For immovable property (land), the most commonly granted security is a registered mortgage over the land (governed by the Property Law Act 2007 and the Land Transfer Act 2017). A mortgage is solely a form of security for a debt or obligation and does not transfer title/ownership of the land; instead, it creates a statutory charge over the land which can be enforced in the event of default. Other types of security interests can also include submortgages, charges, bills of exchange, guarantees, indemnities and pledges. For a mortgage, a mortgage instrument has to be executed (this will need to specify the secured amount and the terms of the mortgage) and then registered with Land Information New Zealand (LINZ). This will ensure the mortgage is valid and enforceable. If the mortgage is unregistered it may still create equitable interests in the land, however registered interests take priority over unregistered interests.

For movable property (personal property such as chattels, shares and bank accounts), security is usually granted though security interests (governed by the Personal Property Securities Act 1999). A security interest includes any interest in personal property which secures payment or performance of an obligation. Other forms of security include pledges, liens and charges. To create a security interest, the secured party can either take possession of the personal property in question or enter into a security agreement and registering a financing statement for the security interest with the Personal Property Securities Register. A failure to meet these requirements may mean the security interest is unenforceable against third parties and/or the security interest losing priority to other interests and creditors. However, it will generally not affect validity as against the grantor.

Secured creditors face practical challenges when enforcing their security package, including statutory waiting periods, mandatory notice requirements, and potential court involvement. These are particularly pronounced during formal insolvency proceedings where enforcement may be imposed, requiring secured creditors to navigate complex legal frameworks. Where there is a registered mortgage, the mortgagee can exercise its power of enforcement including taking possession of the property or exercising power of sale. A statutory default notice needs to be given to the mortgagor and any other parties with registered interests in the land or property under the Property Law Act 2007. For receivership, a default notice also needs to be given before the receiver can exercise a power of sale which specifies a time during which you need to comply (at least 20 business days).

Restructuring and rescue procedures include voluntary administration, receivership, statutory management (under the Corporations (Investigation and Management) Act 1989 where a government appoints a statutory manager to take control of the corporation’s affairs), scheme of arrangement and creditor compromise. Voluntary administration is the primary corporate rescue procedure in New Zealand and is governed by Part 15A of the Companies Act 1993. Here, a voluntary administrator is appointed either by a resolution which is passed by the company’s board of directors, High Court of New Zealand after an application by a creditor, liquidator or the Registrar of Companies. When a company is undergoing administration, the control of the company’s property is held by the administrator. However, an administrator can be removed from office and a new one can be appointed by the company’s creditors. The role of the administrator is to effectively undertake an investigation into the company and to determine if a company should continue trading. While the administrator makes this decision, the company is allowed to continue trading under the direction of the administrator. The final decision into company’s administration is done by creditors at a “watershed meeting” which is held within 20 working days of the administrator’s appointment. The entry requirement for voluntary administration is that the company must be insolvent or may become insolvent in the future. This is explicitly stated in section 239A of the Companies Act 1993.

The next is receivership. Receivership differs from voluntary administration in that it is primarily designed to allow secured creditors to enforce their security interests rather than prioritising business rescue. A receiver is appointed to take control of specific assets or the entire business of a company to recover secured debt. The entry requirement for receivership is the appointment by a secured creditor, typically under the power granted by a security agreement.

Another is creditor’s compromise which is governed by Part 14 of the Companies Act 1993. The purpose of this is to allow a company to cancel or vary some of the debts that it owes to creditors and to also potentially amend the company constitution that will allow the company to repay some or all of its debts. A creditor’s compromise can only be proposed if there are grounds that the company is or will be unable to pay its debts. This differs to voluntary administration because it is not a reorganisation procedure where the running of the company is done by an administrator and instead the control of the company remains with the directors. The process involves proposing a compromise, providing prescribed information to creditors, conducting meetings where creditors vote in classes, and if approved by a majority in number representing 75% in value of voting creditors, the compromise becomes binding on all creditors who received notice, regardless of whether they voted in favor. The court may grant leave to a creditor or shareholder to propose a compromise and may order the company to supply information to enable the proposal, as provided in section 228(2) of the Companies Act 1993.

