NEW ZEALAND Law and Practice Contributed by: David Weavers, Jesse Fairley and Matt Consedine, Russell McVeagh
Transactions at an Undervalue Transactions at an undervalue are voidable to the extent of the difference in the value received by the company and the value given by the compa- ny provided that the transaction occurred within two years of the company’s liquidation and the company was either insolvent at the time or became insolvent as a result of the transaction. Inadequate or Excessive Consideration The Companies Act also aims to prevent com- panies from siphoning away their assets in anticipation of future liquidation. Liquidators can therefore pursue related persons of a company (directors, company controllers or related com- panies) who have entered into certain transac- tions with the company within three years of the commencement of liquidation. The following transactions are considered void- able under this provision: • where a related person receives consideration from the company considered excessive for the company to have given; or • where a related person gives consideration to the company considered inadequate for the The Companies Act provides for an innocent creditor defence to creditors who have dealt with the company. A liquidator or other credi- tors cannot pursue a creditor party to one of the specified transactions if the creditor satisfies the three limbs of the test. • It must have acted in good faith. • There must be no reasonable grounds for suspecting the company was or would become insolvent. company to have received. Innocent Creditor Defence
• It must have provided value or materially altered its position on reasonable belief the transaction was valid. PLA Voidability The PLA operates independently of the Com- panies Act and allows creditors or liquidators to apply to the court to set aside a disposition of property that prejudices a creditor (or creditors). The court may set aside a disposition of property if the company: • was insolvent at the time, or became insol- vent as a result of the disposition; • would be left with an unreasonably small pool of assets; or • at least would reasonably have believed it was incurring debts beyond its ability to pay. The disposition must also have been made with the intention to prejudice a creditor or have been a gift or been made at an undervalue. There is therefore a degree of overlap with voidability for transactions at an undervalue in the Companies Act. Solvency Confirmation Companies provide a certification of solvency within the customary director’s certificate given by a director of the company as a condition precedent to a financing transaction. This is intended to provide some comfort to the credi- tor to the transaction that the innocent creditor defence may apply to them. 8. Tax Issues 8.1 Stamp Taxes No stamp taxes are applicable in New Zealand.
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