA 289 setting aside …. CA 290 powers of court on application …. CA 291 Statutory management nature of …. III.4 procedure …. III.4 Student loans deductions …. III.8 no asset procedure …. II.5 student loan balance, definition …. IA06 3 Subsidiary definition …. CA 2 Summary instalment order additional orders …. IA06 344 alternative to bankruptcy …. IA06 8 application form …. IA06 342 who may apply for …. IA06 341 assignee may make …. IA06 343

credit, offence of obtaining …. IA06 360 creditor’s claim …. IA06 356 current, definition …. IA06 3, IA06 355 default by debtor …. IA06 359 definition …. IA06 340 discharge …. IA06 350 distribution of money paid by debtor …. IA06 358 effect …. IA06 351 form of application …. IA06 342 notice to creditors …. IA06 353 order that proposal not act of bankruptcy …. IA06 41 period of instalment …. IA06 349 proceedings against debtor …. IA06 352 public register of debtors …. IA06 354 supervisor appointment …. IA06 345 definition …. IA06 3 documents, requirement to provide …. IA06 347 payment of debtor’s earnings to …. IA06 357 role …. IA06 346 termination of appointment for failure to supervise adequately …. IA06 348 variation …. IA06 350 who may apply for …. IA06 341 Summary offences see Offences Supervisor definition …. IA06 3

summary instalment order see Summary instalment order Surplus bankrupt, payment to …. IA06 281 insolvent deceased estates …. IA06 394 liquidation surplus account see Liquidation surplus account liquidator, distribution by …. CA 313 receivership, in meaning of surplus …. RA 30D payment into court …. RA 30C priorities on distribution of surplus …. RA 30B Surplus assets definition …. CA 2

T Trading reckless, by directors …. CA 135 Transactions insolvent see Insolvent transactions irregular see Irregular transactions major see Major transactions offences in relation to record of see Offences real nature of, power of court to look at …. IA06 412 undervalue see Transactions at undervalue Transactions at undervalue difference in value, assignee may recover …. IA06 211, IA06 212 overview …. II.4 recovery by liquidator …. III.6, CA 297

Trust property held in trust by bankrupt …. IA06 104 Trust money unsatisfied judgment for non-payment of …. IA06 28 Trustee disposition of property to, for benefit of creditors …. IA06 18 order that disposition not act of bankruptcy …. IA06 41 Māori see Māori Trustee proposals see Proposal

U Uncertainty creditor’s claim see Creditors’ claims (bankruptcy) Undervalue transactions see Transactions at undervalue Undistributed money bankruptcy surplus account application of money held in …. IA06 286 matters concerning …. IA06 289 payment from approval of official assignee …. IA06 288 requisition of minister, requirement for …. IA06 287 public trust to pay to …. IA06 285 definition …. IA06 282 public trust bankruptcy surplus account, payment to …. IA06 285

money held by …. IA06 284 payment to …. IA06 283

V Voidable charge see Charge history …. II.4, III.6 personal insolvency, harmonisation with …. III.6 receivers, by …. IV.4 time periods …. III.6 Voluntary administration administrator agent of company …. CA 239W appointment …. III.4, CA 239D company, by …. CA 239I consent …. III.4, CA 239G court, by …. III.4, CA 239L disqualification …. CA 239P interim liquidator, by …. CA 239J just and equitable grounds …. III.4 liquidator, by …. CA 239J new administrator, to fill vacancy …. CA 239S no revocation of …. CA 239M notice of …. CA 239ADW, CA 239ADX secured creditor, by …. CA 239K, CA 239ADX two or more administrators …. CA 239N validity, court may rule on …. CA 239ADQ who may appoint …. CA 239H

who may be appointed …. CA 239F company property, dealings with effect on …. CA 239Z void, liability for compensation …. CA 239AA death of …. CA 239P default, order to remedy …. CA 239ADT definition …. CA 239B directions, power to seek …. CA 239ADR directors, effect of appointment on …. CA 239X documents, right to …. CA 239AG duties …. III.4 employees, effect of appointment on …. CA 239Y investigation of company’s affairs …. CA 239AE joint administrators …. III.4 liabilities …. III.4 misconduct, reporting …. CA 239AI powers …. III.4, CA 239V prohibition order …. CA 239ADV qualifications …. III.6 refusal of consent, no liability in damages …. CA 239ABF registrar, lodgment of report with …. CA 239AH removal by court …. CA 239P, CA 239R remuneration …. III.4, CA 239O replacement, creditors must consider appointment of …. III.4, CA 239T resignation …. CA 239P, CA 239Q role …. CA 239U status …. III.4 supervision by court …. CA 239ADS

