NEW ZEALAND Law and Practice Contributed by: Deemple Budhia, Ling Yan Pang, Fred Ward and Matt Kersey, Russell McVeagh
As noted in 4.6 Treatment of Securitisation in Financial Entities , the DTA will implement a new regime for the regulation of registered banks (and other deposit takers), including crisis man - agement and resolution of such entities and their associated persons. Full details of such provi - sions, in particular how they may apply to SPEs, are still to be confirmed. 6.3 Transfer of Financial Assets The two essential elements of a true sale are an absolute transfer of property (rather than a transfer by way of security) and the payment of a price. In determining whether a transaction is a true sale or is more properly characterised as creating a security interest, it is necessary to first consider the intention of the parties, and second to consider the substance of the trans - action taken as a whole. A court will give effect to the intention of the parties unless it reaches the conclusion that the form of the transaction is a sham and the transaction is more properly characterised as the creation of security. Ultimately, it is a factual matter as to whether a transaction is characterised as a true sale or a secured loan. Assignment The transfer of financial assets for a securitisa - tion is generally done via two possible methods: • in relation to receivables (eg, a mortgage loan), this would be an absolute assignment of a legal thing in action for the purposes of Section 50(1) of the Property Law Act 2007 (an absolute assignment); and • in relation to certain types of security sup - porting receivables (eg, the mortgage over land that secures the mortgage loan), this would be an equitable assignment.
Neither of these methods requires notice to the underlying obligors to be effective as a true sale. Under an absolute assignment, the originator passes on to an SPE all its rights and remedies in relation to the receivables and the power to give a good discharge to the relevant obligor. It is not necessary for notice to be provided to the relevant obligor before these rights, reme - dies and powers pass to the SPE. However, the passing of those rights, remedies and powers is subject to any equities in relation to the receiva - bles that arise before the relevant obligor has actual notice of the assignment. Notice to the relevant obligor is required to “per - fect” the assignment and thereby prevent further equities arising that have priority over the SPE’s claim. In the case of certain underlying security (eg, a mortgage over land), additional steps are also required to perfect the assignment (such as registration of a transfer in respect of a mort - gage over land). The originator usually grants a power of attorney to allow these perfection steps to take place upon certain perfection triggers occurring (as discussed further in 3.3 Principal Perfection Provisions ). If a transfer does not comply with the above requirements for a true sale, the SPE may face the risk that the receivables are recovered by an insolvency practitioner appointed to the origi - nator (because of the bankruptcy remoteness risks discussed in 6.1 Insolvency Laws and 6.2 SPEs ). Personal Property Securities Act 1999 In contrast, for a secured loan, the secured party would take a security interest over the relevant receivables. This is a much simpler process under the Personal Property Securities Act 1999
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