If a liquidator is found guilty of stealing money from a company in liquidation, most creditors would assume that he or she could never be a liquidator again. Not in New Zealand. A recent case highlights the need for urgent reform of the regulation of insolvency practitioners.
The lessons to be drawn from the Crafar receivership in relation to the Personal Properties Securities Act (PPSA) have now been distilled by the Court of Appeal, which has largely confirmed the High Court’s reasoning.
We discuss the implications of the litigation.
When insolvency practitioners consider who may be held accountable for corporate failures, auditors are often near the top of the list. It is easy to see why. From a practical perspective, auditors are relatively likely to be able to meet good claims, and from a legal perspective it is easy to identify the duties that the auditors owed and, in an unfortunate number of cases, breached.
Justice Heath issued a sweeping judgment last month limiting the ability of liquidators to examine witnesses and seek documents. In the decision, ANZ National Bank Ltd v Sheahan and Lock [2012] NZHC 3037, the Court also:
The High Court has clarified the extended good faith defence, introduced into the Companies Act in 2007, for creditors facing ‘claw back’ of a payment by liquidators.1
The Court’s interpretation, while good news for creditors, may make it more difficult for liquidators to recover insolvent transactions.
The 2007 amendment to section 296(3)
Further to our November update, the Securities Markets (Unsolicited Offers) Regulations 2012 have now come into force, on 1 December 2012. The Regulations set out specific rules applying to unsolicited offers (also known as "predatory" or "low-ball" offers) including new processes, detailed disclosure requirements, and the right to cancel acceptances of unsolicited offers.
Big changes are proposed to the use of trusts as trading enterprises by the Law Commission as part of its ongoing review into trust law.
Recommendations include:
The decision of Grant v CP Asset Management Ltd & Ors outlined the appropriate methodology to be used when examining whether a resolution passed at a creditors' meeting should be set aside as prejudicial to a creditor or class of creditors under section 245A of the Companies Act 1993.
In our March 2012 update we reported on a claim under section 294 of the Companies Act 1993 by the liquidators of Five Star Finance Limited (in liquidation) (FSF) against a trustee of a trading trust (Bowden No. 14 Trust (Trust)) to set aside payments amounting to $928,937.79.
Armitage v Established Investments Limited (in liq) involved an appeal by an undischarged bankrupt (A), against a High Court decision imposing conditions that A was not to engage in business for three years following discharge at the end of his bankruptcy. The High Court had also ordered that the period of bankruptcy was to be extended for three years beyond the statutory three year period, although A did not challenge this aspect of the High Court decision.