Ministry of Economic Development
DRAFT
INSOLVENCY LAW REFORM BILL
April 2004
Insolvency Law Reform Bill
Government Bill
Explanatory note
Hon Lianne Dalziel
Insolvency Law Reform Bill
Government Bill
Contents
1 Title
2 Commencement
Part 1
Interpretation and scope
3 Interpretation
4 Rights and powers under other
Acts not affected
5 Act binds the Crown
6 Corporation and other entities
not subject to Act
Part 2
Nature of bankruptcy, and process of
being made bankrupt
Subpart 1-Bankruptcy and its
alternatives
7 Nature of bankruptcy
8 Alternatives to bankruptcy
Subpart 2-Process of being made
bankrupt
9 Introduction to Subpart 2
Adjudication
10 Adjudication
11 Adjudication by Court
12 Adjudication on debtor's initiative
Court adjudication on creditor's
application
13 When creditor may apply for
debtor's adjudication
14 Application by secured creditor
15 Court's permission required for
withdrawal of application
Acts of bankruptcy
16 Requirement of act of bankruptcy
17 Failure to comply with bankruptcy
notice
18 Disposition of property to trustee
for benefit of creditors
19 Fraud or intent to prefer a creditor
20 Departure from New Zealand
21 Avoidance of creditors
22 Notice of suspension of debts
23 Admission to creditors of insolvency
24 Possession under execution process
25 Writ of sale
26 Return that sufficient goods not
found under execution process
27 Removal or concealment of
property
28 Unsatisfied judgment for
non-payment of trust money
Bankruptcy notice
29 Form of bankruptcy notice
30 Effect of overstatement of
amount owing
Effect on execution process of filing
creditor's application
31 Creditor's execution process
must not be issued or continued
32 Execution processes by other
creditors
33 Execution process issued by
another Court
34 No restriction on execution process
if application for adjudication
withdrawn or dismissed
35 Meaning of execution process
Court's options when hearing creditor's
application
36 Court may adjudicate debtor
bankrupt
37 Court may refuse adjudication
38 Court may halt application
39 Orders if more than 1 application
40 Orders if more than 1 debtor
41 Order that disposition or proposal
not act of bankruptcy
42 Halt or refusal of application
when judgment under appeal
43 Court may halt application while
underlying debt determined
44 Substitution of creditor
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Insolvency Law Reform Bill
Debtor's application
45 When debtor may file application
46 Debtor must first file statement
of affairs
47 Debtor automatically adjudicated
bankrupt
48 Debtors' joint application
49 Steps for filing debtor's application
Subpart 3-Appointment of receiver
Power of Court to appoint Assignee as
receiver
50 Application for appointment of
Assignee as receiver
51 Additional orders after receiver's
appointment
52 Appointment of Assignee as
receiver and manager must be
advertised
53 Execution process halted
54 Effect when execution halted
Subpart 4-Adjudication
Adjudication
55 Bankruptcy commences on adjudication
56 Date of adjudication
57 Date and time of adjudication
must be recorded
58 Registrar must notify Assignee
of adjudication by Court
59 Official Assignee must nominate
Assignee
60 Presumption that act or transaction
entered into or effected after
adjudication
61 Adjudication final and binding
Subpart 5-What happens on
adjudication
62 Debtor adjudicated bankrupt
called the bankrupt
63 Outline of what happens on adjudication
Assignee must advertise adjudication
64 Assignee must advertise adjudication
65 Order that Assignee must not
advertise pending appeal
Bankrupt's statement of affairs
66 Bankrupt must file statement of
affairs with Assignee
67 Notice that bankrupt must file
statement of affairs
68 Time for filing statement of
affairs
Assignee must call meeting of creditors
69 Assignee must call meeting of
creditors
70 Time when meeting must be held
71 Assignee may dispense with first
creditors' meeting
72 Notice that first creditors' meeting
should not be called
73 Documents to be sent with notice
of meeting
Court proceedings are halted
74 Effect of adjudication on Court
proceedings
Execution process
75 Execution process must not be
begun or continued after adjudication
advertised
Bankrupt's death
76 Effect of bankrupt's death after
adjudication
Subpart 6-Role of creditors
77 Overview of creditors' role in
bankruptcy
Creditors' meetings
78 Types of creditors' meetings
79 Subsequent meetings
80 Meeting and resolution not
defective for lack of notice
Conduct of creditors' meetings
81 Chairperson
82 Chairperson may adjourn meeting
83 Assignee must report to meeting
84 Attending a creditors' meeting
85 Bankrupt may be required to
attend and be questioned
86 Attendance by non-creditors
87 Minutes
88 Number of persons for valid
meeting
89 Who may represent creditor or
bankrupt
90 Voting at meetings
91 Postal votes
92 Who may vote at creditors'
meeting
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Insolvency Law Reform Bill
93 When secured creditor may vote
94 When creditor under bill of
exchange or promissory note
may vote
95 Person disqualified from voting
through preferential effect
96 Creditor of partner
97 Creditors may appoint expert or
committee to assist Assignee
Documents
98 Creditor's right to inspect documents
Part 3
Dealing with bankrupt and bankrupt's
property
Subpart 1-Status of bankrupt's property
General
99 Status of bankrupt's property on
adjudication
100 Status of property acquired during
bankruptcy
101 Property vests in replacement
Assignee
102 Property held in trust by bankrupt
103 Effect of other laws
104 Court may order that money
due to bankrupt is assigned to
Assignee
105 Application of section 268 to
payments by bankrupt or assignments
by Court
Bankrupt's property subject to execution
process
106 When execution creditor may
retain execution proceeds
107 Effect of notice to sheriff of
adjudication
108 Sheriff must retain proceeds of
execution for 10 working days
109 Purchaser under sale by sheriff
acquires good title
110 Court may set aside rights conferred
on Assignee
Validity of property transactions with
bankrupt
111 Transaction in good faith and for
value after adjudication
112 Executions and attachments in
good faith
113 When execution or attachment
completed for purposes of section
106 or section 112
114 Assignee's interest in property
passes
Disclaimer of onerous property
115 Assignee may disclaim onerous
property
116 Effect of disclaimer
117 Position of person who suffers
loss as result of disclaimer
118 Assignee may be required to
elect whether to disclaim
119 Liability for rentcharge on bankrupt's
land after disclaimer
Land subject to mortgage
120 Transmission of interest in land
121 Assignee cannot claim interest
in land if bankrupt remains in
possession until discharge
Shares and other securities
122 Assignee may transfer shares and
other securities
123 Assignee may disclaim liability
under shares
124 Assignee may be required to
elect whether to disclaim liability
under shares
125 Transfer of shares after disclaimer
126 Company may prove for unpaid
calls
Goods on hire purchase
127 Meaning of hire purchase terms
used in this Subpart
128 Restrictions on creditor dealing
with goods
129 Assignee's powers in relation to
hire-purchase goods
130 Creditor in possession of goods
may prove in bankruptcy if
Assignee has not exercised powers
131 Creditor may assign goods to
Assignee
Second bankruptcy
132 Status of bankrupt's property on
second bankruptcy
133 Effect of notice to Assignee of
application for adjudication
Subpart 2-Duties of bankrupt
134 General duty of bankrupt
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Insolvency Law Reform Bill
Duties in relation to property
135 Bankrupt must deliver property
to Assignee on demand
136 Bankrupt must disclose property
acquired before discharge
137 Bankrupt must take all steps
required in relation to property
and distribution of proceeds to
creditors
Duties to provide information
138 Bankrupt must give Assignee
accounting records and other
documents
139 Bankrupt must give Assignee
information relating to property
140 Bankrupt must give Assignee
information relating to income
and expenditure
141 Bankrupt must notify Assignee
of change in personal information
142 Bankrupt must give Assignee
financial information
Subpart 3-Control over bankrupt
during bankruptcy
143 Bankrupt may be required to
contribute to payment of debts
144 Onus of proof if bankrupt
defaults in making payment
145 Prohibition of bankrupt entering
business
146 Warrant to search for and seize
bankrupt's property
147 Seizure of bankrupt's property
148 Bankrupt must vacate land or
buildings if required to do so
149 Blank
150 Bankrupt's right to inspect documents
Restrictions on bankrupt dealing with
property
151 No power to recover property or
give release or discharge
152 No steps to defeat beneficial
interest
Bankrupt's bank accounts
153 Bank must notify Assignee of
bankrupt's account
Subpart 4-Provision for bankrupt
during bankruptcy
Provision for bankrupt
154 Bankrupt may retain certain
assets
155 Bankrupt may retain certain
assets with consent of creditors
156 Retention of assets does not
affect rights under security or
hire purchase agreement
157 Retention provisions do not confer
rights to other assets
158 Relative may exercise bankrupt's
right to retain assets
159 Assignee may make allowance to
bankrupt
160 Assignee may allow bankrupt to
retain money
Subpart 5-Powers of Assignee and
Court to examine bankrupt and others
Examination of persons summoned by
Assignee
161 Assignee may summon bankrupt
and others to be examined
162 Conduct of examination of person
summoned by Assignee
163 Expenses of person summoned
by Assignee
164 Report of examination must not
be published unless Court consents
165 Examination provisions also
apply when Assignee appointed
receiver and manager of debtor's
property
166 Assignee may obtain documents
167 No lien over bankrupt's documents
and other records
Bankrupt's public examination
168 Court must hold public examination
if Assignee or creditors
require
169 Notice of examination
170 Time for holding examination
171 Assignee must file report before
examination
172 Conduct of examination
173 Record of examination
174 When examination ends
175 Bankrupt's failure to attend
examination
176 Bankrupt's expenses in attending
examination
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Insolvency Law Reform Bill
Investigation of company controlled by
bankrupt and associate
177 Assignee may examine books
and shareholders of company
178 Meaning of associate
Privilege and representation of persons
examined
179 No privilege against self-incrimination
180 Statement made by person examined
not generally admissible in
criminal proceedings against that
person
181 Representation
Subpart 6-Status of bankrupt's
contracts
Bankrupt's contracts entered into before
adjudication
182 Assignee may continue or disclaim
bankrupt's contract
183 Contract terminated by other
contracting party
184 Blank
Transaction with bankrupt in ignorance
of adjudication
185 Payment of money or delivery of
property is good discharge
Joint contractual liability
186 Bankrupt's co-contractor may
sue and be sued
Solicitors' costs
187 Solicitors' costs
Subpart 7-Irregular transactions before
adjudication
188 Overview of Subpart 7
189 Meaning of 2 years and 6 months
Insolvent transactions
190 Insolvent transaction may be
cancelled
191 Meaning of insolvent transaction
192 Insolvent transaction presumed
193 When series of transactions must
be regarded as single transaction
Insolvent securities
194 Insolvent security may be cancelled
195 Security for new consideration
or security in substitution not
affected
196 Presumption that bankrupt unable
to pay due debts
197 Security for unpaid purchase
price given after sale of property
198 Appropriation of payments by
bankrupt to security holder
199 Security agreed before specified
period may not be cancelled
Insolvent gifts
200 Insolvent gift may be cancelled
201 Presumption of insolvent gift
Procedure for cancelling irregular
transactions
202 Procedure for cancelling irregular
transactions
203 Blank
204 Court may order re-transfer of
property or payment of value
205 Limits on recovery
206 Recovery by appointee
207 Land Transfer Act 1952 does not
limit sections 202 to 206
Transactions at undervalue
208 Assignee may recover difference
in value
209 When Assignee may recover difference
Bankrupt's contribution to another
person's property
210 Court may order recipient to pay
value to Assignee
211 Court's powers in relation to
bankrupt's contribution to recipient's
property
212 How Assignee must use repayment
of bankrupt's contribution
to property
213 Land Transfer Act 1952 does not
limit sections 210 to 212
Subpart 8-Role and powers of Assignee
Powers of Assignee
214 Assignee's general powers
215 Assignee's power of sale
216 Assignee's power of sale by private
contract
217 Title of purchaser from Assignee
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Insolvency Law Reform Bill
218 Obligation to bank and power to
invest money
219 Assignee may assign right to sue
under this Act
Assignee's decisions
220 Assignee's discretion
221 Assignee may apply for directions
by Court
222 Appeal from Assignee's decision
Assignee's accounting records
223 Assignee must keep proper
accounting records
223A Assignee's final statement of
accounts and statement of financial
position
224 Auditor-General may audit
Assignee's accounts
225 Assignee may return or destroy
accounting records
Subpart 9-Proofs of debt
Provable debts
226 Meaning of provable debt and
proof of debt
227 What debts are provable debts
Procedure for proving debt
228 Creditor must submit proof of
debt
Role of Assignee in examining proofs
of debt
229 Assignee must examine proofs of
debt
230 Assignee must give creditor
notice of grounds of rejection
231 Assignee's power to obtain evidence
of debt
232 Notice to Assignee to admit or
reject proof of debt
233 Court may cancel proof of debt
234 Court may reverse or modify
Assignee's decision rejecting
proof of debt
235 Parties to application to Court in
relation to proof of debt
236 Which court may hear application
in relation to proof of debt
237 Court may make order as to costs
Secured creditors
238 Secured creditor's options in
relation to property subject to
security
239 Assignee may require secured
creditor to choose option
240 Realisation of property subject to
security
241 Valuation of security and proof
for balance due
242 False claim by secured creditor
243 Assignee's powers when secured
creditor values property subject
to security and proves for balance
244 Secured creditor who surrenders
security may withdraw surrender
or submit new proof
Proofs subject to uncertainty
245 Assignee may estimate amount
of uncertain proof
246 Application to Court to determine
amount of uncertain proof
Proofs of debts payable after
adjudication
247 Proof of debt payable 6 months
or more after adjudication
Set-off
248 Mutual credit and set-off
Set-off under netting agreement
249 Definitions relating to set-off
under netting agreement
250 Application of set-off under netting
agreement
251 Calculation of netted balance
252 Mutuality required for transactions
under bilateral netting
agreements
253 When mutuality required for
transactions under recognised
multilateral netting agreements
254 Application of set-off under section
248 to transaction subject to
netting agreements
255 Transactions under netting agreement
and insolvent transactions
256 Set-off under netting agreement
not affected by notice under section
202(2)
257 Disclaimer of onerous property
and termination of netting agreement
not permitted
Interest
258 Pre-adjudication interest
259 Post-adjudication interest at prescribed
rate if surplus remains
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Insolvency Law Reform Bill
260 Additional post-adjudication
interest on contract or judgment
debt if surplus remains
261 Meaning of prescribed rate
Miscellaneous provisions relating to
proofs of debt
262 Creditor must deduct trade discounts
263 Proof when security void
264 Judgment creditor may prove for
costs
265 Company may prove for unpaid
calls
266 When surety for bankrupt may
prove
Subpart 10-Distribution of assets
267 Priority of payments for distribution
of bankrupt's assets
Preferential claims
268 Priority of payments to preferential
creditors
269 Conditions to priority of payments
to preferential creditors
270 Provisions concerning preferential
payments to employees
271 Subrogation of persons if payment
has been made
272 Priority given to person who
distrains on goods
273 Creditors to have priority over
creditors of joint bankrupt
Payments to general creditors and to
bankrupt
274 Payment of remaining money to
general creditors
275 Payment of surplus to bankrupt
Undistributed money paid to Public
Trust
276 Definition of undistributed
money
276A Undistributed money to be paid
to Public Trust
276B Public Trust to hold undistributed
money
276C Public Trust to pay undistributed
money to bankruptcy surplus
account
276D Application of undistributed
money held in bankruptcy surplus
account
276E Requisition of Minister required
for payment under section
276D(c)
276F Approval of Official Assignee
required for payment under section
276D(d)
276G Matters concerning bankruptcy
surplus account
Part 4
End of bankruptcy
Subpart 1-Discharge
Automatic discharge
277 Automatic discharge 3 years
after adjudication
278 Effect of automatic discharge
279 Objection to automatic discharge
280 Objection may be withdrawn
Application for discharge
281 Bankrupt may apply for discharge
