NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
7.8 Out-of-Court v In-Court Enforcement There is no “typical” private credit out-of-court restructuring in New Zealand. Informal and out-of- court restructuring techniques include: • rescheduling debts and amending key terms of finance documents (including granting waivers and agreeing forbearance or standstill periods; • debt trading or sub-participation arrangements; • distressed M&A; • structured/pre-pack business or asset sales; and • debt-for-equity transactions and credit bidding. Statutory management is a rarely used process that the Crown can enact to take control of groups in cer - tain, limited circumstances via the appointment of a statutory manager. Common considerations for private credit out-of- court restructuring will include: • the need for a balance sheet and operational restructuring; • obtaining an insolvency estimated outcome opinion from a licensed insolvency practitioner to support the financial component of a balance sheet restructuring; • the ability of the borrower to deliver assets clear of encumbrances without the need for a statutory cramdown mechanism; • the cash position of the group and the need for, and availability of, new funding; • risks of challenge to the transaction from stake - holders (which may depend on which stakeholders the restructuring is imposed upon); • ability for the debtor company/group of companies to deliver major transaction approval if necessary (which is the approval of 75% of the company’s shareholders); and • in contrast, the challenges with maximising returns in an enforcement counterfactual, including if part of a loan-to-own strategy (where OIO considera - tions may be relevant if there is an overseas private credit lender).
received and the value that the company in liquida - tion received. • Transactions for inadequate/excessive considera - tion with directors and certain other related per - sons that occurred three years prior to the com - pany’s liquidation. • Dispositions of property that are made by way of gift, with an intention to prejudice creditors, in circumstances when the company cannot pay its due debts and certain other circumstances with a six-year limitation period from the date of the dispositions. • Distributions to shareholders that were made at a time when the company failed the solvency test. A six-year limitation period applies from when the distribution was made. A “good faith defence” is available to shareholders who did not know that the company failed to meet the solvency test at the time that a distribution was made. There are certain defences to many of these actions, including the “good faith defence”. This requires: • the payment to have been received in good faith and in circumstances when a reasonable person in the creditor’s position would not have suspected, and the creditor did not suspect, that the company was or would become insolvent; and • the creditor to have given value to the company (which can be given before or after the creditor received payment) or changed its position in the reasonably held belief that the transfer was valid and would not be set aside. 7.7 Set-Off Rights Section 310 of the Companies Act provides for man - datory and self-executing set-off upon liquidation between an unsecured creditor and the company in liquidation where (subject to limited exceptions) there have been mutual credits, mutual debts, or other mutual dealings between a company and a claimant in the company’s liquidation. In addition, a separate regime in the Companies Act governs the application of set-off under a netting agreement in a company’s insolvency.
183 CHAMBERS.COM
Powered by FlippingBook