New Zealand Companies Act 1993 - Liquidation

New Zealand New Zealand Companies Act 1993 New Zealand Companies Act 1993 New Zealand Companies Act 1993

Part 16 Liquidations

The process of liquidation

240 Interpretation

  • (1) In this Act, unless the context otherwise requires,—

    creditor means a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and includes a secured creditor only—

    • (a) for the purposes of sections 241(2)(c), 247, 250, and 289; or

    • (b) to the extent of the amount of any debt owing to the secured creditor in respect of which the secured creditor claims under section 305 as an unsecured creditor

    liquidation committee means a liquidation committee appointed under section 314

    Official Assignee means an Official Assignee or Deputy Assignee appointed under the Insolvency Act 2006

    statutory demand has the meaning set out in section 289.

    (2) For the purposes of this Act, the power to appoint a liquidator of a company includes the power to appoint 2 or more persons as liquidators of a company.

    Section 240(1) creditor: replaced, on 1 July 1994, by section 30 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

    Section 240(1) Official Assignee: amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

240A Liquidation of licensed insurers

  • If a licensed insurer may be put into liquidation under or in accordance with this Part, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Prudential Supervision) Act 2010.

    Section 240A: inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

241 Commencement of liquidation

  • (1) A company may be put into liquidation by the appointment as liquidator of a named person or of an Official Assignee for a named district.

    (2) A liquidator may be appointed by—

    • (a) special resolution of those shareholders entitled to vote and voting on the question; or

    • (b) the board of the company on the occurrence of an event specified in the constitution; or

    • (c) the court, on the application of—

      • (i) the company; or

      • (ii) a director; or

      • (iii) a shareholder or other entitled person; or

      • (iv) a creditor (including any contingent or prospective creditor); or

      • (v) if the company is in administration, the administrator; or

      • (va) if the company is a financial markets participant, the FMA; or

      • (vi) the Registrar; or

      • (vii) if the company is a licensed insurer, the Reserve Bank of New Zealand; or

      • (viii) in the case of a company that has been removed from the New Zealand register, the Registrar or a person who, immediately before the company was removed from the New Zealand register, was a person described in subparagraph (ii), (iii), (iv), or (vii); or

    • (d) a resolution of the creditors passed at the watershed meeting held under section 239AT.

    (2A) However, the court must not appoint a liquidator under subsection (2)(c)(viii) unless the company is restored to the New Zealand register under section 328 or 329.

    (3) An Official Assignee may be appointed liquidator of a company only—

    • (a) if the special resolution passed in accordance with paragraph (a) of subsection (2) is passed by reason of the Official Assignee exercising voting rights attaching to shares in the company of—

      • (i) a person who has been adjudged bankrupt; or

      • (ii) another company of which the Official Assignee is liquidator; or

    • (b) by the court.

    (4) The court may appoint a liquidator if it is satisfied that—

    • (a) the company is unable to pay its debts; or

    • (b) the company or the board has persistently or seriously failed to comply with this Act; or

    • (c) the company does not comply with section 10; or

    • (d) it is just and equitable that the company be put into liquidation.

    (5) The liquidation of a company commences on the date on which, and at the time at which, the liquidator is appointed.

    Section 241(2): replaced, on 1 November 2007, by section 7 of the Companies Amendment Act 2006 (2006 No 56).

    Section 241(2)(c)(va): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 241(2)(c)(vii): inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

    Section 241(2)(c)(vii): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 241(2)(c)(viii): inserted, on 25 February 2012, by regulation 4(1) of the Companies Amendment Act 2012 (2012 No 7).

    Section 241(2A): inserted, on 25 February 2012, by regulation 4(2) of the Companies Amendment Act 2012 (2012 No 7).

    Section 241(5): replaced, on 26 April 1999, by section 3 of the Companies Amendment Act 1999 (1999 No 19).

241AA Restriction on appointment of liquidator by shareholders or board after application filed for court appointment

  • (1) This section applies if an application has been filed for the appointment of a liquidator of a company by the court under section 241(2)(c).

    (2) A liquidator of the company may only be appointed under section 241(2)(a) or (b) if the liquidator is appointed within 10 working days after service on the company of the application.

    (3) If a liquidator is appointed under section 241(2)(a) or (b), the creditor who filed the application referred to in subsection (1) may apply to the court under section 283(4) for the review of his or her appointment as if the words “successor to a liquidator" in section 283(4) read “liquidator.

    (4) Subsection (2) does not apply once the application has been finally disposed of.

    Section 241AA: inserted, on 1 November 2007, by section 15 of the Companies Amendment Act 2006 (2006 No 56).

241A Commencement of liquidation to be recorded

  • (1) If—

    • (a) a liquidator is appointed under section 241(2)(a), the shareholders must record in the special resolution appointing the liquidator the date on which, and the time at which, the special resolution was passed; or

    • (b) a liquidator is appointed under section 241(2)(b), the board of the company must record in the instrument appointing the liquidator the date on which, and the time at which, the liquidator was appointed; or

    • (c) a liquidator is appointed under section 241(2)(c), the court must record in the order appointing the liquidator the date on which, and the time at which, the order was made.

    • (d) a liquidator is appointed under section 241(2)(d), the creditors must record in the resolution appointing the liquidator the date on which, and the time at which, the resolution was passed.

    (2) If any question arises as to whether on the date on which a liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.

    Section 241A: inserted, on 26 April 1999, by section 4 of the Companies Amendment Act 1999 (1999 No 19).

    Section 241A(1)(d): inserted, on 1 November 2007, by section 8 of the Companies Amendment Act 2006 (2006 No 56).

242 Liquidators to act jointly unless otherwise stated

  • Where 2 or more persons are appointed as liquidators of a company, those persons must act jointly unless the special resolution of shareholders or the resolution of the board of the company or the order of the court appointing the liquidators states that the liquidators may exercise their powers individually.

243 Liquidator to summon meeting of creditors

  • (1) Subject to section 245 and to subsection (8), the liquidator of a company must call a meeting of the creditors of the company for the purpose,—

    • (a) in the case of a liquidator appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241, of resolving whether to confirm the appointment of that liquidator or to appoint another liquidator in place of the liquidator so appointed:

    • (b) in the case of a liquidator appointed pursuant to paragraph (c) of subsection (2) of section 241, of resolving whether to confirm the appointment of that liquidator or to make an application to the court for the appointment of a liquidator in place of the liquidator so appointed:

    • (c) in either case, of determining whether to pass a resolution for the purposes of section 258(1)(b).

    (1A) If the appointment of a liquidator under paragraph (a) or paragraph (b) of section 241(2) is not confirmed at a meeting of creditors and another liquidator is not appointed in place of that liquidator, the appointment of the liquidator under paragraph (a) or paragraph (b) of section 241(2) continues until another liquidator is appointed.

    (2) Notice in writing of a meeting of creditors—

    • (a) must be given to every known creditor together with the report and notice referred to in section 255(2)(c); and

    • (b) if the liquidator receives a notice under section 245(1)(b)(iii), must be given within 10 working days after receiving the notice.

    (3) Public notice of the meeting of creditors must also be given by the liquidator not less than 5 working days before the date of the meeting.

    (4) Except if subsection (2)(b) applies, a meeting of creditors must be held,—

    • (a) in the case of a liquidator appointed under paragraph (a) or paragraph (b) of subsection (2) of section 241, within 10 working days of the liquidator's appointment; or

    • (b) in the case of a liquidator appointed under paragraph (c) of subsection (2) of section 241, within 30 working days of the liquidator's appointment; or

    • (c) in either case, within such longer period as the court may allow.

    (4A) If subsection (2)(b) applies, a meeting of creditors must be held within 15 working days after the liquidator receives a notice under section 245(1)(b)(iii) requiring a meeting of creditors to be called.

    (5) Every meeting of creditors must be held in accordance with Schedule 5.

    (6) If at a meeting of creditors it is resolved to appoint a person as liquidator of the company in place of the liquidator appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241, the person who it is resolved to appoint as liquidator shall, subject to section 282, be the liquidator of the company.

    (7) If at a meeting of creditors it is resolved to apply to the court for the appointment of a person as liquidator in place of the liquidator appointed pursuant to paragraph (c) of subsection (2) of section 241, the liquidator of the company must forthwith apply to the court for the appointment of that person as liquidator and the court may, if it thinks fit, appoint that person as the liquidator of the company.

    (8) Nothing in this section applies to the liquidator of a company appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241 if, within 20 working days before the appointment of the liquidator, the board of the company resolved that the company would, on the appointment of a liquidator under either paragraph (a) or paragraph (b) of that subsection, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration.

    (9) The directors who vote in favour of such a resolution must sign a certificate stating that, in their opinion, the company would, on the appointment of a liquidator under either paragraph (a) or paragraph (b) of subsection (2) of section 241, as the case may be, be able to pay its debts, and the grounds for that opinion.

    (10) Every director who fails to comply with subsection (9) commits an offence and is liable on conviction to the penalty set out in section 373(1).

    (11) Except for subsection (5), this section does not apply if the liquidator is appointed under section 241(2)(d).

    Section 243(1)(a): amended, on 3 June 1998, by section 9(1)(a) of the Companies Amendment Act 1998 (1998 No 31).

    Section 243(1)(b): amended, on 3 June 1998, by section 9(1)(b) of the Companies Amendment Act 1998 (1998 No 31).

    Section 243(1A): inserted, on 3 June 1998, by section 9(2) of the Companies Amendment Act 1998 (1998 No 31).

    Section 243(2): replaced, on 1 November 2007, by section 16 of the Companies Amendment Act 2006 (2006 No 56).

    Section 243(4): amended, on 3 June 1998, by section 9(4) of the Companies Amendment Act 1998 (1998 No 31).

    Section 243(4A): inserted, on 3 June 1998, by section 9(5) of the Companies Amendment Act 1998 (1998 No 31).

    Section 243(11): inserted, on 1 November 2007, by section 9 of the Companies Amendment Act 2006 (2006 No 56).

244 Liquidator to summon meeting of creditors in other cases

  • Subject to section 245, the liquidator of a company who was not, by reason of section 243(8), required to call a meeting of creditors of the company must,—

    • (a) if the liquidator is satisfied that the directors who voted in favour of a resolution referred to in that subsection did not have reasonable grounds to believe that the company would, on the appointment of a liquidator under paragraph (a) or paragraph (b) of subsection (2) of section 241, be able to pay its debts; or

    • (b) if the liquidator is satisfied that the company is not able to pay its debts,—

    forthwith call a meeting of the creditors of the company for the purpose specified in paragraph (a) or paragraph (b) of subsection (1) of section 243, as the case may be; and the provisions of that section shall apply accordingly with such modifications as may be necessary.

245 Liquidator may dispense with meetings of creditors

  • (1) A liquidator is not required to call a meeting of creditors under section 243 or section 244, as the case may be, if—

    • (a) the liquidator considers, having regard to the assets and liabilities of the company, the likely result of the liquidation of the company, and any other relevant matters, that no such meeting should be held; and

    • (b) the liquidator gives notice in writing to the creditors stating—

      • (i) that the liquidator does not consider that a meeting should be held; and

      • (ii) the reasons for the liquidator's view; and

      • (iii) that no such meeting will be called unless a creditor gives notice in writing to the liquidator, within 10 working days after receiving the notice, requiring a meeting to be called; and

    • (c) no notice requiring the meeting to be called is received by the liquidator within that period.

    (2) Notice under subsection (1)(b) must be given to every known creditor together with the report and notice referred to in section 255(2)(c).

    Compare: 1955 No 63 s 235A; 1989 No 101 s 8

    Section 245(2): replaced, on 1 November 2007, by section 17 of the Companies Amendment Act 2006 (2006 No 56).

245A Power of court where outcome of voting at meeting of creditors determined by related entity

  • (1) This section applies if the court is satisfied that—

    • (a) a resolution at a meeting of creditors was passed, defeated, or required to be decided by a casting vote; and

    • (b) the resolution would not have been passed, defeated, or required to be decided by a casting vote if the vote or votes cast by a particular related creditor or particular related creditors were disregarded; and

    • (c) the passing of the resolution, or the failure to pass it,—

      • (i) is contrary to the interests of the creditors, or a class of creditors, as a whole; and

      • (ii) has prejudiced, or is reasonably likely to prejudice, the interest of the creditor who voted against the resolution, or for it, as the case may be, to an extent that is unreasonable having regard to—

        • (A) the benefits accruing to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the resolution; and

        • (B) the nature of the relationship between the related creditor and the company, or between the related creditors and the company; and

        • (C) any other related matter.

    (2) The court may, on the application of the liquidator or a creditor,—

    • (a) order that the resolution be set aside:

    • (b) order that a new meeting be held to consider and vote on the resolution:

    • (c) order that a specified related creditor or creditors must not vote on the resolution or on a resolution to vary or amend it:

    • (d) make any other orders that the court thinks necessary.

    (3) In this section,—

    promoter has the same meaning as in section 2(1) of the Securities Act 1978

    related creditor means a creditor who is a related entity of the company in liquidation

    related entity means, in relation to the company in liquidation,—

    • (a) a promoter; or

    • (b) a relative or spouse of a promoter; or

    • (c) a relative of a spouse of a promoter; or

    • (d) a director or shareholder; or

    • (e) a relative or spouse of a director or shareholder; or

    • (f) a relative of a spouse of a director or shareholder; or

    • (g) a related company; or

    • (h) a beneficiary under a trust of which the company in liquidation is or has at any time been a trustee; or

    • (i) a relative or spouse of that beneficiary; or

    • (j) a relative of a spouse of that beneficiary; or

    • (k) a company one of whose directors is also a director of the company in liquidation; or

    • (l) a trustee of a trust under which a person (A) is a beneficiary, if A is a related entity of the company in liquidation under this subsection.

    Compare: Corporations Act 2001 s 600A (Aust)

    Section 245A: inserted, on 1 November 2007, by section 18 of the Companies Amendment Act 2006 (2006 No 56).

246 Interim liquidator

  • (1) If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.

    (2) Subject to subsection (3), an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.

    (3) The court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.

    (4) The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made.

    (5) The court must record in the order appointing the interim liquidator the date on which, and the time at which, the order was made.

    (6) If any question arises as to whether on the date on which an interim liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the interim liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.

    Section 246(4): inserted, on 26 April 1999, by section 5 of the Companies Amendment Act 1999 (1999 No 19).

    Section 246(5): inserted, on 26 April 1999, by section 5 of the Companies Amendment Act 1999 (1999 No 19).

    Section 246(6): inserted, on 26 April 1999, by section 5 of the Companies Amendment Act 1999 (1999 No 19).

247 Power to stay or restrain certain proceedings against company

  • At any time after the making of an application to the court under section 241(2)(c) to appoint a liquidator of a company and before a liquidator is appointed, the company or any creditor or shareholder of the company may,—

    • (a) in the case of any application or proceeding against the company that is pending in the court or Court of Appeal, apply to the court or Court of Appeal, as the case may be, for a stay of the application or proceeding:

    • (b) in the case of any other application or proceeding pending against the company in any court or tribunal, apply to the court to restrain the application or proceeding—

    and the court or Court of Appeal, as the case may be, may stay or restrain the application or proceeding on such terms as it thinks fit.

    Compare: 1955 No 63 s 221

248 Effect of commencement of liquidation

  • (1) With effect from the commencement of the liquidation of a company,—

    • (a) the liquidator has custody and control of the company's assets:

    • (b) the directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part:

    • (c) unless the liquidator agrees or the court orders otherwise, a person must not—

      • (i) commence or continue legal proceedings against the company or in relation to its property; or

      • (ii) exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company:

    • (d) unless the court orders otherwise, a share in the company must not be transferred:

    • (e) an alteration must not be made to the rights or liabilities of a shareholder of the company:

    • (f) a shareholder must not exercise a power under the constitution of the company or this Act except for the purposes of this Part:

    • (g) the constitution of the company must not be altered.

    (2) Subsection (1) does not affect the right of a secured creditor, subject to section 305, to take possession of, and realise or otherwise deal with, property of the company over which that creditor has a charge.

    (3) This section is subject to section 139J(1) to (3) of the Reserve Bank of New Zealand Act 1989.

    Section 248(3): inserted, on 10 December 2013, by section 12 of the Reserve Bank of New Zealand (Covered Bonds) Amendment Act 2013 (2013 No 103).

249 Completion of liquidation

  • The liquidation of a company is completed when the liquidator—

    • (a) complies with section 257(1)(b); or

    • (b) delivers to the Registrar for registration—

      • (i) a copy of any order made by the court under section 257(2)(a); or

      • (ii) a copy of any order made by the court under section 257(2)(b) together with any documents required to comply with the order,—

    as the case may be.

250 Court may terminate liquidation

  • (1) The court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.

    (2) An application under this section may be made by—

    • (a) the liquidator; or

    • (b) if the company has executed a deed of company arrangement, the deed administrator; or

    • (c) a director or shareholder of the company; or

    • (d) any other entitled person; or

    • (e) a creditor of the company; or

    • (ea) if the company is a financial markets participant, the FMA; or

    • (f) the Registrar.