Examination concerning discharge
282 When bankrupt must be examined
concerning discharge
283 Assignee's report
284 When creditor must give notice
of opposition to discharge
285 Court may grant or refuse discharge
286 Court may restrict bankrupt from
engaging in business after discharge
287 Court may reverse order of discharge
288 Grounds for reversing discharge
289 Effect of reversal of discharge
290 Bankrupt may apply for absolute
discharge if conditions of discharge
too onerous
291 Debts from which bankrupt is
released on discharge
292 Discharge conclusive evidence
of bankruptcy
293 Discharge does not release partners
and others
294 Discharged bankrupt must assist
Assignee
295 Publication of information
regarding bankrupt's discharge
Subpart 2-Annulment
296 Court may annul adjudication
297 When Assignee may annul adjudication
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Insolvency Law Reform Bill
298 Effect of annulment
Part 5
Compositions, proposals, summary
instalment orders, and no asset
procedure
Subpart 1-Composition during
bankruptcy
299 Creditors may accept composition
by passing preliminary resolution
300 Confirming resolution
301 Compositions with members of
partnership
302 Court must approve composition
303 Procedure for Court approval of
composition
304 Deed of composition
305 Effect of deed
306 Bankrupt remains liable for
unpaid balances of certain debts
307 Deadlines for steps to approve
composition and execute deed
308 Procedure following Court
approval of deed
309 Enforcement of composition
310 Court's exclusive jurisdiction
311 Law and practice in bankruptcy
applies to deed
Subpart 2-Proposals
312 Meaning of debt etc
313 Insolvent may make proposal
314 Form of proposal
315 Proposal must be filed in Court
316 Provisional trustee
317 Provisional trustee must call
meeting of creditors
318 Procedure at meeting of creditors
319 Who may represent creditors
320 Court must approve proposal
321 Effect of Court approval
322 Creditor must not take enforcement
steps without Court's permission
323 Duty of insolvent
324 Duties of trustee
325 Trustee must file 6-monthly summary
of receipts and payments
326 Cancellation or variation of proposal
Subpart 3-Summary instalment orders
327 Summary instalment order
328 Who may apply for order
329 Form of application
330 Assignee may make summary
instalment order
331 Additional orders
332 Appointment of supervisor
333 Role of supervisor
334 Period of instalments
335 Variation or discharge of order
336 Effect of order
337 Proceedings against debtor
338 Supervisor must give notice of
summary instalment order to
creditors
339 Proof of debt
340 Payment of debtor's earnings to
supervisor
341 Distribution of money paid by
debtor
342 Default by debtor
343 Offence of obtaining credit
344 Rules for summary instalment
orders
Subpart 4-No asset procedure
345 Introduction to this subpart
Entry to no asset procedure
346 Application for entry to no asset
procedure
347 Criteria for entry to no asset
procedure
348 Debtor disqualified from entry
to no asset procedure in certain
cases
349 Assignee must advertise application
and notify creditors
350 Creditor may object to debtor's
entry to no asset procedure
351 When debtor admitted to no asset
procedure
Effect of entry to no asset procedure
352 Creditors may not enforce debts
353 Debtor's duties after entry to no
asset procedure
Termination and discharge
354 Termination
355 When Assignee may terminate
356 Effect of termination
357 Discharge
Part 6
Insolvent deceased estates
358 Interpretation
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Insolvency Law Reform Bill
Application and order that estate be
administered under this Part
359 Court may order that estate be
administered under this subpart
360 Application by administrator, etc
361 Application by creditor or beneficiary
for order under this Part
362 Notice of application by creditor
or beneficiary
363 When Registrar may hear application
364 Costs of application
365 Court may order administration
by Assignee or Public Trust
366 Certificate filed by Public Trust
or Maori Trustee has effect as
application and order
Effect of order that estate be
administered under this Part
367 Estate vests in appointee
368 Appointee must realise, administer,
and distribute estate
369 Entitlement of surviving spouse
to household furniture and
effects
370 Appointee may make allowance
to surviving spouse
Administration of estate under this Part
371 Sections 372 to 379 apply in
respect of estate administered
under this Part
372 Appointee's authority, powers,
and functions
373 Distribution of estate
374 Payment of surplus
375 Creditor's notice to administrator
376 Appointee may act in relation to
deceased's irregular transactions
377 Blank
378 Appointee may cancel execution
379 Administrator's acts valid before
notice
Part 7
Offences and miscellaneous provisions
Subpart 1-The Assignee
380 Appointment of Official
Assignee for New Zealand and
others
381 Assignee may act on behalf of
another Assignee
382 Assignee's powers
383 Assignee's additional rights and
remedies
384 Disqualification of Assignee
385 Vacation of office by Assignee
386 Protection of Assignee
387 Assignee's remuneration
388 Rates of Assignee's remuneration
388A Assignee must apply for order of
release
388B Effect of order
388C Subsequent order of release
Subpart 2-The Court
389 Jurisdiction and powers of Court
390 Court may look at real nature of
transaction
391 Powers of Registrars and District
Court Judges
392 Rehearings and appeals
393 Proceedings not halted pending
appeal
394 Suspension of adjudication pending
appeal
395 Court may extend time
396 Defects in proceedings
Subpart 3-Offences by bankrupt
Indictable offences
397 Offences in relation to debts
398 Offences in relation to property
399 Offence in relation to written
statement to creditor, etc
400 Offence in relation to documents,
etc
401 Offence in relation to fictitious
losses or expenses
402 Offences in relation to credit, etc
403 Offences in relation to obtaining
consent of creditors
404 Offence in relation to leaving
New Zealand
405 Defence of absence of intent
406 Penalties for indictable offences
by bankrupt
Offences in relation to record of
transactions
407 Failure to keep and preserve
proper record of transactions
408 Failure to keep proper records
with intent to conceal
409 Penalties for offences relating to
records
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Insolvency Law Reform Bill
410 When bankrupt deemed not to
have kept or preserved proper
record
Summary offences
411 Summary offences
412 Defences to summary offences of
obtaining credit
413 Penalty for summary offences by
bankrupt
Offences in relation to management of
companies
414 Offence by bankrupt in relation
to management of companies
415 Penalties for offence in relation
to management of companies
Assignee's discretion to prosecute
416 Assignee may prosecute if reasonable
grounds certified by
Crown Solicitor
417 When Assignee has immunity for
prosecution if certificate given
by Crown Solicitor
Subpart 4-Miscellaneous provisions
418 False or misleading statements or
refusal to answer questions
419 Regulations
420 Rules
420A Transitional provision
420B Consequential amendments to
other enactments
Part 8
Companies Act 1993 amendments
421 Companies Act 1993 called principal
Act in this Part
422 Commencement of this Part
423 Interpretation
Voluntary administration
424 New Part 15A inserted
Part 15A
Voluntary administration
Subpart 1-Preliminary
239A Object of this Part
239B Interpretation of some
key terms
239C Interpretation of other
terms
239D When administration
begins
239E When administration
ends
Subpart 2-Appointment of
administrator
239F Who may be appointed
administrator
239G Administrator must consent
in writing
239H Who may appoint administrator
239I Appointment by company
239J Appointment by liquidator
or interim liquidator
239K Appointment by chargeholder
239L Appointment by Court
239M Appointment must not be
revoked
239N Appointment of 2 or
more administrators
239O Remuneration of administrator
Subpart 3-Resignation and
removal of administrator
239P When office of administrator
is vacant
239Q Administrator may resign
239R Removal of administrator
239S Appointer may appoint
new administrator to fill
vacancy
239T Creditors must consider
appointment of replacement
administrator
Subpart 4-Effect of
appointment of administrator
239U Outline of administrator's
role
239V Administrator's powers
239W Administrator is company's
agent
239X Effect on company officers
239Y Effect on employees
239Z Effect on dealing with
company property
239AA Company officer's liability
for compensation
for void transaction or
dealing
239AB Effect on transfer of
shares
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Insolvency Law Reform Bill
Subpart 5-Administrator's
investigation of company's
affairs
239AC Administrator must
investigate company's
affairs and consider possible
courses of action
239AD Directors' statement of
company's position
239AE Administrator's right to
documents, etc
239AF Administrator may
lodge report with Registrar
239AG Administrator must
report misconduct
Subpart 6-Creditors' meetings
generally
239AH Administrator must call
creditors' meetings
239AI Conduct of creditors'
meetings
Subpart 7-First creditors'
meeting to appoint creditors
committee
239AJ Administrator must call
first creditors' meeting
239AK Notice of first creditors'
meeting
239AL Administrator must
table interests statement
239AM Function of creditors'
committee
239AN Membership of creditors'
committee
Subpart 8-Watershed meeting
239AO What is watershed
meeting
239AP Administrator must convene
watershed meeting
239AQ Notice of watershed
meeting
239AR When watershed meeting
must be held
239AS Directors must attend
watershed meeting
239AT Disclosure of voting
arrangements
239AU Court may order that
pooled property owners
are separate class
239AV Adjournment of watershed
meeting
239AW What creditors may
decide at watershed meeting
239AX What happens if proposed
deed not fully
approved at watershed
meeting
Subpart 9-Protection of
company's property during
administration
239AY charge unenforceable
239AZ Owner or lessor must
not recover property used
by company
239ABA Proceedings halted
239ABB Administrator not liable
in damages for refusing
consent
239ABC Enforcement process
halted
239ABD Duties of court officer
in relation to company's
property
239ABE Lis pendens taken to
exist
239ABF Administration not to
trigger guarantee liability
of director or relative
Subpart 10-Rights of
chargeholder, owner, or lessor
239ABG Meaning of terms
used in this subpart
239ABH If chargeholder acts
before or during decision
period
239ABI If enforcement of
charges begins before
administration
239ABJ charge over perishable
property
239ABK Court may limit powers
of chargeholder, etc,
in relation to property
subject to charge
239ABL Giving notice under
security agreement
239ABM If recovery of property
begins before administration
239ABN Recovering perishable
property
239ABO Court may limit powers
of receiver, etc, in
relation to property used
by company
239ABP Giving notice under
agreement about property
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Insolvency Law Reform Bill
Subpart 11-Interface with
liquidation
239ABQ When liquidator may
be appointed to company
in administration
239ABR Court may adjourn
application for liquidation
239ABS Court must not appoint
interim liquidator if
administration in creditors'
interests
239ABT Effect of appointment
of liquidator by Court
239ABU Administrator is
default liquidator
239ABV Person in control of
company must lodge
revised report with Registrar
239ABW Act of administrator
in good faith must not be
set aside in liquidation
239ABX Voidable transactions
Subpart 12-Deed administrator
239ABX Who is deed administrator
239ABZ Who may be
appointed deed administrator
239ACA Deed administrator
must consent in writing
239ACB Appointment of deed
administrator must not be
revoked
239ACC Appointment of 2 or
more deed administrators
239ACD When office of deed
administrator vacant
239ACE Deed administrator
may resign
239ACF Removal of deed
administrator
239ACG Remuneration of deed
administrator
239ACH Deed administrator
may sell shares in company
Subpart 13-Execution and
effect of deed of company
arrangement
239ACI When this subpart
applies
239ACJ Preparation and contents
of deed
239ACK Execution of deed
239ACL Procedure if deed not
fully approved at watershed
meeting
239ACM Creditor must not act
inconsistently with deed,
etc, before execution
239ACN Company's failure to
execute deed
239ACO Who is bound by deed
239ACP Extent to which deed
binds creditors
239ACQ Person bound by deed
must not take steps to
liquidate, etc
239ACR Court may restrain
creditors and others
from enforcing charge
or recovering property
239ACS Effect of deed on company's
debts
239ACT Court may rule on
validity of deed
Subpart 14-Administrator's
duty to file accounts
239ACU Administrator
includes deed administrator
239ACV Administrator must
file accounts
Subpart 15-Variation and
termination of deed
239ACW Creditors may vary
deed
239ACX Court may cancel
creditors' variation
239ACY Termination of deed
239ACZ Termination by Court
239ADA Termination by creditors
239ADB creditors' meeting to
consider proposed variation
or termination of
deed
Subpart 16-Administrator's
liability and indemnity for debts
of administration
239ADC Administrator not liable
for company's debts
except as provided in this
subpart
239ADD Administrator liable
for general debts
239ADE Administrator's liability
for rent
12
Insolvency Law Reform Bill
239ADF Administrator not liable
for rental if non-use
notice in force
239ADG Court may exempt
administrator from liability
for rent
239ADH Administrator's
indemnity
239ADI Administrator's right
of indemnity has priority
over other debts
239ADJ Lien to secure indemnity
Subpart 17-Powers of Court
239ADK Court's general power
239ADL Orders to protect creditors
during administration
239ADM Court may rule on
validity of administrator's
appointment
239ADN Administrator may
seek directions
239ADO Court may supervise
administrator or deed
administrator
239ADP Court may order
administrator or deed
administrator to remedy
default
239ADQ Court's power when
office of administrator
or deed administrator
vacant, etc
Subpart 18-Notices about steps
taken under this Part
239ADR Administrator must
give notice of appointment
239ADS Chargeholder who
appoints administrator
must give notice to company
239ADT Deed administrator
must give notice of execution
of deed of company
arrangement
239ADU Deed administrator
must give notice of failure
to execute deed of
company arrangement
239ADV Deed administrator
must give notice of termination
by creditors
of deed of company
arrangement
239ADW Company must disclose
fact of administration
239ADX Notice of change of
name
239ADY Effect of contravention
of this subpart
Subpart 19-Miscellaneous
239ADZ Effect of things done
during administration of
company
239AEA Interruption of time
for doing act
Amendments to Companies Act 1993
consequential on new voluntary
administration provisions
425 Commencement of liquidation
426 Commencement of liquidation to
be recorded
427 Liquidator to summon creditors'
meeting
428 Court may terminate liquidation
429 Restrictions on rights of creditors
to complete execution, distraint,
or attachment
430 Other duties of liquidator
431 Restriction on enforcement of
lien over documents
432 Power of Court to require persons
to repay money or return
property
Qualifications of liquidators
433 Qualifications of liquidators
Assignment of liquidator's statutory
right to sue
434 New section 260A inserted
260A Liquidator may assign
right to sue under this
Act
Voidable transactions
435 Transactions having preferential
effect
292 Insolvent transaction
voidable
436 Voidable charges
437 New section 294 substituted
294 Procedure for setting
aside transactions and
charges
438 New section 295 substituted
295 Other orders
13
cl 1 Insolvency Law Reform Bill
439 Additional provisions relating to
setting aside transactions and
charges
440 Transactions at undervalue
New offence for directors
441 Carrying on business fraudulently
Phoenix companies
442 New sections 386A and 386B
inserted
386A Director of failed company
must not be director,
etc, of phoenix company
with same or substantially
similar name
386B Liability for debts of
phoenix company
443 Consequential amendments to
section 126 of Companies Act
1993
443A Consequential amendment to
section 373(4) of Companies
Act 1993
Seventh Schedule
444 Seventh Schedule
Consequential amendments to other
enactments
445 Consequential amendments to
other enactments
446 Blank
447 Blank
Part 9
Cross-border insolvency
448 Commencement
449 Purpose
450 Interpretation
451 Further provision relating to
interpretation
452 Part binds the Crown
453 Application of Model Law on
Cross-Border Insolvency in New
Zealand
454 Blank
455 High Court to act in aid of
overseas courts
456 Power to make rules
457 Regulations may prescribe specified
insolvency proceedings
458 Regulations
459 Transitional provisions
460 Consequential amendments to
other enactments
Schedule 1
Assignee's general powers
Schedule 2
Consequential amendments to other
enactments
Schedule 3
New Schedule 7 substituted in
Companies Act 1993
Schedule 4
Consequential amendments relating
to Part 8
Schedule 5
Rules applying to cross-border
insolvency proceedings
Schedule 6
Consequential amendments relating
to Part 9
The Parliament of New Zealand enacts as follows:
1 Title
This Act is the Insolvency Law Reform Bill 2004.
