NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
debtor and key stakeholders, any mandatory statu- tory time periods (see 6.1 Enforcement of Collateral by Non-Bank Secured Lenders ; 6.4 A Foreign Pri- vate Credit Lender’s Ability to Enforce Its Rights ; and 7.1 Impact of Insolvency Processes ), any chal - lenges to enforcement and tax consequences of an enforcement. It is possible to “pre-pack” the sale of a business to transact shortly after the appointment of a receiver or administrator (see 7.10 Expedited Restructurings ). 6.6 Practical Considerations/Limitations on Enforcement When undertaking enforcement in New Zealand, pri - vate credit lenders should consider the following prac - tical limitations or considerations: • the impact of the OIO on any sales process as part of an enforcement (see 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights ); • any value leakage to creditors resulting from those creditors having a higher statutory ranking out of certain collateral (see 7.2 Waterfall of Payments ); • impacts on the private credit lender’s reputation from taking enforcement action, both as regards other credit providers and the debtor community; and • the need for further liquidity to support the enforce - ment process, how the funder’s position is best protected, and how that interacts with a private credit lenders’ investment mandate and structure.
ment. This security agreement will include the grant of security over all or part of the assets of the debtor/ grantor and, commonly, will provide that a receiver can be appointed to those secured assets on default. Receivers can also be appointed by the High Court pursuant to its inherent jurisdiction (and on its terms) where assets are at risk. The receiver’s primary function is to take control, man - age and realise the secured assets for the benefit and in the repayment of the secured creditor. The receiv - er’s powers derive from the Receiverships Act 1993 and the security agreement. These powers commonly include all ability to do anything that the grantor could do regarding the secured assets (and the receivers have associated duties). There is no statutory mora - torium that arises upon their appointment. Voluntary Administration Voluntary administration is available where there is a prospect of preserving, and implementing the recov - ery of, the going concern of the debtor company. Administrators can be appointed by the company’s board, a creditor with security over all or substantially all of the assets of the company, or a liquidator. An administrator can also be appointed by application to the High Court (including by a creditor) if it is just and equitable to do so, or if the company is or may be insolvent and administration is likely to result in a better return than liquidation. The administration pro - cess is subject to the supervision of the High Court. The administrator takes control of the company and largely displaces the role of the directors. Administration results in an immediate statutory mora- torium preventing enforcement action or terminating leases, with limited exceptions. Creditors ultimately vote on whether the company should be liquidated or a deed of company arrangement (DOCA) should be entered into. If neither of those outcomes receive the approval of 50% in number of voting creditors repre - senting at least 75% of the value of voted debt, the company will be returned to its directors. A DOCA is a flexible tool to facilitate a debt restructuring which binds all affected creditors, and a DOCA’s terms must deliver a better outcome for creditors than an immedi - ate liquidation.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
The three primary insolvency processes available in New Zealand are receivership, voluntary administra - tion and liquidation. Schemes of arrangement can also be used to implement debt restructurings. Statu - tory management is a rarely used process that the Crown can enact to take control of groups in certain, limited circumstances via the appointment of a statu -
tory manager. Receivership
Receivers are most often appointed to secured prop - erty pursuant to rights granted in a security docu -
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