The High Court has confirmed its broad power to bypass the strict legislative requirements that otherwise govern voluntary administrations. Section 239ADO(1) of the Companies Act allows the Court to make any order that it thinks appropriate about how the voluntary administration provisions of the Companies Act are to operate in relation to a particular company.
“...we consider that the section means what it says, and that there is not much point in trying to paraphrase it.” (Supreme Court in Thompson v CIR)
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.
In Sea Management Singapore Pte Ltd v Professional Service Brokers Ltd, SEA, a 50% shareholder in PSB, applied to put PSB into liquidation due to the irreconcilable deadlock SEA claimed existed at both board and shareholder levels over the direction of Conexa, a PSB subsidiary. Associate Judge Bell dismissed the application, holding that it was not just and equitable to order liquidation when a reasonable option existed in the constitution, or under the shareholders' agreement.
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.