14
Insolvency Law Reform Bill Part 1 cl 3
2 Commencement
This Act comes into force on a date to be appointed by the
Governor-General by Order in Council; and 1 or more orders
may be made bringing different provisions into force on different
dates.
Part 1
Interpretation and scope
3 Interpretation
In this Act, unless the context otherwise requires,-
Assignee or Official Assigneemeans the Official Assignee for
New Zealand, the Deputy Official Assignee for New Zealand,
and any other Official Assignee or Deputy Assignee appointed
under this Act
bankrupt means a person who has been adjudicated bankrupt
(see section 10)
charge includes a right or interest in relation to property
owned by a debtor, by virtue of which a creditor of the debtor
is entitled to claim payment in priority to other creditors; but
does not include a charge under a charging order issued by a
court in favour of a judgment creditor
company means any company or overseas company within
the meaning of the Companies Act 1993; and includes-
(a) a building society within the meaning of the Building
Societies Act 1965:
(b) a society incorporated under the Incorporated Societies
Act 1908:
(c) a registered society within the meaning of the Industrial
and Provident Societies Act 1908:
(d) a society incorporated or registered overseas that is similar
to any society in paragraphs (a) to (c)
Court means the High Court
goods means personal property of every kind
Judge means a Judge of the High Court
ordinary resolution or resolution means a resolution of creditors
passed in accordance with section 90(1)(a)
15
Part 1 cl 3 Insolvency Law Reform Bill
prescribed means prescribed by this Act or by regulations
made under this Act or by rules
property means property of every kind, whether tangible
or intangible, real or personal, corporeal or incorporeal, and
includes rights, interests, and claims of every kind in relation
to property however they arise
provable debt has the meaning given in section 226
registrar means a Registrar of the Court; and includes a Deputy
Registrar
relative, in relation to any person (A) means-
(a) A's parent, spouse, child, brother, or sister; or
(b) the parent, child, brother, or sister of A's spouse; or
(c) a nominee or trustee for any of them
rules means rules for the time being in force under this Act;
and includes forms prescribed by the rules
secured creditor means a person entitled to a charge on or
over property owned by a debtor
shares includes stock
sheriff includes any officer who undertakes the execution or
process of any court
special resolution means a resolution of creditors passed in
accordance with section 90(1)(b)
spouse, in relation to a person (A), includes a person with
whom A has a relationship in the nature of marriage (whether
of the same or different sex)
supervisor means a person who is appointed under section
321.
Compare: 1967 No 54 s 2
4 Rights and powers under other Acts not affected
This Act does not affect-
(a) a local authority's rights under any statute relating to
rates and recovery of rates-
(i) to obtain a judgment of unpaid rates:
(ii) to enforce payment of rates by selling or leasing
the land for which the rates are payable:
16
Insolvency Law Reform Bill Part 2 cl 7
(b) the provisions of the Joint Family Homes Act 1964:
(c) except where this Act expressly provides, a secured
creditor's power to realise or otherwise deal with the
security as if this Act had not been passed.
Compare: 1967 No 54 s 3(1), (2), (3)
5 Act binds the Crown
This Act binds the Crown.
Compare: 1967 No 54 s 4
6 Corporation and other entities not subject to Act
A corporation, association, or company incorporated or registered
under any Act must not-
(a) be adjudicated bankrupt:
(b) make a proposal to its creditors:
(c) be the subject of a summary instalment order under this
Act:
(d) be admitted to the no asset procedure.
Compare: 1967 No 54 s 168
Part 2
Nature of bankruptcy, and process of being made
bankrupt
Subpart 1-Bankruptcy and its alternatives
7 Nature of bankruptcy
(1) Bankruptcy affects the legal status of a person and has important
consequences. These include-
(a) the bankrupt's property vests in the Official Assignee:
(b) the bankrupt is limited in the business activities he or
she can undertake:
(c) the Official Assignee may be entitled to recover assets
that the bankrupt has transferred before bankruptcy.
(2) This section is intended only as a guide to the consequences
of bankruptcy.
17
Part 2 cl 8 Insolvency Law Reform Bill
8 Alternatives to bankruptcy
(1) A debtor who is insolvent may have an alternative to bankruptcy,
such as-
(a) making a proposal to creditors (see subpart 2 of Part 5);
or
(b) paying creditors in instalments under a summary instalment
order (see subpart 3 of Part 5); or
(c) entry to the no asset procedure (see subpart 4 of Part 5).
(2) This section is intended only as a guide to the alternatives of
bankruptcy.
Subpart 2-Process of being made bankrupt
9 Introduction to Subpart 2
(1) This Subpart describes how a person is adjudicated bankrupt.
(2) In this Subpart, the person who is adjudicated bankrupt is
called the debtor.
Adjudication
10 Adjudication
(1) Adjudication occurs when a debtor is adjudicated bankrupt.
(2) A debtor is adjudicated bankrupt if either-
(a) a creditor of the debtor applies to the Court for an order
of adjudication, and the Court makes the order; or
(b) the debtor himself or herself files an application with
the Assignee for adjudication.
11 Adjudication by Court
(1) A Court may adjudicate the debtor bankrupt if-
(a) a creditor of the debtor has applied under section 13 for
the debtor's adjudication; and
(b) the debtor has committed an act of bankruptcy.
(2) The Court's options in dealing with a creditor's application
are set out in sections 36 to 44.
(3) What is an act of bankruptcy is set out in sections 17 to 28.
18
Insolvency Law Reform Bill Part 2 cl 15
12 Adjudication on debtor's initiative
(1) A debtor may be adjudicated bankrupt by filing an application
with the Official Assignee.
(2) The requirements for a debtor's application are set out in sections
45 and 46.
(3) The procedure for filing a debtor's application is set out in
section 49.
Court adjudication on creditor's application
13 When creditor may apply for debtor's adjudication
A creditor may apply for a debtor to be adjudicated bankrupt
if-
(a) the debtor owes the creditor $1,000 or more or, if 2 or
more creditors join in the application, the debtor owes
a total of $1,000 or more to those creditors between
them; and
(b) the debtor has committed an act of bankruptcy within
the period of 3 months before the filing of the application;
and
(c) the debt is a certain amount; and
(d) the debt is payable either immediately or at a date in
the future that is certain.
Compare: 1967 No 54 s 23
14 Application by secured creditor
The Courtmust not make an order of adjudication on the application
of a secured creditor unless the creditor has established
that the amount of the debt exceeds the value of the security
by at least $1,000.
Compare: 1967 No 54 s 25
15 Court's permission required for withdrawal of application
A creditor may not withdraw an application for adjudication
without first obtaining the permission of the Court.
Compare: 1967 No 54 s 26(10)
19
Part cl Insolvency Law Reform Bill
Acts of bankruptcy
16 Requirement of act of bankruptcy
(1) A debtor must not be adjudicated bankrupt on a creditor's
application unless the debtor has committed an act of bankruptcy
within the period of 3 months before the creditor files
the application.
(2) The acts of bankruptcy are set out in sections 17 to 28.
17 Failure to comply with bankruptcy notice
(1) A debtor commits an act of bankruptcy if-
(a) a creditor has obtained a final judgment or a final order
against the debtor for any amount; and
(b) execution of the judgment or order has not been halted
by a court; and
(c) the debtor has been served with a bankruptcy notice;
and
(d) the debtor has not, within the time limit specified in
subsection (4),-
(i) complied with the requirements of the notice; or
(ii) satisfied the Court that he or she has a cross claim
against the creditor.
(2) The form that the bankruptcy notice must take is set out in
section 29.
(3) The debtor must have been served with the bankruptcy notice
in New Zealand, unless the Court gave permission for the
service of the notice on the debtor outside New Zealand.
(4) The time limit referred to in subsection (1)(d) is,-
(a) if the debtor is served with the bankruptcy notice in
New Zealand, 10 working days after service; or
(b) if the debtor is served outside New Zealand, the time
specified in the order of the Court permitting service
outside New Zealand.
(5) In this section, a creditor who has obtained a final judgment
or a final order includes a person who is for the time being
entitled to enforce a final judgment or final order.
20
Insolvency Law Reform Bill Part 2 cl 20
(6) In this section, if a Court has given permission for enforcing an
arbitration award that the debtor pay money to the creditor,-
(a) final order includes the arbitration award; and
(b) proceedings includes the arbitration proceedings in
which the award was made.
(7) In subsection (1)(d)(ii), cross claim means a counterclaim,
set-off, or cross demand that-
(a) is equal to, or greater than, the judgment debt or the
amount that the debtor has been ordered to pay; and
(b) the debtor could not use as a defence in the action or
proceedings in which the judgment or the order, as the
case may be, was obtained.
Compare: 1967 No 54 s 19(1)(d), (2)
18 Disposition of property to trustee for benefit of creditors
A debtor commits an act of bankruptcy if, in New Zealand or
elsewhere, the debtor disposes of all or substantially all of the
debtor's property to a trustee for the benefit of all or any of
the debtor's creditors.
Compare: 1967 No 54 s 19(1)(a)
19 Fraud or intent to prefer a creditor
A debtor commits an act of bankruptcy if the debtor takes any
of the following steps fraudulently or with an intent to give
any creditor an advantage over other creditors:
(a) disposes of his or her property, or part of it:
(b) creates a charge on his or her property or gives any
security in it:
(c) makes any payment:
(d) incurs any obligation.
Compare: 1967 No 54 s 19(1)(b)
20 Departure from New Zealand
A debtor commits an act of bankruptcy if the debtor takes any
of the following steps with intent to defeat or delay his or her
creditors:
(a) departs, attempts to depart, or prepares to depart, from
New Zealand:
21
Part 2 cl 20 Insolvency Law Reform Bill
(b) if the debtor is already outside New Zealand, remains
there.
Compare: 1967 No 54 s 19(1)(c)
21 Avoidance of creditors
A debtor commits an act of bankruptcy if the debtor, with
intent to defeat or delay his or her creditors, avoids them by,
for example, leaving or keeping away from the debtor's home,
or by staying within that home.
Compare: 1967 No 54 s 19(1)(c)
22 Notice of suspension of debts
A debtor commits an act of bankruptcy if the debtor notifies
any of the debtor's creditors that the debtor has suspended, or
is about to suspend, payment of the debtor's debts.
Compare: 1967 No 54 s 19(1)(e)
23 Admission to creditors of insolvency
(1) A debtor commits an act of bankruptcy if the debtor admits at
a meeting of creditors that he or she is insolvent and-
(a) a majority of the creditors present at themeeting require
the debtor to file an application for adjudication; or
(b) the debtor agrees to file an application for adjudication
and does not do so within 2 working days after the
meeting.
(2) In subsection (1)(a), majority means a majority by number of
creditors present and the value of their combined debts.
Compare: 1967 No 54 s 19(1)(f)
24 Possession under execution process
(1) A debtor commits an act of bankruptcy if-
(a) an execution process has been issued against the debtor
or property of the debtor; and
(b) property of the debtor has been taken into possession
under the execution process; and
22
Insolvency Law Reform Bill Part 2 cl 25
(c) the judgment or order for which the execution process
has been issued is not satisfied within 5 working days
after possession has been taken.
(2) In this section, execution process means-
(a) a charging order; or
(b) a writ of sale; or
(c) a writ of possession; or
(d) a writ of arrest; or
(e) a writ of sequestration.
(3) The period of 5 working days in subsection (1) is qualified
if an interpleader application has been made in respect of the
debtor's property that has been taken into possession. In that
case the period of 5 working days does not include the days
that elapse between-
(a) the date when the application is made; and
(b) the date when the application is finally determined,
withdrawn, abandoned, or otherwise resolved.
Compare: 1967 No 54 s 19(1)(g)
25 Writ of sale
(1) A debtor commits an act of bankruptcy if-
(a) a writ of sale directed against any land of the debtor, or
any interest in that land, has been delivered to a sheriff;
and
(b) as part of the execution process, the land or interest
has been advertised for sale in at least 1 newspaper
published or circulating in the town or district in which
the land is situated.
(2) However, subsection (1) does not apply, and an act of bankruptcy
is not committed, if the judgment or the order under
which the writ of sale has been issued is satisfied within 5
working days after the writ of sale has been both delivered to
the sheriff and advertised.
Compare: 1967 No 54 s 19(1)(h)
23
Part 2 cl 26 Insolvency Law Reform Bill
26 Return that sufficient goods not found under execution
process
A debtor commits an act of bankruptcy if, under an execution
process issued against the debtor or the debtor's property, a
return is made that sufficient goods and chattels of the debtor
could not be found on which to levy the debt.
Compare: 1967 No 54 s 19(1)(i)
27 Removal or concealment of property
A debtor commits an act of bankruptcy if the debtor takes
any of the following steps with intent to prejudice his or her
creditors, or to give 1 creditor an advantage over another:
(a) removes or attempts to remove any of the debtor's property
from any place:
(b) conceals or attempts to conceal any of his or her
property.
Compare: 1967 No 54 s 19(1)(j)
28 Unsatisfied judgment for non-payment of trust money
A debtor commits an act of bankruptcy if-
(a) the debtor is required by law to keep a trust account;
and
(b) judgment has been given against the debtor for
non-payment of trust money; and
(c) the judgment is not satisfiedwithin 5 working days after
the date of the judgment.
Compare: 1967 No 54 s 19(1)(k)
Bankruptcy notice
29 Form of bankruptcy notice
(1) The bankruptcy notice must-
(a) be in the prescribed form; and
(b) require the debtor, in relation to the judgment debt or
the sum ordered to be paid under a final order,-
(i) to pay the amount owing, plus costs; or
(ii) to give security for the amount owing that satisfies
the creditor or the Court; or
24
Insolvency Law Reform Bill Part 2 cl 30
(iii) to compromise the amount owing on terms that
satisfy the Court or the creditor; and
(c) state what are the consequences if the debtor does not
comply with the notice; and
(d) be served on the debtor in the prescribed manner.
(2) The bankruptcy notice may name an agent to act on behalf of
the creditor in so far as the notice requires-
(a) any payment to be made to the creditor; or
(b) any other step to be taken that involves the creditor.
(3) In this section,-
(a) creditor includes a person entitled to enforce a final
judgment or final order; and
(b) final order includes an arbitration award, if the Court
has given permission to enforce the award.
Compare: 1967 No 54 ss 19(2), 20(a)
30 Effect of overstatement of amount owing
(1) Overstatement in a bankruptcy notice of the amount actually
owing by the debtor does not invalidate the notice, unless-
(a) the debtor notifies the creditor that the debtor disputes
the validity of the notice because it overstates the
amount actually owing; and
(b) the debtor makes that notification within the time specified
in the notice for the debtor to comply with the
notice.
(2) A debtor complies with a notice that overstates the amount
actually owing by-
(a) taking steps that would have been compliance with the
notice had it stated the correct amount owing (for example,
by paying the creditor the correct amount owing
plus costs); and
(b) taking those steps within the time specified in the notice
for the debtor to comply.
Compare: 1967 No 54 s 20(b)
25
Part cl Insolvency Law Reform Bill
Effect on execution process of filing creditor's application
31 Creditor's execution process must not be issued or
continued
(1) A creditor who applies for a debtor to be adjudicated bankrupt
must not issue an execution process against the debtor in
respect of the debtor's property or person to recover a debt on
which the application is based.
(2) If the creditor has already issued the execution process, the
creditor must not continue it.
(3) However, the creditor may apply to the Court for permission
to issue or continue the execution process, as the case may be.
Compare: 1967 No 54 s 24(1)
32 Execution processes by other creditors
(1) After a creditor's application for adjudication has been filed,
the debtor or any creditor may apply to the Court for an
order halting the issue or continuance of an execution process
against the debtor in respect of the debtor's property or person
by any other creditor.