Another is a Scheme of Arrangement which is provided by Part 15 of the Companies Act 1993. Here, either the company, creditor or a shareholder may apply to Court for the approval of a scheme of arrangement. Some of the outcomes under the Scheme of Arrangement include compromise with creditors, amalgamation of two or more companies of a reorganisation of share capital. The Scheme of Arrangement becomes binding on the creditors and shareholders once it is ordered by the Court. The important difference with this is that Scheme of Arrangements do not require a company to be insolvent. Once the Court makes an order approving the Scheme, the Court may also make an order as to the issue of shares, securities or policies of any kind, the transfer or vesting of real or personal property, assets, rights, powers, interests, liabilities, contracts and engagements, the liquidation of any company, the continuation of legal proceedings, amongst other orders available under section 237(1) of the Companies Act 1993.

A debtor can obtain new or extended financing (executed through a receiver or administrator) however this will depend on the specific circumstances of the restructuring process and it will not have automatic priority over the existing debt. This may take place pursuant to an approved deed of company arrangement. However, because New Zealand does not provide priority to ‘debtor in possession’ financing (unlike other jurisdictions such as the US), the ability to borrow funds is limited.

There might be instances where a certain scheme or arrangement (such as a deed of company arrangement) provides for the release of claims against directors and other related parties of the debtor, however, generally restructuring proceedings do not release claims against non-debtor parties.

In insolvency proceedings, advisory fees are generally part of the insolvency resolution process costs and so would usually be covered by the debtor’s assets, however this can vary depending on the type of insolvency.

The test for insolvency comprises two components: the cashflow test (ability to pay debts as they become due in the normal course of business) and the balance sheet test (value of assets being greater than liabilities, including contingent liabilities). Both components must be satisfied for a company to be considered solvent. New Zealand courts have established that the test for insolvency is objective, focusing on the company’s position at the time of the relevant transaction. For individuals, insolvency is generally determined by being adjudged bankrupt under the Insolvency Act, while for companies, insolvency can be established through various mechanisms, including failing to comply with a statutory demand (which creates a rebuttable presumption of insolvency) or through liquidation proceedings.

There is no obligation on directors or officers to open insolvency proceedings when a company becomes distressed or insolvent. However, directors have a duty not to engage in reckless trading, must consider creditors’ interests when the company is in financial distress, and may be personally liable if they allow a company to continue trading while insolvent. Section 301 of the Companies Act 1993 enables a shareholder, creditor or liquidator to pursue recovery of funds from a director if the director has breached their duties in the face of the company’s insolvency.

For companies, the main proceedings are liquidation, voluntary administration, and receivership, while for individuals, the proceedings include bankruptcy, proposals to creditors, summary instalment orders, and the no asset procedure. Liquidation, under Part 16 of the Companies Act 1993, involves the appointment of a liquidator to realise and distribute a company’s assets. A liquidator (who is the officer of the court and under court supervision) takes over the management of the company during liquidation however there is no specific timeframe during which a liquidation needs to be completed.

Voluntary administration under Part 15A provides an alternative to immediate liquidation. A director, liquidator or a secured creditor with a security interest can apply to place the company into administration.  While in administration, the administrator has control of the company’s business, property, and affairs and may carry on that business and manage that property and those affairs and may terminate or dispose of all or part of that business.

The next is receivership where a receiver can be appointed by a secured creditor, to take control of a company’s assets in order to recover debts. The receiver is tasked with realising secured assets, not necessarily the entire company. The receiver must file a first report within 2 months of appointment and subsequent reports every 6 months, or upon completion. When the assets are sold and proceeds distributed, the receiver resigns and files a final report. While receivers primarily represent secured creditors’ interests, they must also consider other stakeholders. The Receiverships Act provides that the court may authorise a receiver to sell property despite a mortgagee’s objection if “the sale— is in the interests of the grantor and the grantor’s creditors; and will not substantially prejudice the interests of the mortgagee.” This provision demonstrates the balancing of interests that occurs in receivership cases. The duration is typically 6 to 12 months.

