NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
7.9 Dissenting Lenders and Non-Consensual Restructurings Creditors’ compromises, DOCAs under voluntary administrations and schemes of arrangement are procedures which can impose non-consensual restructuring on dissenting lenders/creditors (see 7.1 Impact of Insolvency Processes and 7.4 Rescue or Reorganisation Procedures Other Than Insolven- cy for thresholds required to impose cramdowns). Whilst cross-class cramdown is not available in New Zealand, creditors vote in a single class in voluntary administration (however secured creditors and lessors of property cannot be bound by a DOCA unless they vote in favour of it). In each procedure, dissenting creditors have avail - able procedures to challenge the compromise that was reached: • DOCAs can be challenged and subject to termi - nation on various grounds including if the DOCA was unfairly prejudicial or discriminatory against a creditor; • creditors can apply to the High Court for orders that they are not bound by a creditors’ compromise on limited grounds including that the compromise was unfairly prejudicial to that creditor or their class; and • challenges from a creditors’ scheme of arrange - ment will typically be in relation to class composi - tion, procedural issues, whether the scheme was “fairly put”, and if the class of creditors was fairly represented at the scheme meeting.
7.10 Expedited Restructurings Pre-pack restructurings are permitted in New Zealand, although they are less commonly employed than other jurisdictions because: • New Zealand does not have a regulatory frame - work for pre-packs, unlike SIP 16 in the UK; • careful structuring will be required to implement a pre-packaged sale given a receiver’s duties to obtain the best price reasonably obtainable at the time of sale and a voluntary administrator’s duty to act in the best interests of all creditors; and • historically, there were challenges for an insolvency practitioner taking an appointment as receiver if they were involved in pre-planning work (although a statutory exception now exists which facilitates this). Balance sheet restructurings are typically implement - ed either consensually or via receivership or voluntary administration (or sometimes in tandem). One benefit of voluntary administration is that a balance sheet restructuring can be implemented whilst maintain - ing the corporate entity (although dissenting secured creditors cannot be crammed down). In contrast, a restructuring via a receivership will typically involve the transfer of assets into a new entity (releasing secu - rity that ranks subsequent to the appointor’s security).
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