Failing to register security interests on the Personal Property Securities Register (PPSR) - a simple and straightforward exercise - can be costly.
This was amply demonstrated recently when General Electric's attempt to argue that its $60 million wind turbines were exempt from the operation of the Personal Property Securities Act (PPSA) was rejected by the Supreme Court of New South Wales.
The case
Liquidators are not limited to the procedure set out in section 295 of the Companies Act to recover a debt once an insolvent transaction has been set aside.
Two court judgments which could significantly affect New Zealand’s insolvent transactions regime are due out soon. When they are released, we will provide a Hothouse seminar on their potential implications for creditors and liquidators (sign up here).
We discuss the cases briefly here and provide an overview of the current liquidation “market” based on information supplied by the Companies Office.
The Supreme Court has today considerably expanded the “good faith” defence for voidable transactions.
Where a creditor “gave value” through the original transaction, that creditor can now defeat a voidable transaction claim by proving only that it acted in good faith, with no suspicion of insolvency.
The Court of Appeal has confirmed that if a secured creditor votes its secured debt in a liquidation meeting, the vote is invalid – and the security remains.
Liquidation meetings are for unsecured creditors. A secured creditor has no vote, except in respect of debt that is unsecured.
The case
Like many legal tests, the test for insolvency is easy to state, but hard to apply in practice.
The United Kingdom Supreme Court (UKSC)1 has recently issued an important clarification, which confirms that an element of forwards projection must be applied – extending in extreme cases to assessments of balance-sheet as well as cash-flow solvency.
This liberal approach is likely to be followed in New Zealand, despite differences in statutory wording.
Despite initial uncertainty, the Insolvency Practitioners Bill has been picked up by the new government. It will be amended by Supplementary Order Paper.
That SOP is yet to be released. Whether the amendments follow the direction agreed by the former Cabinet remains to be seen.
The Bill is on the Order paper under the name of new Commerce Minister Kris Faafoi. Chapman Tripp has been advised by the Leader of the House that Faafoi is awaiting advice from officials on “possible amendments”.
Liquidators cannot examine directors to obtain private financial information on which to judge their worth as prospective defendants.
This position was reinforced by the Court of Appeal in a recent decision.
The Supreme Court’s decision in McIntosh v Fisk has confirmed how the courts will deal with claw back claims under the voidable transactions regime in the context of Ponzi schemes. Liquidators’ recoveries will be limited to the fictitious profits for which there was no value given.
The Supreme Court this week provided clarification on the extent to which a disputed damages claim should be taken into account when deciding whether a “company is unable to pay its due debts".
At issue was whether the enquiry should be limited to those debts that were or were shortly to become legally due, or whether a more practical and commercial approach be taken? We look at the decision.