Statutory management is another form of insolvency proceeding available particularly for corporations of significant public interest. This process is governed by the Corporations (Investigation and Management) Act 1989. When a company is placed under statutory management, a moratorium is imposed that prevents any legal or enforcement actions from being initiated or continued against the company without the consent of the statutory manager. This includes actions by secured creditors. Additionally, no assets of the company can be transferred or removed without the statutory manager’s approval. The manager has the authority to suspend the payment of debts or the fulfilment of obligations, either fully or partially. There is no time limit on how long the moratorium or debt suspension can remain in effect.

When a company enters voluntary administration, a moratorium is immediately imposed. This stops most legal actions and enforcement against the company without the permission of the administrator or the Court. Creditors cannot enforce charges, take possession of company assets, or act on guarantees given. However, a secured creditor with a general security interest can still enforce their rights but only if they act within ten working days of the administrator’s appointment.

For liquidation, legal action against it and enforcement over its property is generally prohibited. However, secured creditors retain the right to deal with the assets they hold security over. This means they can still, for example, appoint a receiver to recover their debt, despite the liquidation process. The moratoriums associated with the insolvency processes are not explicitly limited in terms of geographic scope. However, their effectiveness outside New Zealand depends on whether a foreign court under its own laws will recognise the insolvency and grant orders to pause legal actions or enforcement in that jurisdiction. This relies on the foreign court’s willingness to provide recognition and assistance to the New Zealand insolvency proceedings.

For receivership, there is no automatic general moratorium against legal proceedings or enforcement of creditors’ claims, unlike in administration, liquidation, or statutory management.

Creditors and other affected parties proceed in liquidation proceedings through filing claims with the liquidator, attending creditors’ meetings, and seeking court directions or orders when necessary. They must follow prescribed statutory procedures which include submitting claims in the correct form, meeting specified deadlines, and attending meetings to vote on key decisions regarding the liquidation process.

In a voluntary administration, creditors can approve a deed of company arrangement (DOCA) which is the outcome of voluntary administration, which takes place at a meeting during which the future of the company is assessed and determined. Once approved (which needs to be approved by the majority of creditors), the terms will become binding on other unsecured creditors.

In New Zealand insolvency proceedings, creditors are ranked according to a strict hierarchy established by statute. Secured creditors generally have priority over assets subject to their security interests, followed by preferential creditors (including liquidators’ costs, employee claims, and certain government claims), and finally unsecured creditors who share proportionally in any remaining assets. Certain classes of creditor claims can be subordinated both through statutory mechanisms and through recognition of subordination agreements. The Receiverships Act 1993 explicitly recognizes the concept of subordinate security interests, suggesting that contractual subordination arrangements are likely to be recognized and enforced in New Zealand insolvency proceedings. Section 30A of the Receiverships Act 1993 says that: “If property has been disposed of by a receiver, all security interests in the property and its proceeds that are subordinate to the security interest of the person in whose interests the receiver was appointed are extinguished on the disposition of the property.” This provision clearly recognises that security interests can exist in a hierarchical relationship, with some being “subordinate” to others. When a receiver disposes of property, the subordinate security interests are extinguished, while the senior security interests are preserved.

A liquidator has the power to apply to Court to have a certain transaction set aside, which includes: voidable transactions (entered into when the company was insolvent within a six month period (or two years for a related party) before a liquidation application was made); voidable charges (this is where charges were given while the company was insolvent within the six month period (or two years for a related party) before the liquidation application was made); transactions at an undervalue (this is where an amount from a creditor can be recovered which is the difference in value between the value given by the company and the value received by the company from a transaction that took place while the company was insolvent within the two year period); dispositions that prejudice directors (this is where dispositions were made without a reasonably equivalent value being given in return with the overall intention to defeat creditors) and also where distributions to shareholders took place that were made at the time the company was insolvent (with a six year limitation period from the time the distribution was made). When a debtor’s pre-insolvency transaction is successfully challenged, the primary effect is that the transaction is set aside, allowing for the recovery of property or its value for distribution among creditors. The transaction can be automatically set aside if no objection is raised within the specified timeframe, or a court can order the return of property or payment of compensation to the liquidator or assignee for distribution to creditors. The rights of third parties who received property or payments through such transactions are significantly impacted as they may be required to return the property or pay reasonable compensation. However, New Zealand law provides protections for third parties in certain circumstances, particularly if they acted in good faith, had no reasonable grounds to suspect insolvency, and gave value for the property or altered their position based on the belief that the transfer was valid.

