This guide introduces you to New Zealand's business and trading environment, with particular focus on legal and regulatory matters.
The Law Commission is looking into whether the regulation of trading trusts gives enough protection to creditors and beneficiaries in circumstances of insolvency.
Submissions are due on the issues paper by 2 March 2012.
What is a trading trust?
Making a payment to a creditor (in this case, the IRD) will in and of itself give that creditor priority over competing creditors. A recent Court of Appeal judgment to that effect, under section 95 of the Personal Property Securities Act (PPSA), carries serious implications for receivers.1
In Aotearoa Kiwifruit Export Limited v ANZ National Bank Limited, the High Court was required to examine the difficulties that arise when a director of a company ordered into liquidation disputes that order.
Official Assignee v Mayers and Ors concerns the common practice of forgiveness of debt owed by a family trust and the consequences of such a gifting programme in the event of the bankruptcy of the lender.
A recent Court of Appeal decision (Clark v Libra Developments Ltd [2011] NZCA 493), provides a useful guide to the general principles which apply to partners who do not have a formal agreement in place governing the dissolution of their partnership.
Receivers cannot escape personal liability on contracts they cause the company to enter into simply because all of the company’s assets have been paid out.
So the Court of Appeal found last week in a decision which explored the application of limitation of liability clauses where, as is common practice, the liability is limited to the “available assets” of the company.
The Supreme Court has affirmed the Court of Appeal’s finding in August of this year that a voluntary administrator may only use a casting vote at a watershed meeting where the number of creditors voting for and against a proposed deed of company arrangement (DOCA) is equal.
In Stockco Ltd v Denize the applicants sought an order to set aside bankruptcy notices on the ground that the creditor had not complied with High Court Rule 24.8(3). That Rule requires that a certified copy of the judgment or order on which the bankruptcy notice is based must be attached to the bankruptcy notice. The applicants claimed that the notice was defective as it was served separately from copies of the judgment.
Fairfield Sentry Limited (Sentry) was a "feeder fund" that placed 95% of its investments into BLMIS. When BLMIS was discovered to be a Ponzi scheme, Sentry suspended redemptions of its shares and went into liquidation. Here, Sentry's liquidators sought to have redemptions paid to the defendant investors prior to the suspension returned to Sentry's fund on the grounds that the redemptions were paid under a mistake because Sentry's net asset value (NAV) was "little better than nil" due to the Ponzi scheme.
The issues were: