Recently a number of businesses that were acquired in the relatively heady pre-GFC days have needed to take action to restructure their equity and debt. Often the businesses have been carrying a significant debt burden from the acquisition. Compounding this, the value of the business may have been eroded to a level that is less than the value of the debt, possibly because of operating results having deteriorated and/or the valuation multiples attributed to the business having shortened.

A recent High Court decision by Justice Heath on the new section 30(2B) of the Receiverships Act 1993 (the Act) provides guidance as to how receivers should account for their remuneration and expenses when dealing with accounts receivable and inventory.

The key points are as follows:  

Until recently, the PPSA did not give second and subsequent ranking secured creditors a statutory right to take possession of collateral in the event of default. The PPSA has recently been changed to allow all secured creditors to exercise this right. The recent case of Glenmorgan v New Zealand Bloodstock [2011] NZCA 672, however, confirms that all secured creditors can also rely on contractual rights to take possession of collateral. Secured creditors should ensure that their security documents clearly give them this right.

In a decision released in September 2011, the High Court ruled that a mortgagee cannot exercise its power of sale under the mortgage if the Family Court has subsequently made an interim occupation order under the Property (Relationships) Act. That ruling had significant consequences for mortgagees, and was appealed to the Court of Appeal.

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.