Generally, contracts during insolvency and restructuring processes are preserved albeit subject to its relevant statutory regime.  Each statutory regime has distinct provisions that will either enable, modify or suspend the performance of pre-existing contractual duties.  These regimes, we consider, strike a necessary balance between reinforcing freedom for parties to contract on their own terms, as well as ensuring confidence for debtors and creditors alike during the restructuring and insolvency process.

Pre-existing contracts – liquidation

The Companies Act 1993 (s 248) is the primary framework for governing what happens upon liquidation in New Zealand.  Unless there is an ipso facto clause, existing contracts are not automatically terminated by the event of liquidation, but there are heavy restrictions on enforcing contractual rights against a liquidated company.  For example, s 248 prevents any party from commencing legal proceedings or enforcing a contractual right or remedy against a company.  However, this restriction is not absolute, as s 248 grants the liquidator or the Court a discretion to permit enforcement.  A liquidator may choose to cause the company to repudiate the contract, leaving the counterparty having to claim in the liquidation for its loss.

The Companies Act 1993 Liquidation Regulations 1994 (r 10) allows for the continuation of periodical payments (including rent) to be claimed in a pre-existing contract when liquidation commences at any time other than at the beginning of a specified period.  Periodic payments are treated as accruing daily up to the point of liquidation, with lessors of the property retaining the right to claim rent accruing on or after the commencement of liquidation.

A liquidator may disclaim onerous property (subject to receiving notice from an opposing party under s 270) under s 269 of the Companies Act.  ‘Onerous property’ includes unprofitable contracts, unsaleable or not readily saleable property that may give rise to a liability to pay money or performance an onerous act.  A disclaimer has the effect of ending the rights, interests or liabilities of the company in relation to the property disclaimed from the date of disclaimer.  A disclaimer does not affect the rights or liabilities of any other person except insofar as necessary to release the company from a liability.  A person suffering loss or damage because of a disclaimer may make a claim as a creditor in the liquidation.

Pre-existing contracts – voluntary administration

Similarly, any pre-existing contract is not automatically terminated should a company enter voluntary administration and the administrator can choose whether to continue with the performance or to repudiate the contract.  Also, like liquidation, ss 239ABC-ABJ of the Companies Act 1993 prescribes a broad moratorium of actions which prevent creditors from undertaking the enforcement of charges, recovery of property or the commencement / continuation of proceedings against a company during its administration.

Should a company elect to enter into a Deed of Company Arrangement (DOCA) the Companies (Voluntary Administrations) Regulations 2007 explicitly provide that any existing contractual debts are discharged when the creditor receives their entitlement as stipulated under the DOCA.

Section 239ADI of the Companies Act provides that administrators remain personally liable for rent and other debts (such as salaries and wages) due under a contract made before the administration began and relating to the use, possession or occupation of property by a company.

Pre-existing contracts – receivership

Much like liquidation and voluntary administration, pre-existing contracts (prior to the appointment of a receiver) are not automatically terminated after the receivership is brought to an end (subject to an ipso facto clause in the relevant contract).  A receiver has discretion whether to allow a company to continue to perform its contractual obligations under pre-existing contracts or repudiate the contract, which will leave counterparties having to claim against the debtor company.

The continuity of certain contracts is provided for in section 32 of the Receiverships Act 1993.  This provides that receivers are personally liable for contracts for the payment of wages or a salary or rent unless the contract is terminated within 14 days of appointment.  A receiver is not normally personally liable for pre-receivership contracts, unless they are deemed to act in bad faith or they contract separately to assume personal liability for those pre-existing contracts.