(2) On an application under subsection (1), the Court may-
(a) halt the execution process, on the terms and conditions
(if any) that the Court thinks appropriate; or
(b) allow the execution process to continue, on the terms
and conditions that the Court thinks appropriate.
Compare: 1967 No 54 s 24(2)
33 Execution process issued by another Court
(1) This section applies if an execution process has been issued
out of a court (Court 1) other than the Court (Court 2) where
the application for adjudication was filed.
(2) If it is proved to Court 1 that an application for the adjudication
of the debtor has been filed in Court 2, Court 1 may-
(a) halt the execution process, subject to the terms and conditions
(if any) that Court 1 thinks appropriate; or
(b) permit the execution process to continue, but on the
terms and conditions that Court 1 thinks appropriate.
Compare: 1967 No 54 s 24(2)
26
Insolvency Law Reform Bill Part 2 cl 35
34 No restriction on execution process if application for
adjudication withdrawn or dismissed
The restrictions in sections 31 and 33 on issuing or continuing
an execution process do not apply if the application for adjudication
is withdrawn or dismissed.
Compare: 1967 No 54 s 24(5)
35 Meaning of execution process
In sections 31 to 34, execution process means any of the
following:
(a) issuing or proceeding with any of the following writs
or warrants under a judgment or order obtained against
the debtor in any court in its civil jurisdiction (except a
judgment or order for possession of any land or building
obtained on the ground that the debtor is a trespasser or
that the debtor's tenancy has expired):
(i) a writ or warrant for the possession, seizure, or
sale of any property:
(ii) a writ of attachment:
(b) obtaining a garnishee order in favour of a judgment
creditor under rule 270 of the District Courts Rules
1948:
(c) obtaining an order that a judgment creditor may sue a
subdebtor under rule 271(2)(c) of the District Courts
Rules 1948:
(d) having a charging order nisi made absolute under rule
585 of the High Court Rules:
(e) beginning or continuing proceedings in any court for
the appointment of a receiver of any property, except
an application for the appointment of the Assignee as
receiver and manager under section 50:
(f) exercising any power of re-entry under a lease, or any
power terminating a lease:
(g) seizing or selling any property by way of distress for
rent.
Compare: 1967 No 54 s 24(4)
27
Part cl Insolvency Law Reform Bill
Court's options when hearing creditor's application
36 Court may adjudicate debtor bankrupt
The Court may, at its discretion, adjudicate the debtor bankrupt
if the creditor has established the requirements set out in
section 13.
Compare: 1967 No 54 s 26(1)
37 Court may refuse adjudication
The Courtmay, at its discretion, refuse to adjudicate the debtor
bankrupt if-
(a) the applicant creditor has not established the
requirements set out in section 13; or
(b) the debtor is able to pay his or her debts; or
(c) it is just and equitable that the Court does not make an
order of adjudication; or
(d) for any other reason an order of adjudication should not
be made.
Compare: 1967 No 54 s 26(2)
38 Court may halt application
(1) The Court may at any time halt the creditor's application for
adjudication.
(2) The Court may halt the application on the terms and conditions,
and for the period, that the Court thinks appropriate.
Compare: 1967 No 54 s 26(7)
39 Orders if more than 1 application
(1) If there is more than 1 application for adjudication, and 1
application has been halted by a court order, the Court may, if
there is a good reason, make an order of adjudication on the
application that has not been halted.
(2) If the Court makes an order of adjudication under subsection
(1), the Courtmust dismiss the application that has been halted,
on the terms that the Court thinks appropriate.
Compare: 1967 No 54 s 26(8)
28
Insolvency Law Reform Bill Part 2 cl 42
40 Orders if more than 1 debtor
If a creditor's application for adjudication relates to more than
1 debtor, the Court may refuse adjudication of 1 or some of
the debtors without affecting the application in relation to the
remaining debtor or debtors.
Compare: 1967 No 54 s 26(8)
41 Order that disposition or proposal not act of bankruptcy
(1) This section applies if the debtor-
(a) has made a disposition of all, or substantially all, of
the debtor's property to a trustee for the benefit of the
debtor's creditors; or
(b) has made a proposal under Part 5; or
(c) has applied for a summary instalment order under Part
5.
(2) The debtor or the trustee or any creditor may apply for an
order under this section.
(3) On the application, the Court may make any of the following
orders:
(a) order that the disposition or proposal is not an act of
bankruptcy:
(b) halt or refuse the application for adjudication:
(c) order that any other application for adjudication must
not be filed:
(d) make any order as to costs that the Court thinks appropriate:
(e) if it orders that costs must be paid to the creditor who
has applied for adjudication, order that the costs must
be paid out of the debtor's estate.
(4) This section does not limit the powers of the Court under
section 37.
Compare: 1967 No 54 s 26(3)
42 Halt or refusal of application when judgment under
appeal
(1) This section applies if the creditor's application for adjudication
relies on 1 of the following acts of bankruptcy:
29
Part 2 cl 42 Insolvency Law Reform Bill
(a) the debtor failed to comply with a bankruptcy notice
(see section 17):
(b) a judgment against the debtor for non-payment of trust
money is not satisfied within 5 working days after the
date of the judgment (see section 28).
(2) If the debtor has appealed against the judgment or order underlying
the bankruptcy notice or the judgment for non-payment
of trust money, as the case may be, and the appeal is still to
be decided, then the Court may-
(a) halt the creditor's application for adjudication; or
(b) refuse the application.
Compare: 1967 No 54 s 26(4)
43 Court may halt application while underlying debt
determined
(1) This section applies if the debtor appears in opposition to a
creditor's application and the debtor says either-
(a) that he or she does not owe a debt to the creditor; or
(b) that he or she does owe a debt to the creditor, but the
debt is less than $1,000.
(2) The Court may, instead of refusing the application, halt the
application so that the question of whether the debt is owed,
or how much of the debt is owed, can be resolved at a trial.
(3) As a condition of halting the application, the Court may
require the debtor to give security to the creditor for any debt
that may be established as owing by the debtor to the creditor,
and for the costs of establishing the debt.
Compare: 1967 No 54 s 26(5)
44 Substitution of creditor
(1) The Court may substitute another creditor (Creditor 2) for the
creditor making the application for adjudication (Creditor 1),
if-
(a) Creditor 1 has not proceeded with due diligence or at
the hearing of the application offers no evidence; and
(b) the debtor owes Creditor 2 $1,000 or more.
30
Insolvency Law Reform Bill Part 2 cl 49
(2) In that case, Creditor 2 must file another application for adjudication,
but can rely on the act of bankruptcy to which Creditor
1's application related.
Compare: 1967 No 54 s 26(9)
Debtor's application
45 When debtor may file application
A debtor may file an application with the Official Assignee to
have himself or herself adjudicated bankrupt if the debtor has
combined debts of $1,000 or more in total.
46 Debtor must first file statement of affairs
A debtor may not file an application for adjudication unless
the debtor has first filed with the Official Assignee a statement
of the debtor's affairs in the prescribed form.
47 Debtor automatically adjudicated bankrupt
(1) A debtor who files an application with the Official Assignee to
have himself or herself adjudicated bankrupt is automatically
adjudicated bankrupt when the application is filed.
(2) That adjudication has the same consequences as if the debtor
had been adjudicated bankrupt by the Court.
Compare: 1967 No 54 s 21
48 Debtors' joint application
(1) Two or more debtors, who are partners in a business partnership,
may file a joint application.
(2) The debtors are automatically adjudicated bankrupt separately
and jointly when the application is filed.
Compare: 1967 No 54 s 22
49 Steps for filing debtor's application
(1) To file an application for adjudication, a debtor must-
(a) complete the prescribed form; and
31
Part 2 cl 49 Insolvency Law Reform Bill
(b) take it in person during business hours, or post it, to
an office of the New Zealand Insolvency and Trustee
Service.
(2) If the debtor posts the application, the debtor files the application
when it is endorsed by the New Zealand Insolvency and
Trustee Service as having been received.
Subpart 3-Appointment of receiver
Power of Court to appoint Assignee as receiver
50 Application for appointment of Assignee as receiver
(1) After a creditor's application for adjudication has been filed,
a creditor of the debtor may apply to the Court for an order
appointing an Assignee as receiver and manager of all or part
of the debtor's property.
(2) The Court may make the order at any time before it makes an
order of adjudication.
(3) As part of the order, the Court may authorise the Assignee to
take all or any of the following steps:
(a) take possession of any property:
(b) sell any perishable property or property that is likely to
fall rapidly in value:
(c) control the debtor's business or property as directed by
the Court.
(4) An order for the Assignee's control of the debtor's business
must be confined to what is necessary, in the Court's opinion,
for conserving the debtor's property.
Compare: 1967 No 54 s 27
51 Additional orders after receiver's appointment
After the appointment of an Assignee as receiver and manager,
the Court may, on an application by a creditor or the Assignee,
make additional orders under section 50.
Compare: 1967 No 54 s 27(2)
32
Insolvency Law Reform Bill Part 2 cl 56
52 Appointment of Assignee as receiver and manager must
be advertised
The appointment of an Assignee as receiver and manager of
the debtor's property must be advertised in accordance with
regulations made under this Act for that purpose.
53 Execution process halted
(1) A creditor of the debtor must not issue an execution process
of the kind referred to in section 35 after the appointment of
the Assignee as receiver and manager has been advertised.
(2) A creditor must not continue an execution process already
issued before the advertisement.
(3) However, a creditor or any other person interested may apply
to the Court for an order allowing the issue or continuation of
an execution process, and the Court may make an order on the
terms and conditions that it thinks appropriate.
Compare: 1967 No 54 s 27(3)
54 Effect when execution halted
If execution is halted under section 53, sections 75, 106-110,
and 113 apply as if the order halting execution was an adjudication.
Compare: 1967 No 54 s 24(3)
Subpart 4-Adjudication
Adjudication
55 Bankruptcy commences on adjudication
The bankruptcy commences on the date and at the time when
the debtor is adjudicated bankrupt.
56 Date of adjudication
In this Act, date of adjudication means,-
(a) if the debtor is adjudicated bankrupt on a creditor's
application, the date and time when the Court made
the order of adjudication; or
33
Part 2 cl 56 Insolvency Law Reform Bill
(b) if the debtor is adjudicated bankrupt on the debtor's
application, the date and time when the debtor filed the
application (see section 49(2)).
Compare: 1967 No 54 s 28
57 Date and time of adjudication must be recorded
1 If the debtor is adjudicated bankrupt on a creditor's application,
the Court must record the date and time when the order
was made.
2 If the debtor is adjudicated bankrupt on the debtor's application,
the Assignee must record on the application the date and
time when the debtor filed the application.
Compare: 1967 No 54 s 28A
58 Registrar must notify Assignee of adjudication by Court
The Registrar must notify the Official Assignee as soon as
possible after an order of adjudication is made by the Court.
59 Official Assignee must nominate Assignee
The Official Assignee must nominate an Assignee to be the
Assignee of the debtor's property, and may at any time direct
that another Assignee is the Assignee of the debtor's property.
60 Presumption that act or transaction entered into or
effected after adjudication
(1) This section applies if there is doubt whether an act was done,
or a transaction entered into or effected, before or after the
date of adjudication.
(2) The presumption is that the act was done, or the transaction
entered into or effected, after the date of adjudication, but the
presumption does not apply if the contrary is proved.
61 Adjudication final and binding
Unless an adjudication is appealed under this Act,-
(a) no one can later assert that the adjudication was not
valid or that a prerequisite for adjudication was absent;
and
34
Insolvency Law Reform Bill Part 2 cl 65
(b) the adjudication is binding on everybody.
Compare: 1967 No 54 s 30
Subpart 5-What happens on adjudication
62 Debtor adjudicated bankrupt called the bankrupt
In this Act, a debtor who has been adjudicated bankrupt is
called the bankrupt.
63 Outline of what happens on adjudication
(1) On adjudication-
(a) the Assignee must advertise the adjudication; and
(b) the bankrupt must file with the Assignee a statement of
his or her affairs, if the bankrupt has not already done
so; and
(c) the Assignee may call a meeting of the bankrupt's creditors;
and
(d) proceedings to recover certain debts must be halted; and
(e) the property of the bankrupt vests in the Assignee.
(2) This section is a guide only to the immediate consequences of
adjudication.
Assignee must advertise adjudication
64 Assignee must advertise adjudication
(1) The Assignee must advertise the adjudication of the bankrupt
as soon as practicable after it has occurred.
(2) The Assignee must advertise the adjudication in the prescribed
manner.
(3) Subsection (1) is subject to section 65.
Compare: 1967 No 54 s 31
65 Order that Assignee must not advertise pending appeal
The Court may order that the Assignee must not advertise the
adjudication if the bankrupt has appealed against an order of
adjudication.
35
Part cl Insolvency Law Reform Bill
Bankrupt's statement of affairs
66 Bankrupt must file statement of affairs with Assignee
After adjudication, the bankrupt must file with the Assignee
a statement in the prescribed form of the bankrupt's affairs,
unless the bankrupt has already filed a statement under section
46.
Compare: 1967 No 54 s 33
67 Notice that bankrupt must file statement of affairs
(1) As soon as practicable after adjudication, the Assignee must
send the bankrupt a notice stating-
(a) that the bankrupt must file a statement in the prescribed
form of the bankrupt's affairs; and
(b) the time when the statement must be filed.
(2) The Assignee must send the notice to the address of the bankrupt
given in the application for adjudication or the bankrupt's
last known address.
Compare: 1967 No 54 s 33(1)
68 Time for filing statement of affairs
(1) The bankrupt must file a statement in the prescribed form of
the bankrupt's affairs with the Assignee within 10 working
days after receiving the Assignee's notice that the statement
must be filed.
(2) At any time after filing a statement of affairs with the
Assignee, the bankrupt may file additional or amended
statements or answers.
Assignee must call meeting of creditors
69 Assignee must call meeting of creditors
(1) After adjudication, the Assignee must call the first meeting of
the bankrupt's creditors, unless the Assignee dispenses with
the meeting under section 71.
(2) The Assignee may call the meeting by sending a notice of the
time and place of the meeting by ordinary post to-
(a) the bankrupt, at the bankrupt's last known address; and
36
Insolvency Law Reform Bill Part 2 cl 71
(b) each creditor named in the bankrupt's statement of
affairs, at the address given in the statement of affairs
or at any other address that the Assignee believes is the
creditor's address; and
(c) any other creditors known to the Assignee.
(3) The Assignee must advertise the time and place of the meeting
in the prescribed manner.
Compare: 1967 No 54 s 34(1), (2)
70 Time when meeting must be held
(1) The first creditors' meeting must be held-
(a) within 25 working days after the bankrupt files the
statement of affairs; or
(b) if the bankrupt is late in filing the statement or does not
file a statement at all, at the latest within 25 working
days after adjudication.
(2) However, the Assignee may delay calling the first creditors'
meeting if the Assignee considers that there are special circumstances
that justify the delay.
Compare: 1967 No 54 s 34(1)
71 Assignee may dispense with first creditors' meeting
(1) The Assignee need not call a first creditors' meeting if the
Assignee-
(a) decides that the meeting should not be called; and
(b) sends each creditor named in the bankrupt's statement
of affairs, and any other creditor known to the Assignee,
a notice that complies with section 72; and
(c) does not receive, within 10 working days after the
Assignee's notice was sent, written notice from a creditor
requiring the Assignee to call the meeting.
(2) In deciding whether the meeting should be called, the
Assignee must consider-
(a) the bankrupt's assets and liabilities; and
(b) the likely result of the bankruptcy; and
(c) any other relevant matters.
Compare: 1967 No 54 s 34A
37
Part 2 cl 72 Insolvency Law Reform Bill
72 Notice that first creditors' meeting should not be called
The Assignee's notice to creditors under section 71 must-
(a) state that the Assignee considers that the first creditors'
meeting should not be called; and
(b) give the reasons for not calling the meeting; and
(c) state that the Assignee will not call the meeting unless
a creditor gives the Assignee written notice, within
10 working days after the Assignee's notice was sent,
requiring the Assignee to call the meeting.
