NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
• liability under indemnities given to insolvency officials that they appoint.
over all or substantially all of the assets of the company, or a liquidator. An administrator can also be appointed by application to the High Court (including by a creditor) if it is just and equitable to do so, or if the company is or may be insolvent and administration is likely to result in a better return than liquidation. The adminis - tration process is subject to the supervision of the High Court. The administrator takes control of the company and largely displaces the role of the directors. Administration results in an immediate statu- tory moratorium preventing enforcement action or terminating leases, with limited exceptions. Creditors ultimately vote on whether the com - pany should be liquidated or a deed of com - pany arrangement (DOCA) should be entered into. If neither of those outcomes receive the approval of 50% in number of voting creditors representing at least 75% of the value of voted debt, the company will be returned to its direc - tors. A DOCA is a flexible tool to facilitate a debt restructuring which binds all affected creditors, and a DOCA’s terms must deliver a better out - come for creditors than an immediate liquida - tion. Liquidation Liquidation is the process by which the assets of a company are realised and their proceeds distributed to creditors in accordance with the statutory priority under the Companies Act. It almost always results in the deregistration of the company at the end of the liquidation. Liq - uidators can be appointed to a body corporate (including companies and limited partnerships) by shareholders (by special resolution), the com - pany (on the occurrence of an event in the con - stitution), or by various stakeholders (including the company, a director and creditors) by appli - cation to the High Court. The High Court has a
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes The three primary insolvency processes avail - able in New Zealand are receivership, volun - tary administration and liquidation. Schemes of arrangement can also be used to implement debt restructurings. Receivership Receivers are most often appointed to secured property pursuant to rights granted in a security document. This security agreement will include the grant of security over all or part of the assets of the debtor/grantor and, commonly, will pro - vide that a receiver can be appointed to those secured assets on default. Receivers can also be appointed by the High Court pursuant to its inherent jurisdiction (and on its terms) where assets are at risk. The receiver’s primary function is to take con - trol, manage and realise the secured assets for the benefit and in the repayment of the secured creditor. The receiver’s powers derive from the Receiverships Act 1993 and the security agree - ment. These powers commonly include all ability to do anything that the grantor could do regard - ing the secured assets (and the receivers have associated duties). There is no statutory morato - rium that arises upon their appointment. Voluntary Administration Voluntary administration is available where there is a prospect of preserving, and implementing the recovery of, the going concern of the debtor company. Administrators can be appointed by the company’s board, a creditor with security
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