    (2A) On an application by a deed administrator, the court must have regard to—

    • (a) any misconduct by the company's officers reported by the deed administrator, the liquidator, or the Registrar; and

    • (b) the commercial decision of the creditors in accepting the deed of company arrangement; and

    • (c) whether the deed of company arrangement would leave the company insolvent; and

    • (d) any other matters that the court thinks fit.

    (3) The court may require the liquidator of the company to furnish a report to the court with respect to any facts or matters relevant to the application.

    (4) The court may, on making an order under subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.

    (5) Where the court makes an order under this section, the person who applied for the order must, within 10 working days after the order was made, deliver a copy of the order to the Registrar for registration.

    (6) Where the court makes an order under subsection (1), the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.

    (7) Every person who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(2).

    Section 250(2): replaced, on 1 November 2007, by section 10 of the Companies Amendment Act 2006 (2006 No 56).

    Section 250(2)(ea): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 250(2A): inserted, on 1 November 2007, by section 10 of the Companies Amendment Act 2006 (2006 No 56).

Provisions relating to prior execution process

251 Restriction on rights of creditors to complete execution, distraint, or attachment

  • (1) Subject to subsection (3), a creditor is not entitled to retain the benefit of any execution process, distress, or attachment over or against the property of a company unless the execution process, distress, or attachment is completed before—

    • (a) the passing of a special resolution under section 241(2)(a) or a resolution under section 241(2)(d) appointing a liquidator of the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or

    • (b) the passing of a resolution by the board of a company under section 241(2)(b) appointing a liquidator or the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or

    • (c) the making of an application to the court under section 241(2)(c) to appoint a liquidator of the company.

    (2) Notwithstanding subsection (1),—

    • (a) a person who, in good faith, purchases property of a company from an officer charged with an execution process acquires a good title as against the liquidator of the company:

    • (b) a person who, in good faith, purchases property of a company on which distress has been levied acquires a good title as against the liquidator of the company.

    (3) The court may set aside the application of subsection (1) to such an extent and on such terms and conditions as the court thinks fit.

    (4) For the purposes of this section,—

    • (a) an execution or distraint against personal property is completed by seizure and sale:

    • (b) an attachment of a debt is completed by receipt of the debt:

    • (c) an execution against land is completed by sale, and, in the case of an equitable interest, by the appointment of a receiver.

    (5) Nothing in this section limits or affects section 292.

    Compare: 1955 No 63 s 314; 1980 No 43 s 29

    Section 251(1)(a): amended, on 1 November 2007, by section 11 of the Companies Amendment Act 2006 (2006 No 56).

252 Duties of officer in execution process

  • (1) Subject to subsection (6), where—

    • (a) property of a company is taken in an execution process; and

    • (b) before completion of the execution process the officer charged with the execution process receives notice that a liquidator of the company has been appointed,—

    he or she must, on being required by the liquidator to do so, deliver or transfer the property and any money received in satisfaction or partial satisfaction of the execution or paid to avoid a sale of the property, as the case may be, to the liquidator.

    (2) The costs of the execution process are a first charge on any property or money delivered or transferred to the liquidator under subsection (1) and the liquidator may sell all or some of the property to satisfy that charge.

    (3) Subject to subsection (6), where—

    • (a) property of a company is sold in an execution process in respect of a judgment for a sum exceeding $500; or

    • (b) money is paid to the officer charged with the execution process to avoid a sale of the property,—

    the officer must retain the proceeds of sale or the money so paid for 10 working days.

    (4) Subject to subsection (6), if,—

    • (a) within the period of 10 working days, the officer has notice of—

      • (i) the calling of a meeting at which a special resolution is proposed to appoint a liquidator pursuant to section 241(2)(a); or

      • (ii) the calling of a meeting of the board at which a resolution is proposed to appoint a liquidator pursuant to section 241(2)(b); or

      • (iii) the making of an application to the court to appoint a liquidator pursuant to section 241(2)(c); and

    • (b) the company is put into liquidation—

    the officer must deduct from the amount the costs of the execution process and pay the balance to the liquidator.

    (5) A liquidator to whom money is paid under subsection (4) is entitled to retain it as against the execution creditor.

    (6) The court may set aside the application of this section to such extent and on such terms and conditions as it thinks fit.

    Compare: 1955 No 63 s 315

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