Compare: 1967 No 54 s 34A
73 Documents to be sent with notice of meeting
(1) The Assignee must send the following documents with the
notice of the first creditors' meeting:
(a) a summary of the bankrupt's statement of assets and
liabilities; and
(b) extracts from, or a summary of, the bankrupt's explanation
of the causes of the bankruptcy; and
(c) any comments on the bankruptcy that the Assignee
chooses to make.
(2) However, subsection (1) does not apply if the Assignee has not
received the bankrupt's statement of affairs when the notice is
sent.
(3) A failure in sending or receiving the documents in subsection
(1) does not affect the validity of the proceedings at the meeting.
Compare: 1967 No 54 s 35
Court proceedings are halted
74 Effect of adjudication on Court proceedings
(1) On adjudication, all proceedings to recover any debt provable
in the bankruptcy are halted.
(2) However, on the application by any creditor or other person
interested in the bankruptcy, the Court may allow proceedings
that had already begun before the date of adjudication
38
Insolvency Law Reform Bill Part 2 cl 77
to continue on the terms and conditions that the Court thinks
appropriate.
Compare: 1967 No 54 s 32
Execution process
75 Execution process must not be begun or continued after
adjudication advertised
(1) A creditor must not begin or continue an execution, attachment,
or other process in respect of the bankrupt's property or
person, for the recovery of a debt provable in the bankruptcy,
after-
(a) the Assignee has advertised the bankrupt's
adjudication; or
(b) the Assignee has given notice of the adjudication to the
creditor.
(2) After advertisement of the adjudication or notice by the
Assignee to the creditor, a creditor must not seize or sell any
property by way of distress for rent due by the bankrupt,
but the creditor may continue with the distress procedure if
already begun.
Compare: 1967 No 54 s 50(5)
Bankrupt's death
76 Effect of bankrupt's death after adjudication
If the bankrupt dies after adjudication, the bankruptcy continues
in all respects as if the bankrupt were alive.
Compare: 1967 No 54 s 137
Subpart 6-Role of creditors
77 Overview of creditors' role in bankruptcy
The role of the creditors in the bankruptcy is primarily to-
(a) attend meetings of the creditors; and
(b) submit proofs of the debts of the bankrupt.
39
Part cl Insolvency Law Reform Bill
Creditors' meetings
78 Types of creditors' meetings
(1) There are 2 types of creditors' meetings-
(a) the first creditors' meeting; and
(b) subsequent meetings.
(2) The rules for calling the first creditors' meeting are set out in
sections 69 to 73.
79 Subsequent meetings
(1) The Assignee may call subsequent meetings of creditors.
(2) The Assignee must call a subsequent meeting if required to
do so by one-fourth in number and value of the creditors who
have proved their debts.
(3) The Assignee must call the meeting by taking the steps set out
in section 69(2) and (3).
Compare: 1967 No 54 s 36
80 Meeting and resolution not defective for lack of notice
A creditors' meeting called by notice to creditors, and the resolutions
passed at themeeting, are valid even if some creditors
did not receive the notice, unless a Court orders otherwise.
Compare: 1967 No 54 s 40(6)
Conduct of creditors' meetings
81 Chairperson
(1) The chairperson of a creditors' meeting is the Assignee or a
person appointed by the Assignee.
(2) However, if the Assignee or the Assignee's appointee does not
attend the meeting, the creditors may elect 1 of themselves to
act as chairperson, but only if that person is entitled to vote at
the meeting.
(3) A person appointed by the Assignee or elected by the creditors
to act as chairperson may administer any oath that
the Assignee could have administered if the Assignee had
attended the meeting.
Compare: 1967 No 54 s 37(1)
40
Insolvency Law Reform Bill Part 2 cl 85
82 Chairperson may adjourn meeting
The Assignee or the chairperson of a meeting may adjourn the
meeting from time to time and place to place.
Compare: 1967 No 54 s 37(3)
83 Assignee must report to meeting
If the Assignee attends a creditors' meeting or an adjournment
of the meeting, the Assignee-
(a) must report on the administration of the bankrupt's
estate; and
(b) must give any creditor any further information that the
creditor may properly require; and
(c) must, if required, produce for the meeting (or its
adjournment) all accounting records, deeds, and papers
in the Assignee's possession that relate to the bankrupt's
property.
Compare: 1967 No 54 s 37(4)
84 Attending a creditors' meeting
(1) A person may attend a creditors' meeting-
(a) by being physically present at the time and place
appointed for the meeting; or
(b) if the Assigneemakes it available, by means of an audio
or audio-visual link, so that all those participating in the
meeting can hear and be heard by each other.
(2) A creditor may also attend by voting by postal vote or by
proxy on any resolution to be put to the meeting.
85 Bankrupt may be required to attend and be questioned
(1) The bankrupt must attend all creditors' meetings by being
physically present, if required by the Assignee.
(2) The Assignee, the chairperson of a creditors' meeting, a creditor,
or a representative of a creditor may question the bankrupt.
(3) The questioning may be on oath.
41
Part 2 cl 85 Insolvency Law Reform Bill
(4) The bankrupt must sign a statement of the bankrupt's evidence
given under the questioning, if required to do so by the
Assignee or the chairperson of the meeting.
Compare: 1967 No 54 s 37(2)
86 Attendance by non-creditors
A person who is not a creditor of the bankrupt may attend a
creditor's meeting with the consent of-
(a) the Assignee; or
(b) the creditors attending the meeting, voting by ordinary
resolution.
Compare: 1967 No 54 s 37(5)
87 Minutes
(1) The Assignee must ensure that minutes are kept of every creditors'
meeting.
(2) The Assignee or the chairperson must sign the minutes.
Compare: 1967 No 54 s 37(6)
88 Number of persons for valid meeting
(1) For a valid creditor's meeting, at least the following persons
must attend:
(a) the Assignee, or a person appointed by the Assignee, or
a person who represents the Assignee or the Assignee's
appointee; and
(b) a creditor or a person who represents a creditor.
(2) The meeting lapses if those persons do not attend, and the
Assignee may call another meeting.
Compare: 1967 No 54 s 38
89 Who may represent creditor or bankrupt
(1) At a creditors' meeting, any of the following persons may
represent a creditor or, if the bankrupt attends, the bankrupt:
(a) a barrister or solicitor:
(b) a public accountant:
(c) a person who keeps the creditor's or bankrupt's
accounts:
42
Insolvency Law Reform Bill Part 2 cl 91
(d) a person who is the creditor's or bankrupt's authorised
agent under a power of attorney:
(e) a person who satisfies the Assignee that he or she represents
the creditor or bankrupt:
(f) in the case of a partnership, a partner.
(2) In addition to the persons listed in subsection (1), a creditor
may be represented,-
(a) in the case of the Crown, by any officer of the appropriate
government department:
(b) in the case of a public body, by an officer of that body:
(c) in the case of a company, by a director, or its general
manager or accountant, or a person authorised in writing
by a director, its general manager, or accountant.
Compare: 1967 No 54 s 39
90 Voting at meetings
(1) For a creditors' meeting to pass-
(a) an ordinary resolution, a majority in number and value
of the creditors (or their representatives) who attend and
who vote on the resolution must vote in favour of it:
(b) a special resolution, three-quarters in number and value
of the creditors (or their representatives) who attend and
who vote on the resolution must vote in favour of it.
(2) For the purposes only of determining whether the requisite
majority by value has voted in favour of a resolution,-
(a) the Assignee may admit or reject proofs of debts; and
(b) the Assignee may adjourn the meeting in order to admit
or reject proofs of debt; and
(c) a person whose debt has been admitted is a creditor.
Compare: 1967 No 54 s 40(1)
91 Postal votes
(1) A creditor who is entitled to vote at a creditors' meeting may
vote by postal vote on a resolution to be put to the meeting.
(2) A postal vote must reach the Assignee at least 2 working days
before the meeting begins if it is to be counted at the meeting.
43
Part 2 cl 91 Insolvency Law Reform Bill
(3) A voting paper for each resolution to be put to a creditors'
meeting must accompany the notice of the meeting, together
with instructions for returning the voting paper to the Assignee
at least 2 working days before the meeting begins.
92 Who may vote at creditors' meeting
Creditors of the bankrupt who are entitled to vote, or their
representatives, may vote at a creditors' meeting, but this rule
is qualified by the provisions of sections 93 to 95.
93 When secured creditor may vote
A debt that is secured does not entitle the creditor to vote
unless the creditor has taken 1 of the following steps under
this Act:
(a) surrendered the security; or
(b) valued the security; or
(c) realised the security.
Compare: 1967 No 54 s 40(2)
94 When creditor under bill of exchange or promissory note
may vote
(1) A debt on, or secured by, a current bill of exchange or promissory
note does not entitle the creditor to vote unless the
creditor is willing to take the following steps:
(a) treat a qualifying liability (which is defined in subsection
(2)) as a security in the creditor's hands; and
(b) estimate the value of the security; and
(c) deduct the value of the security from the creditor's proof
of debt for the purposes of voting (but not for the purposes
of distribution under Subpart 10 of Part 3); and
(d) show the bill or note to the Assignee when the Assignee
requires it.
(2) In this section, qualifying liability means the liability to the
creditor on the bill or note of every person who-
(a) is liable on the bill or note antecedently to the debtor;
and
(b) is not a bankrupt.
Compare: 1967 No 54 s 40(3)
44
Insolvency Law Reform Bill Part 2 cl 97
95 Person disqualified from voting through preferential
effect
(1) A person (A) must not vote in favour of a resolution that would
directly or indirectly enable any of the persons listed in subsection
(2) to receive any remuneration out of the bankrupt's
estate other than as a creditor sharing rateably with the other
creditors.
(2) The persons referred to in subsection (1) are-
(a) A:
(b) A's business partner, employer, or employee:
(c) a creditor that A represents:
(d) the business partner, employer, or employee of a creditor
that A represents.
Compare: 1967 No 54 s 40(4)
96 Creditor of partner
The adjudication of a partner in a firm who is indebted to a
creditor jointly with 1 or more of his or her partners entitles
the creditor to prove the debt for the purpose of voting at any
creditors' meeting, and to vote.
Compare: 1967 No 54 s 40(5)
97 Creditors may appoint expert or committee to assist
Assignee
(1) A creditors' meeting may pass a resolution-
(a) appointing an expert to assist the Assignee in the administration
of the bankrupt's estate; and
(b) providing for the expert's remuneration out of the
estate.
(2) A creditors' meeting may pass a resolution appointing a committee
of any persons to assist the Assignee in the administration
of the bankrupt's estate, but in that case the Court must
approve any remuneration of the members of the committee
out of the estate.
Compare: 1967 No 54 s 41(1), (2)
45
Part cl Insolvency Law Reform Bill
Documents
98 Creditor's right to inspect documents
A creditor, or a solicitor or accountant acting for that creditor,
who has lodged a proof of debt may at any convenient time
inspect and take extracts or copies of-
(a) the bankrupt's accounting records:
(b) the bankrupt's answers to the prescribed questions:
(c) the bankrupt's statement of affairs:
(d) all proofs of debt:
(e) the minutes of any creditors' meeting:
(f) the record of any examination of the bankrupt.
Compare: 1967 No 54 s 131
Part 3
Dealing with bankrupt and bankrupt's property
Subpart 1-Status of bankrupt's property
General
99 Status of bankrupt's property on adjudication
(1) On adjudication,-
(a) all property (whether in or outside New Zealand)
belonging to the bankrupt or vested in the bankrupt
vests in the Assignee; and
(b) the powers that the bankrupt could have exercised in,
over, or in respect of any property (whether in or outside
New Zealand) for the bankrupt's own benefit vest in the
Assignee.
(2) This section is subject to section 102.
Compare: 1967 No 54 s 42(1), (2)
100 Status of property acquired during bankruptcy
Between the commencement and the end of the bankruptcy,-
(a) all property (whether in or outside New Zealand) that
the bankrupt acquires or that passes to the bankrupt
vests in the Assignee; and
(b) the powers that the bankrupt could have exercised in,
over, or in respect of that property (whether in or outside
46
Insolvency Law Reform Bill Part 3 cl 105
New Zealand) for the bankrupt's own benefit vest in the
Assignee.
Compare: 1967 No 54 s 42(2)
101 Property vests in replacement Assignee
If the Assignee is replaced, the property and powers vested in
the former Assignee under section 99 or section 100 vest in
the replacement Assignee.
Compare: 1967 No 54 s 42(1)
102 Property held in trust by bankrupt
Property held by the bankrupt in trust for another person does
not vest in the Assignee.
Compare: 1967 No 54 s 42(3)
103 Effect of other laws
(1) Nothing in the Land Transfer Act 1952 restricts the operation
of sections 100 to 102.
(2) Sections 100 to 102 do not affect the operation of any other
law that prevents any property from vesting in the Assignee.
Compare: 1967 No 54 s 42(5)
104 Court may order that money due to bankrupt is assigned
to Assignee
(1) The Court may, on the application of the Assignee, order that
any money due to the bankrupt, or any money to become due
or payable to the bankrupt, is assigned or charged to, or in
favour of, the Assignee.
(2) The assignment or charge is a discharge to the person who
pays the Assignee.
Compare: 1967 No 54 s 45A
105 Application of section 268 to payments by bankrupt or
assignments by Court
The Assignee must apply the following payments in accordance
with section 268:
(a) any amount paid by the bankrupt under section 143:
47
Part 3 cl 105 Insolvency Law Reform Bill
(b) any amount paid to the Assignee under an order made
under section 104.
Compare: 1967 No 54 s 45B
Bankrupt's property subject to execution process
106 When execution creditor may retain execution proceeds
(1) This section applies to a creditor who has, before adjudication,
-
(a) issued execution against the bankrupt's property; or
(b) attached a debt due by the bankrupt.
(2) The creditor may retain the benefit of the execution or attachment
(including the proceeds) only if the creditor completed
the execution or attachment-
(a) before adjudication; and
(b) before the creditor had notice that an application for
adjudication had been filed or that the bankrupt had
committed an act of bankruptcy (other than an act of
bankruptcy arising out of the creditor's execution or
attachment).
(3) The creditor may retain as against the Assignee a payment
made by the bankrupt in the course of the execution or attachment
to avoid the execution or attachment as if-
(a) the payment was the proceeds of the execution or
attachment; and
(b) the execution or attachment was completed when the
payment was made.
(4) For the purposes of this section,-
(a) an execution against goods 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 or, in the
case of an equitable interest, by the appointment of a
receiver.
(5) The right of a creditor under this section to retain the benefit
of an execution or attachment is subject to sections 190 to 193.
Compare: 1967 No 54 s 50(1), (2), (6)
48
Insolvency Law Reform Bill Part 3 cl 108
107 Effect of notice to sheriff of adjudication
(1) This section applies if the sheriff has taken the property of a
debtor in execution and is served with notice of the debtor's
adjudication before the property is sold or before the execution
is completed by the receipt or recovery of the full amount of
the levy of execution.
(2) If the Assignee requires it, the sheriff must deliver to the
Assignee any goods and money seized or received in part
satisfaction of the execution.
(3) The costs of the execution are a first charge on the goods or
money delivered to the Assignee, and the Assignee may sell
the goods or part of the goods to satisfy the charge.
Compare: 1967 No 54 s 50(3)
108 Sheriff must retain proceeds of execution for 10 working
days
(1) This section applies if, under execution of a judgment for a
sum of more than $100, the sheriff sells property of the debtor
or is paid money in order to avoid a sale.
(2) The sheriff must deduct the costs of the execution from the
proceeds of sale or the money paid and retain the balance for
10 working days (which in this section is called the 10 day
period), to be applied in accordance with subsection (3) or
subsection (4).
