NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
supervisory jurisdiction in respect of liquidations. Pending the appointment of liquidators, it is pos - sible for interim liquidators to be appointed to a company if the court is satisfied that it is neces - sary or expedient for the purpose of maintaining the value of assets owned or managed by the company (with powers limited to that purpose). Liquidators have powers to recover transactions that the company made prior to liquidation (see 7.6 Transactions Voidable Upon Insolvency ), and have investigative powers and correspond - ing reporting obligations. Liquidation culminates in the liquidators making a distribution to credi - tors (see 7.2 Waterfall of Payments ). Schemes of Arrangement Schemes of arrangement in New Zealand fol - low the same procedure as schemes of arrange - ment in Australia and the UK, and can be used to implement compromises between the company and some or all of its creditors. Creditors are divided into classes based on their legal rights against the company, and the scheme will be effective if: • in respect of each class of creditors (if there is more than one), the scheme is approved by more than 50% in number of creditors representing at least 75% of the value of debt of those creditors voting in that class; and • the High Court sanctions the scheme. 7.2 Waterfall of Payments Creditors in a company’s insolvency generally rank as follows. • From realisations of accounts receivable and inventory (excluding qualifying receivable purchasing programmes): (i) First, creditors with perfected PMSIs over those assets; (ii) Second, preferential creditors (eg,
employee entitlements up to a statu - tory cap per employee and the In - land Revenue Department for certain unpaid taxes); (iii) Third, other secured creditors; (iv) Fourth, the costs and expenses of a liquidator and voluntary administra - tor; and (v) Fifth, unsecured creditors ranking amongst each other on a pari passu basis. • Realisations from other assets are applied as per the above but excluding preferential creditors (who are treated as general unse - cured creditors out of other assets). There are various statutory and common law rules that impact the above rankings (includ - ing any equitable interests, liens or proprietary interests). 7.3 Length of Insolvency Process and Recoveries There is no standard time to complete an insol - vency process. However: • receivers will retire once they have repaid their appointor’s secured debt and may retire earlier if the purpose of the receivership has been satisfied; • voluntary administration typically lasts for at least 25 working days but this can be extend - ed by order of the High Court; and • liquidation would typically take much longer (often longer than a year) before distributions are made to creditors and the company is deregistered. Recoveries depend on various factors. It is common for the realisation value of assets to be lower than the book value of assets recorded prior to insolvency, and creditor recoveries will
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