vacation of office …. CA 239P court’s power …. CA 239ADU Australian legislation …. I.1, III.5 background to reform proposal …. III.4 change of name, notice of …. CA 239AEC charges enforcement beginning before administration …. CA 239ABM limitation of secured creditor’s powers …. CA 239ABO perishable property, over …. CA 239ABN commencement …. III.4, CA 239D compulsory liquidation, where application for …. III.6 company’s property court officer, duties of …. CA 239ABH dealings with effect on …. CA 239Z void, liability for compensation …. CA 239AA protection of …. CA 239ABC refusal of consent by administrator, no liability in damages …. CA 239ABF court orders to protect creditors …. CA 239ADP power of …. CA 239ADO role of …. III.5 supervision of administrator …. CA 239ADS creditors, orders to protect …. CA 239ADP

creditors’ committee functions …. CA 239AQ membership …. CA 239AR creditors’ meetings see Creditors’ meetings directions, administrator’s power to seek …. CA 239ADR directors effect of appointment on …. CA 239X statement of company’s position …. CA 239AF disclosure of fact of …. CA 239AEB documents, administrator’s right to …. CA 239AG duties of administrator …. III.4 effect of …. III.4 employees, effect of appointment on …. III.4, CA 239Y end of …. CA 239E enforcement process halted …. CA 239ABG future insolvency …. III.4 guarantee not to be enforced …. CA 239ABJ interpretation …. CA 239B, CA 239C introduction of …. I.1 investigation of company’s affairs …. CA 239AE key terms …. CA 239B legislation lessor “adequate protection” …. III.4 no recovery of property used by company …. CA 239ABD rights of …. CA 239ABK licensed insurers …. CA 239EA

liquidation adjournment of application for …. CA 239ABV administrator’s act in good faith must not be set aside …. CA 239ACA effect of voluntary administration on …. CA 239AC interface of voluntary administration with …. CA 239ABU relationship with …. III.4, III.5, III.6 voidable transactions …. CA 239ACB liquidator appointment of …. CA 239ABU, CA 239J effect of …. CA 239ABX former administrator …. CA 239ABY interim, court must not appoint …. CA 239ABW lodgment of report with registrar …. CA 239ABZ lis pendens taken to exist …. CA 239ABI misconduct, administrator must report …. CA 239AI moratorium under …. III.4 objects of …. III.4, CA 239A overview …. III.4 owner “adequate protection” …. III.4 no recovery of property used by company …. CA 239ABD rights of …. CA 239ABK perishable property charge over …. CA 239ABN recovering …. CA 239ABR pool companies …. III.5 addition of related companies …. CA 239AEU

definition …. CA 239AEQ single administration, creditors’ meetings in …. CA 239AEV single deed of company administration …. CA 239AEW proceeding must not be begun or continued …. CA 239ABE property used by company no recovery by owner or lessor …. CA 239ABD notice under agreement about …. CA 239ABT receiver, limitation of powers …. CA 239ABS purposes …. III.4 receivership, effect on …. III.4, CA 239AD recovery of property commencement before administration …. CA 239ABQ owner or lessor, no recovery by …. CA 239ABD perishable property …. CA 239ABR reform proposal, background to …. III.4 registrar, lodgment of report with …. CA 239AH liquidator, where appointment of …. CA 239ABZ related companies, single administration of court may order …. CA 239AER guidelines for order …. CA 239AET interpretation …. CA 239AEQ notice of application …. CA 239AES secured creditor appointment of administrator by …. CA 239K notice …. CA 239ADX decision period, acting before or during …. CA 239ABL limitation of powers in relation to property subject to charge …. CA

239ABO rights of …. CA 239ABK security agreement, notice under …. CA 239ABP stay of proceedings …. III.4 termination …. III.5 things done during, effect of …. CA 239AEE time for doing act, interruption of …. CA 239AEF transfer of shares, effect on …. CA 239AB watershed meeting …. III.4 adjournment …. III.4, CA 239AZ administrator must convene …. III.4, CA 239AT convening period …. III.4 definition …. CA 239B, CA 239AS directors must attend …. CA 239AW notice of …. CA 239AU order that pooled property owners are separate class …. CA 239AY outcomes …. III.4 proposed deed not fully approved at …. CA 239ABB, CA 239ACP time for …. CA 239AV voting arrangements, disclosure of …. III.4, CA 239AX what creditors may decide …. CA 239ABA Voting creditors’ meetings see Creditors’ meetings

W Warrant search and seizure of bankrupt’s property …. IA06 150

Watershed meeting voluntary administration see Voluntary administration Writ of sale act of bankruptcy …. IA06 25