(3) If the sheriff is served with notice within the 10 day period
that the debtor has filed an application for adjudication, the
sheriff must pay the balance to the Assignee, who is entitled
to retain it as against the execution creditor.
(4) If the sheriff is served with notice within the 10 day period
that a creditor has filed an application for the adjudication of
the debtor, subject to subsection (3), the sheriff must-
(a) retain the balance until the application (and any other
application of which notice is served on the sheriff
pending disposal of the first application) has been disposed
of; and
(b) if adjudication results, pay the balance to the Assignee;
or
49
Part 3 cl 108 Insolvency Law Reform Bill
(c) if adjudication does not result, pay the balance to the
execution creditor, who is entitled to retain it against
the Assignee (subject to section 110).
(5) If the sheriff is not served with notice within the 10 day period
that an application for the adjudication of the debtor has been
filed, the sheriff must pay the balance to the execution creditor,
who is entitled to retain it against the Assignee.
Compare: 1967 No 54 s 50(4)
109 Purchaser under sale by sheriff acquires good title
A purchaser in good faith of a debtor's property, on which
execution has been levied and which is sold by the sheriff,
acquires a good title to the property as against the Assignee.
Compare: 1967 No 54 s 50(7)
110 Court may set aside rights conferred on Assignee
The Court may set aside the rights conferred on the Assignee
under sections 107 and 108 in favour of the execution creditor,
to the extent and on the terms that the Court thinks appropriate.
Compare: 1967 No 54 s 50(8)
Validity of property transactions with bankrupt
111 Transaction in good faith and for value after adjudication
(1) This section applies to a transaction between a person (A) and
the bankrupt under which, after adjudication, the bankrupt
acquires property, or property passes to the bankrupt.
(2) The transaction is valid against the Assignee if-
(a) A deals with the bankrupt in good faith and for value;
and
(b) the transaction is completed without an intervention by
the Assignee.
(3) If A is the bankrupt's bank, a transaction by A dealing with
the bankrupt for value includes-
(a) the receipt by A of any money, security, or negotiable
instrument from the bankrupt or by the bankrupt's order
or direction; and
50
Insolvency Law Reform Bill Part 3 cl 114
(b) a payment by A to the bankrupt or by the bankrupt's
order or direction; and
(c) the delivery by A of a security or negotiable instrument
to the bankrupt or by the bankrupt's order or direction.
(4) A payment of money or delivery of property by a legal personal
representative to, or by the direction of, the bankrupt is
a transaction for value.
Compare: 1967 No 54 s 49(1)(a), (3), (4)
112 Executions and attachments in good faith
(1) This section applies to property that the bankrupt has acquired,
or that has devolved upon the bankrupt, after adjudication.
(2) An execution or attachment against the property is valid
against the Assignee if it is-
(a) in good faith; and
(b) in respect of a debt or liability incurred by the bankrupt
after adjudication; and
(c) completed without an intervention by the Assignee.
Compare: 1967 No 54 s 49(1)(b)
113 When execution or attachment completed for purposes of
section 106 or section 112
For the purposes of section 106 or section 112-
(a) an execution against goods 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 or, in the
case of an equitable interest, by the appointment of a
receiver.
Compare: 1967 No 54 s 50(2)
114 Assignee's interest in property passes
The Assignee's interest in property that is acquired by or
passes to the bankrupt after adjudication ends and passes in the
51
Part 3 cl 114 Insolvency Law Reform Bill
manner and to the extent necessary to give effect to a transaction,
execution, or attachment to which section 111 or section
112 applies.
Compare: 1967 No 49(2)
Disclaimer of onerous property
115 Assignee may disclaim onerous property
(1) Subject to section 118, the Assignee may disclaim onerous
property.
(2) Subsection (1) applies even if the Assignee has taken possession
of the property, tried to sell it, or otherwise exercised
rights of ownership in relation to it.
(3) The Assignee must, within 10 working days after the disclaimer,
send a written notice of the disclaimer to every person
whose rights are, to the Assignee's knowledge, affected
by it.
(4) For the purposes of this section and section 118, onerous
property-
(a) means-
(i) an unprofitable contract; or
(ii) property of the bankrupt that is unsaleable, or not
readily saleable, or thatmay give rise to a liability
to pay money or perform an onerous act; but
(b) does not include-
(i) a netting agreement to which sections 249 to 257
apply; or
(ii) any contract of the bankrupt that constitutes a
transaction under that netting agreement.
Compare: 1993 No 105 s 269(1), (2), (4)
116 Effect of disclaimer
A disclaimer by the Assignee-
(a) brings to an end, on and from the date of the disclaimer,
the rights, interests, and liabilities of the Assignee and
the bankrupt in relation to the property disclaimed:
52
Insolvency Law Reform Bill Part 3 cl 119
(b) does not affect the rights or liabilities of any other person,
except so far as necessary to release the Assignee
or the bankrupt from a liability.
Compare: 1993 No 105 s 269(3)
117 Position of person who suffers loss as result of disclaimer
(1) A person suffering loss or damage as a result of disclaimer by
the Assignee may-
(a) claim as a creditor in the bankruptcy for the amount of
the loss or damage, taking account of the effect of an
order made by the Court under paragraph (b):
(b) apply to the Court for an order that the disclaimed
property be delivered to, or vested in, that person.
(2) The Court may make an order under subsection (1)(b) if it is
satisfied that it is fair that the property should be delivered to,
or vested in, the applicant.
Compare: 1993 No 105 s 269(5), (6)
118 Assignee may be required to elect whether to disclaim
The Assignee loses the right to disclaim if-
(a) a person whose rights would be affected by the disclaimer
has sent the Assignee a written notice requiring
the Assignee to elect whether to disclaim the onerous
property in question or not; and
(b) the notice specifies a date to disclaim that is not less
than 20 working days after the Assignee has received
the notice; and
(c) the Assignee does not disclaim the onerous property
before the close of that date.
Compare: 1993 No 105 s 270
119 Liability for rentcharge on bankrupt's land after
disclaimer
(1) The vesting of land subject to a rentcharge after disclaimer
by the Assignee in the Crown, any other person, or their successors
in title does not make any of those persons personally
liable for the rentcharge.
53
Part 3 cl 119 Insolvency Law Reform Bill
(2) However, this section does not affect the liability of a person
in subsection (1) for rentcharge accruing after that person has
taken possession or control of the land or has entered into
possession of it.
Compare: 1967 No 54 s 79
Land subject to mortgage
120 Transmission of interest in land
(1) This section applies to an interest in land that-
(a) is owned by the bankrupt; and
(b) is subject to a mortgage or a charge; and
(c) is not disclaimed by the Assignee.
(2) The Assignee must-
(a) register, under the Land Transfer Act 1952, the transmission
of the interest in the land to the Assignee; or
(b) give notice to the mortgagee or other person entitled
under the charge that the Assignee cannot, or does not
intend to, register transmission of the interest in the
land.
(3) Notice under subsection (2)(b) is notice that the interest has
vested in the Assignee, and the mortgagee or person entitled
under the charge is, in the event of entering into possession
or selling, liable to account to the Assignee as if the Assignee
was the registered proprietor of the interest.
Compare: 1967 No 54 s 80(1), (2)
121 Assignee cannot claim interest in land if bankrupt
remains in possession until discharge
(1) The Assignee cannot, after the bankrupt's discharge, claim
an interest in land to which section 120(1) applies and for
which the Assignee has not registered a transmission if the
bankrupt-
(a) was in possession of the interest at the time of adjudication;
and
(b) remained in possession until discharge from bankruptcy.
54
Insolvency Law Reform Bill Part 3 cl 123
(2) Subsection (1) applies whether or not the Assignee gave a
notice under section 120(2)(b).
(3) However, the Assignee may apply to the Court for an order
that the Assignee is entitled, after discharge, to claim the bankrupt's
interest in the land, and the Court must have regard to-
(a) the good faith of the bankrupt; and:
(b) the time that has elapsed since adjudication; and
(c) the value of any improvements made by the bankrupt;
and
(d) all other relevant matters.
Compare: 1967 No 54 s 80(3)
Shares and other securities
122 Assignee may transfer shares and other securities
(1) The Assignee may transfer the following property belonging
to the bankrupt in the same way as the bankrupt could have
transferred it if the bankrupt had not been adjudicated bankrupt:
(a) securities in a company:
(b) securities of the New Zealand Government:
(c) securities issued by a local authority:
(d) shares in ships:
(e) any other property transferable in the records of a company,
office, or person.
(2) A person whose act or consent is necessary for the transfer of
the property must, on the Assignee's request, do whatever is
necessary for the transfer to be completed.
(3) In the case of the transfer by the Assignee of securities in a
company, a shareholder towhom the securitiesmust be offered
for sale under the constitution and who agrees to purchase
must pay a reasonable price for the securities, whether or not
the constitution provides a procedure for fixing the price.
Compare: 1967 No 54 s 74(1), (2), (3)
123 Assignee may disclaim liability under shares
The Assignee may disclaim any liability under shares owned
by the bankrupt in any company by disclaiming the shares as
55
Part 3 cl 123 Insolvency Law Reform Bill
onerous property under section 115, but section 117 (which
relates to the position of a person who suffers loss as result of
disclaimer) and section 118 (which provides that the Assignee
may be required to elect whether to disclaim) do not apply to
a disclaimer of liability under shares.
Compare: 1967 No 54 s 78(1)
124 Assignee may be required to elect whether to disclaim
liability under shares
The Assignee loses the right to disclaim liability under shares
if-
(a) the company or a person who has an interest in the
shares has sent the Assignee a written notice requiring
the Assignee to elect whether to disclaim liability under
the shares or not; and
(b) the notice specifies a date to disclaim that is not less
than 20 working days after the Assignee has received
the notice; and
(c) the Assignee does not disclaim liability under the shares
before the close of that date.
Compare: 1967 No 54 s 78(3)
125 Transfer of shares after disclaimer
(1) After disclaimer, the Assignee may, subject to the rules of any
other Act and to the constitution of the company, transfer the
shares in question to any person who has an interest in them.
(2) If no person has an interest in them, or that person refuses
to accept the transfer, the Assignee may transfer the shares
to the bankrupt if the bankrupt consents, and in that case the
bankrupt is entitled as against the Assignee to retain the shares
and the proceeds if the bankrupt sells them.
(3) If the Assignee does not transfer the shares to a person who
has an interest in them or to the bankrupt, the board of the
company may-
(a) sell the shares; or
(b) with the Court's approval and whatever any other Act
may say, cancel the shares as it thinks approrpriate.
56
Insolvency Law Reform Bill Part 3 cl 128
(4) The Assignee is a director of the company for the purposes
of transferring, selling, or cancelling the shares under this
section, if-
(a) immediately before adjudication the bankrupt was a
director of the company; and
(b) the number of directors is less than the minimum
number of directors required by law or the company's
constitution as a result of the bankrupt's disqualification
as a director.
Compare: 1967 No 54 s 78(4), (5), (6)
126 Company may prove for unpaid calls
(1) This section applies if the Assignee has disclaimed liability
under shares and the company has not been put into liquidation.
(2) The company may prove in the bankruptcy for-
(a) the amount of unpaid calls made before adjudication in
respect of the bankrupt's shares; and
(b) the value of calls to be made in respect of the bankrupt's
shares within 1 year after adjudication.
(3) The Court must determine the value of the calls to be made if
the Assignee and the company cannot agree.
Compare: 1967 No 54 s 78(7)
Goods on hire purchase
127 Meaning of hire purchase terms used in this Subpart
In sections 128 to 131,-
cash price, creditor, debtor, goods, and post-possession
notice have the same meanings as in section 2(1) of the Credit
(Repossession) Act 1997
hire purchase agreement and purchaser have the same
meanings as in section 2(1) of the Hire Purchase Act 1971.
Compare: 1967 No 54 s 91(1)
128 Restrictions on creditor dealing with goods
(1) This section applies if-
57
Part 3 cl 128 Insolvency Law Reform Bill
(a) the bankrupt purchased goods under a hire purchase
agreement before adjudication; and
(b) the creditor either-
(i) took possession of the goods within 21 days
before adjudication, and after adjudication still
possesses them; or
(ii) takes possession of the goods after adjudication.
(2) The creditor must not sell or dispose of the goods or part with
possession of them (except for storage or repair) until 1 month
after the date when the creditor serves a post-possession notice
on the Assignee (which in this section and section 129 is called
the 1 month period).
(3) However, subsection (2) does not apply if the Assignee consents
in writing to the creditor selling or disposing or parting
with possession of the goods before the expiry of the 1 month
period.
Compare: 1967 No 54 s 91(2), (3)
129 Assignee's powers in relation to hire-purchase goods
(1) The Assignee may-
(a) within the 1-month period, exercise the right under section
30 of the Credit (Repossession) Act 1997 to introduce
a buyer for the goods; or
(b) at any time before the creditor sells or agrees to sell the
goods under section 25 of the Credit (Repossession)
Act 1997, settle the bankrupt's obligations as debtor in
accordance with section 31 of that Act.
(2) This section applies no matter what the Credit (Repossession)
Act 1997 says.
Compare: 1967 No 54 s 91(4)
130 Creditor in possession of goods may prove in bankruptcy
if Assignee has not exercised powers
(1) This section applies if-
(a) a creditor has taken possession of goods purchased
under a hire purchase agreement, whether before or
after the adjudication of the debtor; and
58
Insolvency Law Reform Bill Part 3 cl 132
(b) the Assignee has not acted under section 129 in relation
to the goods.
(2) The creditor may prove in the bankruptcy for the amount
(which is subject to the limit in section 35 of the Credit (Repossession)
Act 1997) that the creditor was entitled to recover
from the bankrupt as debtor.
(3) If the creditor does prove in the bankruptcy under subsection
(2),-
(a) the creditor must submit the following documents with
the proof of debt:
(i) the relevant post-possession notice; and
(ii) the statement of account mentioned in section 33
of the Credit (Repossession) Act 1997; and
(b) the Assignee has the rights conferred on a debtor by
sections 20 to 36 of the Credit (Repossession) Act 1997.
Compare: 1967 No 54 s 91(5)
131 Creditor may assign goods to Assignee
(1) This section applies if-
(a) the bankrupt purchased goods under a hire purchase
agreement before adjudication; and
(b) at the time of adjudication the creditor either-
(i) has not taken possession of the goods; or
(ii) has taken possession of them and has not sold or
disposed of or parted with possession of them.
(2) The creditor may assign the goods to the Assignee, and, if
the creditor does so, may prove in the bankruptcy for the net
balance due to the creditor under the agreement.
Compare: 1967 No 54 s 91(6)
Second bankruptcy
132 Status of bankrupt's property on second bankruptcy
(1) The rules in subsections (2) to (4) apply if a bankrupt, before
discharge, is adjudicated bankrupt for a second time.
(2) Property that is acquired by, or has passed to, the bankrupt
since the first adjudication, including property acquired or that
59
Part 3 cl 132 Insolvency Law Reform Bill
has passed since the second adjudication, vests in the Assignee
in the second bankruptcy.
(3) However, the Court may, if it thinks it appropriate, order that
all or part of the following assets or their proceeds vest in the
Assignee in the first bankruptcy:
(a) assets in the second bankruptcy that, in the Court's
opinion, were acquired independently of the creditors
in the second bankruptcy:
(b) assets in the second bankruptcy that devolved upon the
bankrupt.
(4) A surplus in the second bankruptcy is an asset in the estate in
the first bankruptcy, and must be paid to the Assignee in the
first bankruptcy.
Compare: 1967 No 54 s 59(1)(a),(b), (2)
133 Effect of notice to Assignee of application for adjudication
(1) This section applies if the Assignee in a bankruptcy receives
notice that a creditor has filed an application for a second
adjudication.
(2) The Assignee must hold property in his or her possession that
has been acquired by, or passed to, the bankrupt since the first
adjudication until the application for a second adjudication
has been dealt with.
