NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
• the commencement of a formal insolvency process in respect of the debtor; • the creditor obtaining an enforcement certifi - cate; and • the appointment of a receiver by the court in an “event of urgency”. Other typical considerations for foreign private credit lenders include: • navigating inter-creditor arrangements (including stand-down periods on enforce - ment, senior and junior release provisions and applying non-cash consideration via disposal waterfalls); and • choice of jurisdiction to commence any restructuring or enforcement process (includ - ing recognition). 6.5 Timing and Cost of Enforcement The length and cost of an enforcement process will depend on a variety of factors, including the business’ complexity and capital structure, cooperation of the debtor and key stakehold - ers, any mandatory statutory time periods (see 6.1 Enforcement of Collateral by Non-Bank Secured Lenders ; 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights ; and 7.1 Impact of Insolvency Processes ), any chal - lenges to enforcement and tax consequences of an enforcement. It is possible to “re-pack” the sale of a business to transact shortly after the appointment of a receiver or administrator (see 7.10 Expedited Restructurings ). 6.6 Practical Considerations/Limitations on Enforcement When undertaking enforcement in New Zealand, private credit lenders should consider the follow - ing practical limitations or considerations:
• the impact of the OIO on any sales process as part of an enforcement (see 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights ); • any value leakage to creditors resulting from those creditors having a higher statu - tory ranking out of certain collateral (see 7.2 Waterfall of Payments ); • impacts on the private credit lender’s reputa - tion from taking enforcement action, both as regards other credit providers and the debtor community; and • the need for further liquidity to support the enforcement process, how the funder’s posi - tion is best protected, and how that interacts with a private credit lenders’ investment man - date and structure. 6.7 Claims Against Secured Lenders Post-Enforcement Common claims against secured lenders enforc - ing over collateral include: • failure to discharge the duty to obtain the best price reasonably obtainable at the time of sale (see 6.1 Enforcement of Collateral by Non-Bank Secured Lenders ); this can be mitigated by running a proper sales process, through the appointment of a properly quali - fied sales agent, obtaining a valuation and taking legal advice; • entry into possession of the land and becom - ing a mortgagee in possession resulting in potential claims and fines; • liability as a shadow director if, notwithstand - ing a person not being formally appointed as a director, the officially appointed directors of the company typically follow their instructions or directions; lenders should be careful to rely on their contractual rights when imposing limitations on company behaviour; and
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