The wider powers of section 266 of the Companies Act 1993
A liquidator has the duty to take possession of, and to protect the company assets. In the process of discharging this duty, the liquidator may need to request information and documents from parties holding the relevant documents. The liquidator has two avenues under the Companies Act 1993 to request such information. Section 261 The first […]
The broad and inclusive language of section 303 of the Companies Act 1993
When a company is placed into liquidation (or voluntary administration), creditors will have the opportunity to submit claims for debts owing to them by the company. Section 303 of the Companies Act 1993 (the Act) provides (with the exception of fines, monetary penalties, sentences of reparation, orders, and costs to which section 308 applies are not claims that may […]
Reckless trading claims: Who benefits when things go wrong?
If you’re a business owner in New Zealand, you’ll know the importance of careful financial management, especially when times are tough. But if a company becomes insolvent, the question arises: who should benefit from claims against directors found liable for reckless trading? Should these funds flow to secured creditors like banks, or be reserved for […]
Personal receivership: a powerful tool for lenders
Personal receivership: a “powerful tool” of lenders In New Zealand, receivership is one of the formal insolvency processes used alongside liquidation and voluntary administration. When a company struggles with its debt, receivership can be a secured creditor’s solution to recovering funds. However, receivership applies to more than just companies. Lenders can also appoint receivers over […]
Notice of objection not served in response to a Notice to set aside voidable transactions: What now?
One of the routes of recovery available to a liquidator for the benefit of the company’s creditors is through the voidable transaction regime. Normal regime The voidable transaction regime is governed by sections 291A to 296 of the Companies Act 1993 (the Act). The regime allows for a liquidator to claw back money from parties […]
Court of Appeal clarifies insolvency priorities in podular housing systems case: No equitable lien for tiny home purchasers
Introduction In Podular Housing Systems Ltd v Gross (NZCA 528), the New Zealand Court of Appeal has delivered a definitive ruling on the treatment of partially completed tiny homes in an insolvency context. The decision clarifies that purchasers of these unfinished “pods” do not acquire an equitable lien, thereby reinforcing established statutory priorities under the […]
Can related companies become liable in a liquidation?
Whilst the separate corporate identity of a related company must be respected, consideration for what is just and equitable must be made. The courts act to balance these two competing interests. Section 271 of the Companies Act 1993 (the Act) grants the court the power to make an order under conditions when companies related to […]
Common myths about insolvency
Myth 1: A director of a company in liquidation can’t be a director moving forward Right or wrong, it is true that a director can place a company into liquidation and immediately establish a new company. A director can be banned from being a director by MBIE, or if they are made bankrupt, they cannot […]
A brief history of bankruptcy: From debtor’s prison to second chances
The famous novel Robinson Crusoe tells the story of a man who is shipwrecked on a desert island, where he spends 28 years building shelters, hunting goats and passing the time with a dog and cat that he rescued from the shipwreck. But few know the author of Robinson Crusoe, Daniel Defoe, was an entrepreneur […]
Where does the money go, and how do liquidators get paid?
The distribution of funds in a liquidation process depends on where the money came from in the first instance. In a liquidation, a company’s assets are sold to generate funds to pay creditors and settle debts. The sources of revenue in a liquidation include: Assets that are subject to security The most obvious example is […]