Pre-existing contracts – statutory management

Statutory managers are expressly empowered under s 44 of the Corporations (Investigation and Management) Act 1989 to suspend any pre-existing payment obligations without this amounting to a breach or repudiation of the contract.  This provides the necessary security for statutory managers to confidently manage the affairs of a company without incurring further liability for the repudiation or breach of a contract.

Much like voluntary administration, the enforcement of retention of title clauses or right of set-off is expressly prohibited against companies under statutory management under the Corporations (Investigations and Management) Act 1989.

Ipso facto clauses

An ipso facto clause – a clause which automatically terminates or modifies a contract upon the occurrence of an insolvency event – is still subject to the relevant statutory regime.  As discussed above, the moratorium on enforcing pre-existing contractual provisions during administration may allow the administrator to continue contracts that benefit the company.  In contrast, in receivership, a receiver may elect to continue or repudiate any pre-existing contract.

Conditions applying to the sale of assets / business

Generally, property sold during a restructuring or insolvency is acquired with the confidence it is free and clear of any claims or liabilities.  This, however, depends on the satisfaction of conditions applicable to the sale of assets or an entire business which, unsurprisingly, vary significantly according to the type of restructuring or insolvency process an entity is undergoing.

The Receiverships Act 1993 offers the most straightforward route for acquiring assets.  Under s 30 of the Act, subordinate security interests are automatically extinguished when a receiver disposes of any property.  However, where mortgagee consent is required for the sale of property in receivership, the receiver must obtain consent from all mortgagees to give effect to a sale that is free and clear of any claims or liabilities.  Failing this, a receiver may obtain court approval under s 17 for the sale of the property, without the consent of the mortgagee.  This is a rare example of when security may be release without creditor consent.

In contrast, where an administrator or liquidator sells property, there is no automatic extinguishing of security interests in the sale of property nor any ability to release security without creditor consent.  Although (as discussed at Question 13) a secured creditor faces limitations on commencing legal proceedings or exercising their rights over property during the liquidation or administration process, this does not preclude the right of the secured creditor to take possession of or otherwise deal with property over which they have a charge.  Accordingly, there is no guarantee that the property is free and clear of any claims and liabilities upon its sale.

Credit bidding

Credit bidding – where a secured creditor uses the value of its debt as currency in the sale of a debtor’s assets – is not a formalised concept under New Zealand law.  Regulation 22 of the Companies Act 1993 Liquidation Regulations 1994 seems to tacitly approve of credit bidding as a concept.  This allows for a secured creditor to use the value of the amount owed to them to offset the overall amount owed.  They may then claim as an unsecured creditor for any remaining amount of the balance after the amount owed to them is subtracted.

Pre-packaged sales 

Pre-packaged sales, like credit bidding, is not a formalised concept in New Zealand law.  Although, a creditors’ compromise can be seen to embody the spirit of a pre-packaged sale.  A group of creditors may pre-agree to a restructuring to be formalised in a certain manner, which may then be the given effect by achieving the requisite supermajority (75%) of votes in favour by the creditors.

A DOCA, proposed by an administrator or director / creditor also embodies an element of pre-packaging.  Parties may discuss (but not formalise) the terms of a DOCA, which are then formalised at the second watershed meeting of creditors.  The terms of the DOCA may include to the sale of property at an agreed price and to an order of certain parties.

However, pre-packaged sales are inherently more likely to clash with the statutory duties of liquidators and administrators, being duties of independence and duty to sell property for the best price reasonably obtainable at the time of sale.  Whilst strictly not impossible, pre-packaged sales are more likely to be scrutinized from an administrator’s or liquidator’s perspective.

The Companies Act 1993 governs the director duties and liabilities and imports a high standard of behaviour incumbent on directors.  A director (in addition to a person appointed in that position) is defined under s 126 of the Act and includes a person who(se):

• directions or instructions a director may be required or is accustomed to act;
• directions or instructions the board of a company may be required or accustomed to act; and
• exercises or is entitled to exercises or controls or is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board.

