NEW ZEALAND Law and Practice Contributed by: Deemple Budhia, Ling Yan Pang, Fred Ward and Matt Kersey, Russell McVeagh
6.5 Bankruptcy-Remote SPE As mentioned in 6.1 Insolvency Laws , the trans- fer of the financial assets to the trust SPE is structured as a true sale to ensure the bankrupt - cy remoteness of the trust SPE from the origi - nator. See 6.3 Transfer of Financial Assets for further discussion regarding the true sale. These arrangements will be reflected in the securitisa - tion documents. In addition, the securitisation documentation will include provisions that any recourse to the SPE is limited to the assets held by it (limited recourse provisions) and that no insolvency proceedings may be taken against the SPE (non-petition provisions). In a New Zealand context, financial assets are typically transferred directly from the originator to an SPE as the ultimate transferee (ie, the SPE is not an intermediate entity in the chain of trans - actions). For an originator, the transfer of financial assets (other than operating leases) may give rise to tax where there is a disposal of the relevant financial asset. 7. Tax Laws and Issues 7.1 Transfer Taxes If the financial asset is a trade receivable, in respect of which income has already been rec - ognised, no further income should arise from the transfer of the trade receivable. If the financial asset is treated, effectively, as a debt instru - ment for the purposes of the financial arrange - ments rules contained in the Income Tax Act 2007, the transfer will be treated as a disposal for the agreed consideration. The net difference between the cost of the financial asset (eg, prin - cipal advanced) and the consideration for the financial arrangement will give rise to income
(PPSA) than the true sale of a receivable and requires perfection, usually by registration of a financing statement on the Personal Property Securities Register or the taking “possession” of the relevant receivables. However, merely taking security over the receivables exposes the SPE to the bankruptcy risk of the originator (which is described in 6.1 Insolvency Laws and 6.2 SPEs ), and so is not used in securitisations in New Zealand. The PPSA does, however, need to be consid - ered when undertaking a securitisation in New Zealand. For example, the security granted by the SPE to the security trustee needs to be per - fected (this is usually achieved via registration of a financing statement on the Personal Prop - erty Securities Register). In addition, transfers of accounts receivable, chattel paper and leases of greater than one year are deemed to be security interests under the PPSA. Accordingly, the per - fection and priority regime of the PPSA needs careful consideration when structuring a secu - ritisation. For example, when transferring chat - tel paper under a securitisation, the best form of perfection is the SPE taking possession of the underlying chattel paper in order to ensure it obtains the best priority against competing inter - ests in the chattel paper. 6.4 Construction of Bankruptcy-Remote Transactions There are no other means of constructing a bankruptcy-remote transaction that are com - monly used in New Zealand. A legal opinion would be obtained from coun - sel to support the true sale characterisation and bankruptcy remoteness of the transfer. The legal opinion may qualify the conclusions based on known facts and matters.
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