NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
5.3 Downstream, Upstream and Cross- Stream Guarantees Typically, private credit providers will require downstream, upstream and cross-stream guar - antees from obligors. There are no legal limita - tions or restrictions on entities providing these guarantees, subject to compliance with corpo - rate benefit and financial assistance rules. As to corporate benefit, a director of a New Zea - land company has a number of duties. These include the duty to act in the best interests of the company or, if the constitution of a wholly- owned company provides, in the best interests of the company’s holding company, even though it may not be in the best interests of the com - pany. Directors need to turn their mind to this duty when entering into financial transactions, particularly when contemplating subsidiaries of a borrower who make up part of the security package. From a practical perspective, lenders will typi - cally require a corporate certificate from a director of each New Zealand guarantor that confirms, among other things, that the guaran - tee is in the best interests of the company (or, where relevant, its holding company), and that all shareholders of the guarantor have approved the transaction. As to financial assistance, see 5.4 Restrictions on the Target . 5.4 Restrictions on the Target The Companies Act regulates the giving of finan - cial assistance (including the giving of a loan, guarantee or security) to a person for the pur - poses of, or in connection with, the purchase of a share issued or to be issued by the company, or its holding company, whether directly or indi - rectly. This restriction is relevant in an acquisition
property assets (such as shares). Security inter - ests usually operate in relation to both current and future assets, as well as any proceeds of the collateral. The relevant security deed will contain cer - tain required statements to ensure the security “attaches” to the relevant personal property and for such security to be enforceable against third parties. There is no particular form of security agreement that must be used, but it will usually be in the form of a deed. Security over personal property will be “perfect - ed” once either the secured party has taken pos - session of the collateral or a financing statement has been registered on the Personal Property Securities Register (PPSR). It is customary for each security interest to be perfected by regis - tering a financing statement on the PPSR. How - ever, a secured party will also take possession of certain types of collateral, such as shares, in order to give the secured party the best protec - tion possible for their collateral. A PPSR registration includes the names and addresses of the debtor and the secured party, and a description of the collateral. The regis - tration can be made instantly online and costs NZD16.10. The maximum registration period for a financing statement is five years, but it may be renewed at or before the expiry of this period for an additional NZD16.10. 5.2 Floating Charges and/or Similar Security Interests All-asset security can be taken by a single gen - eral security deed. The introduction of the PPSA removed the dis - tinction between fixed and floating charges.
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