There is scope for directors to incur liability for the debts of an insolvent debtor.  This may be achieved by breach of any of the following director duties and liabilities under the Act:

• Section 135 – this stipulates that a director has a duty to the company not to trade recklessly. Additionally, a director must not agree, cause or allow the business of the company to be carried on in a way likely to create a substantial risk of serious loss to the company’s creditors.  This section seeks to penalise the taking of illegitimate business risks.
• Section 136 – this prevents a director from incurring an obligation unless the director believes on reasonable grounds at the time that the company can perform the obligation when required to do so. The director’s belief at the time is assessed on a subjective basis, whereas the decision to incur an obligation is assessed on an objective (reasonable) basis.
• Section 137 – breach of duty of care, which the courts have determined includes a duty to the company to protect the interests of creditors in approaching solvency.
• Section 138A – actions taken in bad faith that is not in the best interests of the company or knowing that the actions will cause serious loss to the company.

Additional common law duties and liabilities include:

• Breach of fiduciary duties – courts have held that the duty to the company to not deal with company assets during insolvency remains.
• Failure to consider creditor interests – the courts have consistently recognized the responsibility of directors to take account of the interests of creditors where a company is insolvent or near-insolvent.

Leave for proceedings is granted by the court under s 165 of the Act either by the company itself or by a shareholder on behalf of the company.  Similarly, under s 301 of the Act, the court allows a liquidator, creditor or shareholder to bring an action against the directors of a company (among others) for acts done negligently, in default or in breach of the director’s duty or trust in relation to the company.  The court may then order that person to repay, restore or contribute towards the money or property at a rate it sees fit.

Section 162 of the Act allows for companies, subject to board approval and their constitution, to provide insurance coverage to directors and employees for matters arising in the course of their duties.  However, under s 162, insurance will not cover criminal conduct or any breach of director or fiduciary duties.

New Zealand does not have any legislative provisions to allow the release of directors or other stakeholders from liability for previous actions and decisions.  This forms a small element of New Zealand’s inherently creditor-friendly jurisdiction, as discussed further at Question 23.

Section 157(3) of the Companies Act 1993 explicitly states that a person who held office as a director remains liable under the provisions of the Act that impose liabilities on directors in relation to acts, omissions and decisions made whilst in their capacity as a director.  As stated at Question 15 above, the courts have consistently recognised the responsibility of directors to take account of the interests of creditors where a company is insolvent or near-insolvent.

Directors remain broadly accountable for their actions in New Zealand.  The liability of directors can be sought across the contexts of various director duties under the Companies Act 1993.

The High Court can recognise foreign proceedings over a local debtor.  This power is found under s 8 of the Insolvency (Cross-border) Act 2006 (ICBA), which allows the High Court to, if it thinks fit, act in aid of and be auxiliary to an overseas court that has jurisdiction in relation to that insolvency proceeding.

To achieve recognition of foreign insolvency proceedings in New Zealand, a foreign representative (as defined under Schedule 1 of the ICBA) must follow the procedure outlined in Rule 24.56 of the High Court Rules 2016.  For brevity, the criteria under r 24.56 have not been described.

The foreign proceeding in question must then meet the test pursuant to Article 17, Schedule 1 of the ICBA.  The definitions of “proceeding” and “representative” must be met under Articles 2(a) and 2(d); have supporting documentation under Article 15(2); not be manifestly contrary to the public policy of New Zealand under Article 6; and be submitted to the High Court.

The Centre of Main Interests (COMI) underpins how the Court recognises proceedings.  A proceeding can be classified as a ‘foreign main proceeding’, meaning a foreign proceeding taking place in the State where the debtor has its COMI; or a ‘foreign non-main proceeding’, meaning means a foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor merely has an establishment in that foreign state, rather than its COMI.  The type of recognition by the Court has tangible flow-on effects such as the centralization and streamlining of proceedings across jurisdictions, as well as the predictability of the process for creditors.

