How does the objective of achieving payment for creditors in insolvency interact with the objectives of pension legislation, which seeks to ensure that individuals are adequately provided for in retirement? The courts in New Zealand and in the UK have each recently grappled with this issue. In both of the recent cases considered in this article the pensions objectives won out and the specific pension funds in question were not made available for the bankrupt individual's creditors.
Over the last couple of years, we have developed the habit of periodically pushing up the periscope to try to determine the ‘big five’ insolvency issues on the horizon.
Below is a retrospective assessment of how we did last time and our best guess as to what will dominate the next 12 months.
The big five for 2015
The Court of Appeal last week extended the armoury available to liquidators seeking to unwind a voidable transaction. Although the Companies Act sets out a procedure for liquidators to follow, the Court held that this is not exclusive, and that liquidators can also serve a statutory demand seeking payment of a voidable debt. Is this a shortcut likely to save costs, or is it a false economy?
The voidable claim
More than two years after the Commerce Committee reported back on the Insolvency Practitioners Bill, Parliament took up the second reading of the Bill late last week – the next step in what has been a long and protracted process.
The original Bill proposed a negative licensing regime, under which the Registrar of Companies would have the power to prohibit individuals from acting as insolvency practitioners.
In Strategic Finance Limited (in receivership & in liquidation) and Strategic Nominees Limited (in receivership) v Bridgman and Sanson CA 553/2011 [2013] NZCA 357 the Court of Appeal has, for the moment, settled what constitutes an "account receivable", and this provides certainty regarding the scope of the assets available to meet preferential creditor claims ahead of secured creditors with general security agreements.
Inland Revenue is now ahead of liquidators and receivers in the queue for payment where cash is available in liquidation and PAYE is owed.
Industry practice has been that PAYE is paid to the Commissioner of IRD only after the insolvency practitioners’ fees and employees’ wages have been paid but the Court of Appeal has accepted the IRD's argument that the Commissioner has first claim.1
More than two years after the Commerce Select Committee reported back on the Insolvency Practitioners Bill, the Bill has passed its second reading.
We picked the good faith defence in the voidable preference regime as one of the big five insolvency issues for 2013 and so it has come to pass, with a wealth of case law on the topic.
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New Zealand in a Nutshell
A case recently heard in the UK suggests that, in certain circumstances, a claim for conversion of assets may be brought against administrators and liquidators of a company. While the claim did not succeed on the facts inEuromex Ventures Ltd & Anor v BNP Paribas Real Estate Advisory & Ors [2013] EWHC 3007 (Ch), the case illustrates that claimants may bring a proceeding on the basis of alleged acts of conversion by a company's liquidators and administrators.