NEW ZEALAND Law and Practice Contributed by: Deemple Budhia, Ling Yan Pang, Fred Ward and Matt Kersey, Russell McVeagh
6. Structurally Embedded Laws of General Application 6.1 Insolvency Laws In New Zealand, financial assets must be the subject of a true sale by the originator to the relevant SPE in order to insulate the SPE from the financial risk of the insolvency of the origina - tor. If the transfer is not a true sale (and could be characterised as a secured loan), certain credi - tors of the originator may have recourse to the SPE’s assets such that the assets would form part of the originator’s insolvent estate. 6.2 SPEs As mentioned in 1.2 Structures Relating to Financial Assets , securitisations in New Zea - land are usually structured using a trust as the SPE. Companies have also been used, but are less common. There are a number of risks of some form of con - solidation in insolvency proceedings of the origi - nator, the most likely of which are set out below. Statutory Management Currently, statutory managers can be appointed under four statutes, depending on whether the originator is a licensed insurer, registered bank, an overseas person with an interest in sensi - tive assets or is otherwise a “corporation”. The equivalent provisions of the DTA use the term “resolution managers” instead, who are appoint - ed by the RBNZ acting as the resolution author - ity. If a statutory manager is appointed to the originator, there is a risk that the assets of the SPE will be consolidated with the assets of the originator. For this to occur, the SPE must be a subsidiary or an “associated person” of the origi - nator. The definition of an associated person var - ies depending on the relevant operative statute. Whether the SPE is an associated person of the
originator is broadly a question of whether the originator exercises ownership or control over the SPE. It is not possible to assess or address this risk in the abstract – consideration of all the circumstances of the structure of the securitisa - tion is required and a legal opinion from counsel is usually necessary. In certain circumstances, a liquidator appoint - ed to the originator could unwind the transfer of assets from the originator to the SPE or the granting of security by the SPE to the security trustee. The originator or SPE (as applicable) usually gives various solvency certifications upon the transfer of the assets to the SPE, or the granting of security (as applicable), to miti - gate these risks. Pooling Liquidation Unwinding There is also the risk that a liquidator appointed to the originator may seek a court order to “pool” the SPE’s assets together with the originator’s assets such that the total pool of assets is avail - able to satisfy the claims of the originator’s creditors. This can occur if the SPE is “related” to the originator. This risk can be addressed by ensuring that the affairs of the originator and the SPE are operated in such a manner as to avoid the operation of the pooling provisions of the Companies Act 1993. Registered banks Where the SPE is established in respect of a registered bank’s covered bond programme, the analysis is simplified by the legislative frame - work noted in 4.2 General Disclosure Laws or Regulations , which means that, if properly structured, the risks of the SPE being caught by the statutory management and liquidation of the originator should not exist.
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