The UNICITRAL Model Law on Cross Border Insolvency has been adopted (with minor alterations) in New Zealand through Schedule 1 of the ICBA and informs the various test mentioned above.  As of the date of this publication, New Zealand has not adopted nor indicated any intention to adopt the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments.  New Zealand is evidently open to adopting international insolvency standards.  However, it remains to be seen whether future legislative developments, an evolving regulatory environment, changing government policy agendas, recognition by the courts in case law or a combination of all the above will provide the necessary impetus for officially adopting the Model Law on Recognition and Enforcement of Insolvency-Related Judgments.

N/A

Debtors incorporated elsewhere can enter restructuring or insolvency proceedings in New Zealand.  Under s 342 of the Companies Act, an application may be made to the court for the liquidation of an overseas company under New Zealand law.  This provision is inherently broad and allows for liquidation of an overseas company to proceed irrespective of whether the company is incorporated under the relevant Part of the Act; has given notice of intention to cease business in New Zealand; has objected to the ceasing of business in New Zealand; or has ever been dissolved under the laws of another country.

New Zealand has few restrictions on entering restructuring or insolvency proceedings in its jurisdiction.  Any application for the liquidation of an overseas company must follow the process of liquidation under Part 16 of the Act, subject to the modifications and exclusions set out in Schedule 9.  These contain procedural requirements or limitations that may restrict what liquidation applications proceed in New Zealand.  However, despite these, the ambit for overseas liquidation proceedings remains broadly applicable.

Unsurprisingly, New Zealand seems to share most of its cross-border problems with Australia.  The adoption of mutual legislation and regulatory instruments, such as the Trans-Tasman Proceedings Act 2010 and the Model Law on Cross-Border Insolvency suggests the volume and significance of cross-border disputes with Australia warrants distinct legal treatment relative to that of New Zealand’s other international counterparts.

The separate legal personality is the foundation of insolvency proceedings involving multiple companies in a corporate group in New Zealand.  This prevents creditors from gaining access to the assets of other companies in order to satisfy the debts owed to them.

However, this starting point is not absolute and courts may facilitate coordinated insolvency proceedings with multiple companies if appropriate.  For example, s 271 allows for the pooling of assets of related companies in a liquidation, and ss 239AL and 239AER empowers the court to allow for joint meetings of creditors and to order a single administration for related companies, respectively.  It is up to the courts to assess whether a group of companies are ‘related companies’ for the purposes of these sections.

New Zealand law provides a strong scope for cooperation between office holders.  As mentioned ss 239AL and 239AER gives flexibility for courts to facilitate a coordinated approach to administration where it deems it appropriate.

New Zealand has not yet passed a law that adopts the UNCITRAL Model Law on Enterprise Group Insolvency (Model Law on Enterprise Insolvency).   As at the date of this publication, New Zealand has not openly expressed an interest in adopting the Model Law on Enterprise Group Insolvency.  As discussed above at Question 17, New Zealand is evidently open towards adopting international insolvency standards, as seen through the statutory integration of the Model Law in 2006.  It remains to be seen whether future legislative developments, an evolving regulatory environment, changing government policy agendas, recognition by the courts in case law or a combination of all the above will provide the necessary impetus for officially adopting the Model Law on Enterprise Group Insolvency.

The New Zealand government has placed reform of the Companies Act 1993 high on its legislative agenda.

In August 2024, Minister Bayly announced a two-phased review to modernise the Act and make it easier for conducting business in New Zealand.

Phase 1 introduced an array of policy initiatives aimed at corporate governance reforms.  Generally, these seek to address what the government perceives as outdated and overly complex corporate governance provisions and combatting poor business practices.  Reforms to restructuring and insolvency include, among others, removing the need to go to court when not required; as well as adopting the recommendations of the Insolvency Working Group, which includes extending the period during which transactions with related parties can be voided to four years when a business is insolvent.  These reforms, it is hoped, will improve outcomes for creditors.

Phase 2 of the review includes consideration of director’s duties and liabilities, as well as wider enforcement provisions.  This comes in the wake of the Supreme Court’s landmark 2023 Mainzeal decision which found that Mainzeal’s directors continued to run the business, despite it being insolvent.  The government has yet to announce the specific policy initiatives aimed at addressing these areas.