(3) The Assignee must transfer the property and its proceeds, less
any deduction for the Assignee's costs and expenses, to the
Assignee in second bankruptcy if the creditor's application
results in a second adjudication, or if the bankrupt is automatically
adjudicated bankrupt on his or her own application.
Compare: 1967 No 54 s 59(1)(c)
Subpart 2-Duties of bankrupt
134 General duty of bankrupt
(1) The bankrupt must, to the best of the bankrupt's ability, assist
in the realisation of the bankrupt's property and the distribution
of the proceeds among the creditors.
60
Insolvency Law Reform Bill Part 3 cl 137
(2) This duty is in addition to any other duty imposed on the
bankrupt by this Act or by any other statute or law.
Compare: 1967 No 54 s 60
Duties in relation to property
135 Bankrupt must deliver property to Assignee on demand
(1) On demand, the bankrupt must deliver so much of the bankrupt's
property that is divisible among the creditors, and that
is under the bankrupt's possession or control, to the Assignee
or a person authorised by the Assignee to receive it.
(2) On demand, the bankrupt must deliver to the Assignee, or a
person authorised by the Assignee to receive it, any property
that is acquired by, or passes to, the bankrupt before his or her
discharge.
Compare: 1967 No 54 s 60(e), (f)
136 Bankrupt must disclose property acquired before
discharge
The bankrupt must as soon as practicable after acquisition
notify the Assignee of any property that is-
(a) acquired by, or passes to, the bankrupt before discharge;
and
(b) is divisible among the creditors.
Compare: 1967 No 54 s 60(b)
137 Bankrupt must take all steps required in relation to
property and distribution of proceeds to creditors
(1) The bankrupt must take all the steps (including the steps specified
in subsection (2)) in relation to the bankrupts' property,
and the distribution of the proceeds to the creditors, that are-
(a) required by the Assignee; or
(b) prescribed by rules or regulations made under this Act;
or
(c) directed to be done by the Court by an order made in
reference to a particular bankruptcy; or
(d) directed to be done by the Court on an application by
the Assignee or a creditor.
61
Part 3 cl 137 Insolvency Law Reform Bill
(2) The steps referred to in subsection (1) include the execution
by the bankrupt of powers of attorney, conveyances, transfers,
deeds, assurances, and instruments.
Compare: 1967 No 54 s 60(d)
Duties to provide information
138 Bankrupt must give Assignee accounting records and
other documents
(1) As soon as practicable after adjudication, the bankrupt must-
(a) deliver to the Assignee at the Assignee's office relevant
documents that are in the bankrupt's possession or control;
and
(b) notify the Assignee of relevant documents that are in
the possession or control of any other person.
(2) In subsection (1), relevant documents means all accounting
records, papers, deeds, instruments, and other documents
relating to the bankrupt's estate.
Compare: 1967 No 54 s 61(1)
139 Bankrupt must give Assignee information relating to
property
The bankrupt must,-
(a) as soon as practicable after adjudication, give the
Assignee a complete and accurate list of the bankrupt's
property and of the bankrupt's creditors and debtors,
and update the lists as necessary; and
(b) give the Assignee any other information relating to the
bankrupt's property that the Assignee requires; and
(c) attend before the Assignee when required by the
Assignee; and
(d) verify any statement by statutory declaration when
required by the Assignee.
Compare: 1967 No 54 s 60(a)
62
Insolvency Law Reform Bill Part 3 cl 142
140 Bankrupt must give Assignee information relating to
income and expenditure
When the Assignee requires it, the bankrupt must provide the
Assignee with details of his or her income and expenditure
after adjudication.
Compare: 1967 No 54 s 60(c)
141 Bankrupt must notify Assignee of change in personal
information
The bankrupt must immediately notify the Assignee of any
change in the bankrupt's-
(a) address; or
(b) empoyment; or
(c) name.
Compare: 1967 No 54 s 60(g)
142 Bankrupt must give Assignee financial information
(1) The bankrupt must give the Assignee (or any person employed
by the Assignee) the information and details that are necessary
to prepare a statement of financial position of the bankrupt's
estate.
(2) If required by the Assignee, the bankrupt must, within a
reasonable time of adjudication, prepare and deliver to the
Assignee full, true, and detailed accounts and statements of
financial position that show-
(a) details of the bankrupt's trading and stocktaking; and
(b) details of the bankrupt's profit and losses during any
period in the 3 years before the adjudication.
(3) For the bankrupt to prepare the accounts and statements of
financial position referred to in subsection (2),-
(a) the Assignee must give the bankrupt full access to the
bankrupt's books and papers in the Assignee's possession;
and
(b) if the Assignee thinks it necessary, the bankrupt must
be assisted by an accountant at the estate's expense.
Compare: 1967 No 54 s 61
63
Part 3 cl 143 Insolvency Law Reform Bill
Subpart 3-Control over bankrupt during bankruptcy
143 Bankrupt may be required to contribute to payment of
debts
(1) If required by the Assignee, the bankrupt must pay an amount
or periodic amounts during the bankruptcy as a contribution
towards payment of the bankrupt's debts.
(2) The Assignee may impose conditions in respect of the payments.
(3) Before the Assignee may require the bankrupt to make the
payment or payments, the Assignee must-
(a) have regard to all the circumstances of the bankruptcy
and the bankrupt's conduct, earning power, responsibilities,
and prospects; and
(b) make reasonable allowance for the maintenance of the
bankrupt and his or her relatives.
(4) The Court may, on the application of the bankrupt or any other
creditor,-
(a) vary, suspend, or cancel the bankrupt's obligations to
make the payments under this section:
(b) remit any arrears owing by the bankrupt.
Compare: 1967 No 54 s 45
144 Onus of proof if bankrupt defaults in making payment
If the bankrupt defaults in making a payment required under
section 143, the onus is on the bankrupt in any proceedings
arising out of the default to show that the default was not
wilful.
Compare: 1967 No 54 s 46
145 Prohibition of bankrupt entering business
(1) An undischarged bankrupt must not, without the consent of
the Assignee or the Court, either directly or indirectly,-
(a) enter into, carry on, or take part in the management or
control of any business:
(b) be employed by a relative of the bankrupt:
64
Insolvency Law Reform Bill Part 3 cl 147
(c) be employed by a company, trust, trustee, or incorporated
society that is managed or controlled by a relative
of the bankrupt.
(2) Nothing in this section restricts section 151 of the Companies
Act 1993.
Compare: 1967 No 54 s 62
146 Warrant to search for and seize bankrupt's property
(1) The Court may issue a search warrant to the Assignee or any
other person if there is reason to believe that any relevant
property is concealed in a locality.
(2) The warrant may authorise the Assignee or other person
named in the warrant, together with any assistants as may be
necessary, to-
(a) enter and search the locality; and
(b) seize and take possession of any relevant property; and
(c) if necessary, use force to enter the locality, whether by
breaking open doors or otherwise; and
(d) break open any box or receptacle at the locality, by force
if necessary.
(3) In this section,-
locality means any building, aircraft, ship, carriage, vehicle,
premises, or place
relevant property means-
(a) any property of the bankrupt; or
(b) any book, paper, or document relating to the bankrupt's
affairs or property.
Compare: 1967 No 54 s 65(2)
147 Seizure of bankrupt's property
If authorised by a warrant issued by the Court, the Assignee
or any other person, together with any assistants that may be
necessary,-
(a) may seize any part of the bankrupt's property in the
custody or possession of the bankrupt or of any other
person; and
(b) with a view to seizing the bankrupt's property, may-
65
Part 3 cl 147 Insolvency Law Reform Bill
(i) break open any building or room of the bankrupt
where the bankrupt is believed to be; and
(ii) break open any building or receptacle of the
bankrupt where the bankrupt's property is
believed to be; and
(iii) seize and take possession of the bankrupt's property
found in the building, room, or receptacle.
Compare: 1967 No 54 s 65(1)
148 Bankrupt must vacate land or buildings if required to
do so
(1) The Assignee may require the bankrupt and any of his or
her relatives to vacate any land or building that is part of the
property vested in the Assignee under the bankruptcy.
(2) If the Assignee's demand is not complied with, the Assignee
may apply to a District Court for an order for possession of
the land or building.
Compare: 1967 No 54 s 66
149 Blank
150 Bankrupt's right to inspect documents
(1) The bankrupt may at any convenient time inspect, and take
extracts or copies of,-
(a) the bankrupt's accounting records:
(b) the bankrupt's answers to the prescribed questions:
(c) the bankrupt's statement of affairs:
(d) all proofs of debt:
(e) the minutes of any creditors' meeting:
(f) the record of any examination of the bankrupt.
(2) The bankrupt's right of inspection under subsection (1) is in
addition to any rights that the bankrupt has under the Privacy
Act 1993.
Compare: 1967 No 54 s 131
66
Insolvency Law Reform Bill Part 3 cl 153
Restrictions on bankrupt dealing with property
151 No power to recover property or give release or discharge
(1) After adjudication, the bankrupt, and any person (other than
the Assignee) who claims through or under the bankrupt, has
no power to-
(a) recover any property that is part of the bankrupt's estate;
or
(b) give a release or discharge in relation to that property.
(2) Subsection (1) applies subject to the provisions of sections 111
and 112.
Compare: 1967 No 54 s 44(a)
152 No steps to defeat beneficial interest
(1) After adjudication, the bankrupt must not execute a power of
appointment, or any other power vested in the bankrupt, if the
result is to defeat or destroy any contingent or other estate or
interest in any property to which the bankrupt may otherwise
be beneficially entitled at any time before his or her discharge.
(2) The restriction on the bankrupt in subsection (1) applies-
(a) both before and after the bankrupt obtains a discharge;
and
(b) subject to the provisions of section 111 and 112.
Compare: 1967 No 54 s 44(b)
Bankrupt's bank accounts
153 Bank must notify Assignee of bankrupt's account
(1) A bank that ascertains that a customer of the bank is an undischarged
bankrupt must,-
(a) as soon as possible, notify the Assignee of any account
that the bankrupt holds with the bank; and
(b) not pay any money out of the account, unless subsection
(2) applies.
(2) The bank may pay money out of the account if-
(a) the bank is authorised by an order of the Court or
instructed by the Assignee to do so; or
67
Part 3 cl 153 Insolvency Law Reform Bill
(b) the bank has notified the Assignee of the account and
has not, within 1 month of notification, received any
instructions from the Assignee.
Compare: 1967 No 54 s 49(5)
Subpart 4-Provision for bankrupt during bankruptcy
Provision for bankrupt
154 Bankrupt may retain certain assets
(1) The bankrupt may choose and retain as the bankrupt's own
property certain assets up to a maximum value.
(2) In this section, and in section 155, maximumvalue means the
maximum value, as assessed by the Assignee, of the assets that
the bankrupt may retain.
(3) The assets and their maximum value are-
(a) the bankrupt's necessary tools of trade - $2,500:
(b) necessary household furniture and effects, including
clothing for the bankrupt and his or her relatives- the
maximum value is fixed in the Assignee's discretion:
(c) motor vehicle - $5,000.
(4) The Governor-General may, by Order-in-Coucil, amend subsection
(3) by increasing the maximum value, to take account
of any rise in the Consumer Price Index.
Compare: 1967 No 54 s 52(1)
155 Bankrupt may retain certain assets with consent of
creditors
The bankrupt may retain necessary tools of trade and necessary
household furniture and effects that are worth more than
the maximum value, if the creditors consent by an ordinary
resolution.
68
Insolvency Law Reform Bill Part 3 cl 160
156 Retention of assets does not affect rights under security
or hire purchase agreement
The retention of an asset by the bankrupt under section 154 or
section 155 does not affect any rights under a valid security or
hire purchase agreement in respect of the asset.
Compare: 1967 No 54 s 52(1)
157 Retention provisions do not confer rights to other assets
The fact that the net value of the assets that the bankrupt retains
is less than the maximum values specified in section 154 does
not give the bankrupt rights in relation to other assets in the
bankrupt's estate.
Compare: 1967 No 54 s 52(1)
158 Relative may exercise bankrupt's right to retain assets
If the bankrupt has died, a relative of the bankrupt, who has
been approved by the Assignee or the Court for this purpose,
may exercise the right to retain assets under section 154 or
section 155 for the benefit of the bankrupt's relatives.
Compare: 1967 No 54 s 52(3)
159 Assignee may make allowance to bankrupt
The Assignee may make an allowance out of the property of
the bankrupt to the bankrupt or any relative of the bankrupt
for the support of the bankrupt and his or her relatives.
Compare: 1967 No 54 s 53(1)
160 Assignee may allow bankrupt to retain money
(1) The Assignee may allow the bankrupt to retain, for the immediate
maintenance of the bankrupt and his or her relatives, any
money up to a maximum of $1,000 that the bankrupt has in
the bankrupt's possession or in a bank account at the time of
adjudication.
(2) The Governor-General may, by Order in Council, amend
subsection (1) by increasing the maximum amount that the
69
Part 3 cl 160 Insolvency Law Reform Bill
Assignee may allow the bankrupt to retain, to take account of
any rise in the Consumer Price Index.
Compare: 1967 No 54 s 53(2), (3)
Subpart 5-Powers of Assignee and Court to examine
bankrupt and others
Examination of persons summoned by Assignee
161 Assignee may summon bankrupt and others to be
examined
(1) The Assignee may at any time, before or after a bankrupt's
discharge,-
(a) summon any of the persons listed in subsection (2) to
appear before the Assignee, another Assignee, or a District
Court Judge to be examined on oath; and
(b) require that person to produce and surrender to the
Assignee any book, paper, or document in that person's
possession or control that relates to bankrupt's property
or dealings.
(2) The persons referred to in subsection (1) are-
(a) the bankrupt:
(b) the bankrupt's spouse:
(c) a person known or suspected to possess any of the bankrupt's
property or any book, paper, or document relating
to the affairs or property of the bankrupt:
(d) a person believed to owe the bankrupt money:
(e) a person believed by the Assignee to be able to give
information regarding-
(i) the bankrupt; or
(ii) the bankrupt's trade, dealings, property, income
from any source, or expenditure.
Compare: 1967 No 54 s 68(1), (2)
162 Conduct of examination of person summoned by Assignee
(1) The Assignee or District Court Judge before whom a person
(A) is summoned to appear under section 161 may examine A
on oath.
70
Insolvency Law Reform Bill Part 3 cl 164
(2) The examination must be recorded in writing, and A must sign
the written record if required to do so.
(3) If A does not appear at the appointed time and has no reasonable
excuse,-
(a) the District Court Judge or the Court may, on the
Assignee's application, by warrant, have A arrested
and brought for examination by the Court; and
(b) the Court may order A to pay all the expenses arising
out of A's arrest and examination before the Court, if
the Court thinks that A's evidence was necessary for the
purposes of the bankrupt's estate.
163 Expenses of person summoned by Assignee
A person who is summoned by the Assignee for examination
-
(a) is entitled to be paid the prescribed expenses of
attending the examination; and
(b) does not default in attending if those expenses have not
been paid or tendered to him or her before the examination.
Compare: 1967 No 54 s 68(6)
164 Report of examination must not be published unless
Court consents
(1) A person must not, without the Court's permission under subsection
(2), publish a report of-
(a) any examination of a person summoned by the
Assignee; or
(b) any matter arising in the course of that examination.
(2) On the Assignee's application, the Court may permit publication
of a report under the conditions that the Court imposes.
(3) A person who contravenes subsection (1) commits an offence
and is liable on summary conviction to imprisonment for a
term not exceeding 12 months or a fine not exceeding $5,000
or both.
Compare: 1967 No 54 s 68(7)
71
Part 3 cl 165 Insolvency Law Reform Bill
165 Examination provisions also apply when Assignee
appointed receiver and manager of debtor's property
Sections 161 to 164 also apply when the Assignee has been
appointed a receiver and manager of all or part of a debtor's
property under section 50, and references in those sections to
the bankrupt must be read as if they were references to the
debtor.
