NEW ZEALAND Law and Practice Contributed by: David Weavers, Jesse Fairley and Matt Consedine, Russell McVeagh
7. Lender Liability 7.1 Equitable Subordination Rules There is no concept of equitable subordination in New Zealand. 7.2 Claw-Back Risk When a company enters liquidation proceedings in New Zealand, the recovery by that compa- ny’s creditors is not always limited to the pool of assets at the date of liquidation. Liquidators are able to void transactions that meet certain criteria under the Companies Act. Insolvent Transactions A transaction by a company is voidable if: • it was entered into within six months of the commencement of liquidation proceedings (or, in the case of related party transactions, within two years); • it was entered into when the company was insolvent; and • it enables another person to receive more towards satisfaction of a debt owed by the company than the person would be likely to receive in the company’s liquidation. Voidable Charges A charge is voidable where it is created within the relevant time periods for an insolvent trans- action and if the giving of that charge means the company is unable to pay the debts it owes. A charge will not be voidable where it: • secures valuable consideration given at the time of, or after, the giving of the charge; or • is a substitute for a charge created before the relevant restricted period.
by remedying all defaults (Sections 114(1) (a) and 133 of the PPSA). Importantly, the enforcement regime under the PPSA does not apply to a receiver. That is, the PPSA enforce- ment regime only applies if the secured party enforces directly rather than via receivership.
6. Guarantees 6.1 Types of Guarantees
Guarantees are typically required to be provided by all material companies in the target group. Material companies are companies owning or contributing a certain percentage of assets or EBITDA of the group. In addition, sufficient members of the target group to satisfy the guar- antor coverage test (as described at 5.1 Types of Security Commonly Used ) must become guarantors. Guarantees will typically be cross-guarantees and indemnities, extending to all obligations owed by all obligors under the finance docu- ments. 6.2 Restrictions Financial assistance includes the giving of upstream guarantees. See 5.5 Financial Assis- tance . The corporate benefit test will also apply to any guarantees given, as detailed in 5.6 Other Restrictions . 6.3 Requirement for Guarantee Fees There is no requirement in New Zealand for a guarantee fee to be paid to a guarantor. To avoid consideration issues, guarantees are often granted in deed form, although this is not a legal requirement.
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