New Zealand is currently considered to be a creditor-friendly jurisdiction.  New Zealand has historically had strong creditor-friendly legislation, such as the Personal Property Securities Act 1999 and the Companies Act 1993 which establish clear procedures across a wide array of avenues, enabling creditors to enforce their rights over security interests effectively and efficiently.

However, come the turn of the millennium, New Zealand has implemented several debtor-friendly legislative instruments that provide a greater balance between debtors and creditors.  As discussed at Question 12, a significant reform was the introduction of voluntary administration (through the Companies Amendment Act 2006) – providing an alternate lifeline for a company in dire financial straits.  A suite of provisions under this Act (such as restrictions on commencement of legal proceedings or enforcing a charge over a company, among others) prevents creditors from undertaking enforcement measures while a debtor company organizes its affairs during voluntary administration.  Other debtor-friendly reforms include amendments to the Credit Contracts and Consumer Finance Act 2003 aimed at protecting and providing remedies to debtors from high-interest loans and oppressive creditor contracts.

Evidently, these amendments have sought to level the playing field between creditors and debtors in New Zealand.

Typically, the New Zealand government has played a minimal, if not non-existent, role in relation to distressed businesses.  The government, through various legislative procedures, simply provides an avenue for distressed businesses to resolve their issues with their stakeholders.  This process is generally free from government intervention but for exceptional circumstances.  For example, under the Reserve Bank of New Zealand Act 1989, the government may place any registered bank under statutory management, albeit in very limited circumstances.

Sociopolitical factors have given rise to preference for certain stakeholders in restructurings and / or insolvencies.  The Employment Relations Act 2000 has various protections for employees affected by a business restructuring which recognizes the inherent imbalance in an employment relationship.  Accordingly, this can be seen as a strong example of sociopolitical concerns (in this case, concerning worker rights) becoming enshrined in legislation.

Despite its general laissez-faire approach to intervention, the New Zealand government has sought to intervene where necessary.  The 2024 collapse of the Du Val Group, a high-profile New Zealand property developer owing more than $250m in debt, forced the government to make the rare move of appointing a statutory manager to oversee the repayment of debts to creditors and investors.  Prior to that, the next-most recent example of government intervention for distressed businesses was during the high-profile collapse of South Canterbury Finance in 2010.  The government intervened to place South Canterbury Finance into statutory management, eventually paying out $1.775 billion, equating to $405 per person in New Zealand, to creditors and investors affected by the company’s collapse.  Although extraordinarily rare, the government is seemingly willing and able to intervene in the affairs of distressed businesses where the business in question is large enough to warrant public interest.

In recent years we have also seen unprecedented intervention by the New Zealand government in response to extraordinary nationwide economic crises.  The COVID-19 pandemic and the widespread damage caused by Cyclone Gabrielle forced the New Zealand government to assist ailing businesses.  The COVID-19 Response (Management Measures) Legislation Act 2021 provided a suite of provisions that included, among other things, a business debt hibernation scheme for affected entities; wage subsidies to maintain employment; or a resurgence support payment for businesses experiencing a 30% drop or more in revenue due to the pandemic.

Using the above examples, we can see that the New Zealand government takes a principled approach to intervening in the affairs of distressed business.  Through its actions, the government has seemingly set a precedent to intervene only during extraordinary economic crises – both at a local and national level.

There do not seem to be many unique barriers to efficient and effective restructurings and insolvencies that cannot be applied across other areas of law.  For example, a major barrier is the complexity of the legal framework covering restructurings and insolvencies and the general requirement for a liquidator or receiver to confer with the court consistently.  This may be seen to slow the restructuring or insolvency process down; however, this must be balanced with the need for high quality personnel and necessary court approval.

The requirements to become a licensed insolvency practitioner in New Zealand may be regarded by some as particularly onerous.  Whilst the Insolvency Practitioners Regulation Act 2019 provides the standards for integrity and ability expected of insolvency practitioners and the wider industry, these standards may deter individuals from otherwise pursuing or continuing to practise in the industry.