Admiralty proceedings against a vessel are necessarily territorial in nature. A debtor’s vessel may sail into a certain jurisdiction and be arrested and sold for the benefit of creditors who both have Admiralty in rem claims against the vessel and actively take the required steps in the Court proceeding concerned. Creditors not having rights of claim of that nature would miss out or only have a very low priority in respect of the proceeds of sale.
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.
The Supreme Court, in a judgment released last Friday,1 has overruled the Court of Appeal by deciding that the IRD stands behind liquidators and employees when cash is available in liquidation and PAYE is owed.
This decision, which upholds the payment waterfall in Schedule 7 of the Companies Act, will be welcomed by insolvency practitioners after the Court of Appeal had upset previous industry practice.
Context
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.
Directors beware – unless you are careful to maintain a subsidiary’s independence, the parent company may be liable for the debts of its subsidiary.
That is the effect of a recent High Court decision invoking a rarely used provision in the Companies Act.
We analyse the judgment and draw some practical advice from it.
Section 271
Section 271(1)(a) of the Companies Act 1993 (the Act) has been used only rarely and is unique to New Zealand law, although Ireland has a similar provision.
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.
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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.
In our December 2012 insolvency update we reported on CP Asset Management Ltd v Grant, in which the High Court upheld a creditors' resolution to appoint new liquidators. The High Court found that a resolution should only be set aside when it was found that the prejudice to creditors was unreasonable. In the High Court, the minority of creditors who voted against the resolution were unable to e