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?

The Insolvency Practitioners Bill is now unlikely to come into force until early 2013 due to the disruption caused by the election.  The Finance and Expenditure Select Committee’s report on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill will also be delayed until next year.

Insolvency Practitioners Bill

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:

The Court of Appeal in Vance v Huhtamaki New Zealand Limited considered the ability of a receiver to limit his or her personal liability for post-receivership contracts under section 32 of the Receiverships Act 1993.

Justice Ellis recently confirmed the position applicable when a bankrupt applies for a stay of the decision adjudicating the debtor bankrupt pending appeal.

Mr Cary had been made bankrupt on 12 September 2011 as a result of a long outstanding debt to Trustees Executors Limited.  His opposition to the bankruptcy was based solely on the fact that Mr Cary thought he should be given more time to advance a proposal to creditors under Part 5 of the Insolvency Act 2006.  This was rejected by the Court for a variety of reasons, and the adjudication order made.