Compare: 1967 No 54 s 68(8)
166 Assignee may obtain documents
The Assignee may, by notice in writing, require the bankrupt,
the bankrupt's spouse, or any other person to deliver to the
Assignee any book, paper, or document relating to the dealings
or property of the bankrupt in that person's possession or under
that person's control.
Compare: 1967 No 54 s 68A
167 No lien over bankrupt's documents and other records
(1) A person is not entitled as against the Assignee to withhold
possession of, or claim a lien over,-
(a) a deed or instrument that belongs to the bankrupt; or
(b) accounting records, accounts, receipts, bills, invoices,
or other papers relating to the bankrupt's accounts, trade
dealings, or business.
(2) However, a person (A), who is not the bankrupt's spouse, may
claim as a preferential creditor under section 268(2)(f) if-
(a) A has performed services in connection with the
bankrupt's accounting records or a deed or instrument
belonging to the bankrupt; and
(b) A has not been paid, or has not been paid in full, for
those services; and
(c) A would, but for subsection (1), ordinarily have had a
lien over the accounting records, deed, or instrument,
as the case may be.
(3) The limit to which Amay claim as a preferential creditor under
section 268(2)(f) is 10% of the total value of the services stated
in subsection (2), up to a maximum amount of $2,000.
Compare: 1967 No 54 s 73
72
Insolvency Law Reform Bill Part 3 cl 171
Bankrupt's public examination
168 Court must hold public examination if Assignee or
creditors require
(1) The Court must hold a public examination of the bankrupt if,
before an absolute order for the bankrupt's discharge is made,
there is filed with the Court either a statement by the Assignee,
or a copy of a creditors' ordinary resolution, that the bankrupt
should be publicly examined.
(2) The copy of the resolution must be certified by the Assignee
or the chairperson of the meeting at which it was passed.
Compare: 1967 No 54 s 69(1)
169 Notice of examination
(1) The Assignee must serve the bankrupt with a notice that
states-
(a) that the Assignee's statement or the creditors' resolution
has been filed with the Court; and
(b) that the bankrupt is required to be publicly examined;
and
(c) the time and place of the examination.
(2) At least 5 working days before the examination, the Assignee
must-
(a) advertise the examination in the prescribed manner; and
(b) send a notice of the examination to each creditor.
Compare: 1967 No 54 s 69(1), (2)
170 Time for holding examination
The Court must hold the public examination of the bankrupt
as soon as practicable, but not before 5 working days have
elapsed after the Assignee has sent the bankrupt a notice under
section 169.
Compare: 1967 No 54 s 69(1)
171 Assignee must file report before examination
Before the public examination of the bankrupt, the Assignee
must file in the Court a report on-
(a) the bankrupt's estate; and
73
Part 3 cl 171 Insolvency Law Reform Bill
(b) the bankrupt's conduct; and
(c) all other matters of which the Court should be informed.
Compare: 1967 No 54 s 69(3)
172 Conduct of examination
(1) The bankrupt must attend the examination, and may be examined
as to the bankrupt's conduct, dealings, and property.
(2) The bankrupt must be examined on oath and must answer
all questions that the Court asks the bankrupt, or allows the
bankrupt to be asked.
(3) The following persons may examine the bankrupt:
(a) the Assignee, or counsel for the Assignee:
(b) any creditor who has proved a claim, or counsel for that
creditor.
(4) The bankrupt is not entitled to notice beforehand of who will
ask the questions or what the questions will be.
Compare: 1967 No 54 s 69(4), (5)
173 Record of examination
(1) The examination must be recorded in writing as the Court
directs.
(2) The record of the examination must be-
(a) read over to, and signed by, the bankrupt; and
(b) available for inspection by a creditor or the creditor's
solicitor at all reasonable times.
Compare: 1967 No 54 s 69(6)
174 When examination ends
(1) The public examination of a bankrupt ends when the Court
makes an order that the examination is ended.
(2) The Court must not make an order that the examination is
ended unless it is satisfied that the bankrupt's affairs have been
sufficiently investigated and that the investigation is finished.
Compare: 1967 No 54 s 69(7)
74
Insolvency Law Reform Bill Part 3 cl 177
175 Bankrupt's failure to attend examination
If the bankrupt does not appear for the examination at the
appointed time and has no reasonable excuse,-
(a) a District Court Judge or the Court may, on the
Assignee's application, by warrant, cause the bankrupt
to be arrested and brought up for examination by the
Court; and
(b) the Courtmay order the bankrupt to pay all the expenses
arising out of the arrest and examination before the
Court, if the Court thinks that the bankrupt's evidence
was necessary for the purposes of the bankrupt's estate.
Compare: 1967 No 54 ss 68(4), (5), 69(8)
176 Bankrupt's expenses in attending examination
A bankrupt who attends a public examination-
(a) is entitled to be paid the prescribed expenses of
attending; and
(b) does not default in attending if those expenses have not
been paid or tendered to him or her before the examination.
Compare: 1967 No 54 ss 68(6), 69(8)
Investigation of company controlled by bankrupt and associate
177 Assignee may examine books and shareholders of
company
(1) If authorised by the Court, the Assignee or a person appointed
by the Assignee may exercise the powers set out in subsection
(2) in relation to a company that is deemed to be controlled by
the bankrupt and an associate or associates according to the
criteria listed in section OD 1 of the Income Tax Act 1994.
(2) The Assignee may-
(a) examine the books and papers of the company:
(b) examine any shareholder of the company on oath about
the company's affairs.
Compare: 1967 No 54 s 74(4)
75
Part 3 cl 178 Insolvency Law Reform Bill
178 Meaning of associate
In section 177, associate means any of the following:
(a) the bankrupt's spouse:
(b) a lineal ancestor or descendant of the bankrupt:
(c) the spouse of a lineal ancestor or descendant:
(d) a brother or sister of the bankrupt:
(e) the spouse of the bankrupt's brother or sister.
Compare: 1967 No 54 s 74(4)
Privilege and representation of persons examined
179 No privilege against self-incrimination
(1) A person who is examined under any power under this Act
must answer all questions relating to the bankrupt's conduct,
dealings, and property.
(2) A person is not excused from answering a question because the
question may incriminate or tend to incriminate that person.
Compare: 1967 No 54 s 70(1)
180 Statement made by person examined not generally
admissible in criminal proceedings against that person
(1) A statement made by a person examined under this Act in
response to a question is not admissible in criminal proceedings
against that person.
(2) However, the statement is admissible if-
(a) the personwas examined under oath and is chargedwith
perjury in relation to the statement; or
(b) in the case of the bankrupt, the bankrupt is charged with
an offence under section 418(1)(b).
Compare: 1967 No 54 s 70(2)
181 Representation
(1) A person who is examined under this Act may be represented
by a lawyer.
(2) The person may be questioned by his or her lawyer, and any
answers form part of the examination.
Compare: 1967 No 54 s 70(3)
76
Insolvency Law Reform Bill Part 3 cl 185
Subpart 6-Status of bankrupt's contracts
Bankrupt's contracts entered into before adjudication
182 Assignee may continue or disclaim bankrupt's contract
If the bankrupt is a party to a contract, the Assignee may-
(a) continue the contract, subject to the terms of the contract
and all relevant rules of law; or
(b) if the contract is onerous property for the purposes of
section 115, disclaim it under that section.
Compare: 1967 No 54 s 76
183 Contract terminated by other contracting party
(1) This section applies if a contract to which the bankrupt is a
party is terminated on the bankrupt's adjudication by the other
contracting party in accordance with the contract.
(2) Whatever the contract may say, the Assignee may recover an
amount from the other contracting party that the Court thinks
is just and equitable in all the circumstances, but the amount
must not be greater than the amount set out in subsection (3).
(3) The amount that the Assignee may recover must not be greater
than C under the formula A - B = C, where-
(a) A is the amount payable to the bankrupt under the contract;
and
(b) B is the total of-
(i) the amount paid to the bankrupt; and
(ii) the cost to complete the contract; and
(iii) a reasonable penalty for delay in completion of
the contract.
184 Blank
Transaction with bankrupt in ignorance of adjudication
185 Payment of money or delivery of property is good
discharge
(1) This section applies if a person (A) pays money or delivers
property-
(a) to a person who is a bankrupt (B); or
77
Part 3 cl 185 Insolvency Law Reform Bill
(b) to a person who is subsequently adjudicated bankrupt
(C); or
(c) to the order of B or C; or
(d) to an assignee from B or C; or
(e) to the order of an assignee from B or C.
(2) The payment or delivery is a good discharge to A if-
(a) the payment or delivery was made before the adjudication
of B or C, as the case may be, was advertised; and
(b) A satisfies the Court that-
(i) A had no knowledge of the adjudication or that
an application for adjudication had been filed;
and
(ii) the payment or delivery was made in the ordinary
course of business or was otherwise made
in good faith.
Compare: 1967 No 54 s 48
Joint contractual liability
186 Bankrupt's co-contractor may sue and be sued
If the bankrupt is jointly liable under a contract with another
person, that other person may sue and be sued on the contract
without the bankrupt being joined as a party to the proceeding.
Compare: 1967 No 54 s 130
Solicitors' costs
187 Solicitors' costs
The Assigneemay recover money paid by a bankrupt, whether
before or after adjudication, to his or her solicitor for costs in
obtaining an order of adjudication, except for prescribed costs
and expenses.
Compare: 1967 No 54 s 12
Subpart 7-Irregular transactions before adjudication
188 Overview of Subpart 7
(1) This Subpart applies to the following irregular transactions by
the bankrupt before adjudication:
78
Insolvency Law Reform Bill Part 3 cl 190
(a) an insolvent transaction:
(b) an insolvent security:
(c) an insolvent gift:
(d) an alienation of property with intent to defraud creditors
to which section 60 of the Property Law Act 1952
applies:
(e) a transaction at undervalue:
(f) a contribution by the bankrupt to the property of another
person.
(2) Broadly, the effect of this Subpart is that the irregular transactions
listed in subsection (1)(a) to (d) may be cancelled on
the Assignee's initiative, and that, in appropriate cases, the
Assignee may recover property or money from a party to an
irregular transaction with the bankrupt.
189 Meaning of 2 years and 6 months
A reference in this Subpart to "2 years" or to "6 months"
means 2 years or 6 months (as the case may be) extended as
follows:
(a) in the case of adjudication on a creditor's application,
extended by the period between the time when the
application was served on the bankrupt and the time
of adjudication:
(b) in the case of adjudication on the bankrupt's own application,
while a creditor's application is waiting a hearing,
extended by the period between the time when the
creditor's application was served on the bankrupt and
the time of adjudication.
Insolvent transactions
190 Insolvent transaction may be cancelled
A transaction by the bankrupt may be cancelled on the
Assignee's initiative if it-
(a) is an insolvent transaction; and
(b) was made within 2 years immediately before adjudication.
79
Part 3 cl 191 Insolvency Law Reform Bill
191 Meaning of insolvent transaction
(1) An insolvent transaction is a transaction by the bankrupt
that-
(a) is made at a time when the bankrupt is unable to pay
his or her due debts; and
(b) enables another person to receive more towards satisfaction
of a debt by the bankrupt than that person would
receive, orwould be likely to receive, in the bankruptcy.
(2) Transaction, as used in the term insolvent transaction,
means any of the following steps by the bankrupt:
(a) conveying or transferring the bankrupt's property:
(b) giving a charge over or security in the bankrupt's property:
(c) incurring an obligation:
(d) undergoing an execution process:
(e) paying money (including money paid in accordance
with a judgment or an order of a court).
Compare: 1967 No 54 s 56(1), (2)
192 Insolvent transaction presumed
A transaction that is made within 6months immediately before
the bankrupt's adjudication is presumed, unless the contrary
is proved, to be made at a time when the bankrupt is unable
to pay his or her due debts.
193 When series of transactions must be regarded as single
transaction
For the purposes of section 191, a series of transactions by the
bankrupt within 2 years immediately before the bankrupt's
adjudication must be treated as a single transaction if-
(a) each transaction in the series is, for commercial purposes,
an integral part of a continuing business relationship
(for example, a running account) between the
bankrupt and the creditor; and
(b) in the course of the relationship, the level of the bankrupt's
net indebtedness to the creditor is increased or
reduced from time to time as a result of each transaction.
80
Insolvency Law Reform Bill Part 3 cl 196
Insolvent securities
194 Insolvent security may be cancelled
A security in any property of a bankrupt may be cancelled on
the Assignee's initiative if-
(a) the security was given within 2 years immediately
before the bankrupt's adjudication; and
(b) immediately after the security was given, the bankrupt
was unable to pay his or her due debts.
Compare: 1967 No 54 s 57(1)
195 Security for new consideration or security in substitution
not affected
(1) A security may not be cancelled under section 194 if the security
secures money actually advanced or paid, or the actual
price or value of property sold or supplied, or any other valuable
consideration given in good faith, by the security holder to
the bankrupt at the time when, or at any time after, the bankrupt
gave the security.
(2) A security may not be cancelled under section 194 if the security
is a substitute for an existing security that was given by
the bankrupt more than 2 years before adjudication, except to
the extent that-
(a) the amount secured by the substituted security is greater
than the amount that was secured by the existing security;
or
(b) the value of the property subject to the substituted security
at the date of substitution was greater than the value
of the property subject to the existing security at that
date.
Compare: 1967 No 54 s 57(2)(a)
196 Presumption that bankrupt unable to pay due debts
A bankrupt who gives a security within 6 months immediately
before adjudication is presumed, unless the contrary is proved,
to have been unable to pay his or her due debts immediately
after giving the security.
81
Part 3 cl 197 Insolvency Law Reform Bill
197 Security for unpaid purchase price given after sale of
property
(1) This section applies if the bankrupt, after purchasing property,
has within 2 years immediately before adjudication given the
seller a security in the property.
(2) Section 194 does not affect the security to the extent that it
secures unpaid purchase money, whether it is unpaid in relation
to the property over which the security is given or some
other property, if the security was given not more than 15
working days after the date of the sale of the property to the
bankrupt.
Compare: 1967 No 54 s 57(2)(b)
198 Appropriation of payments by bankrupt to security
holder
(1) This section applies if the bankrupt has made a payment or
payments to a security holder after the bankrupt has given a
security to which section 195 or section 197 applies.
(2) The bankrupt's payment or payments must be credited (as far
as is necessary) towards-
(a) repayment of the money actually advanced or paid by
the security holder to the bankrupt when or after the
bankrupt gave the security; or
(b) payment of the actual price or value of property sold
by the security holder to the bankrupt when or after the
bankrupt gave the security; or
(c) payment of any other liability of the bankrupt to the
security holder in respect of any other valuable consideration
given in good faith when or after the bankrupt
gave the security.
(3) Nothing in this section applies to any payments received by
any registered bank within the meaning of the Reserve Bank
of New Zealand Act 1989 in good faith in the ordinary course
of business and without negligence.
Compare: 1967 No 54 s 57(3)
82
Insolvency Law Reform Bill Part 3 cl 202
199 Security agreed before specified period may not be
cancelled
A security given by the bankrupt under an agreement to give
the security that was made before the period of 2 years immediately
before adjudication may not be cancelled under section
194.
Compare: 1967 No 54 s 57(4)(a)
Insolvent gifts
200 Insolvent gift may be cancelled
A gift by a bankrupt to another person (A) may be cancelled
on the Assignee's initiative if-
(a) the bankrupt made the gift within 2 years immediately
before adjudication; and
(b) the bankrupt was unable to pay his or her due debts
immediately after making the gift.
201 Presumption of insolvent gift
A gift that is made within 6 months immediately before the
bankrupt's adjudication is presumed, unless the contrary is
proved, to be made at a time when the bankrupt is unable to
pay his or her due debts.
Procedure for cancelling irregular transactions
202 Procedure for cancelling irregular transactions
(1) The procedure set out in this section applies to the following
irregular transactions:
(a) an insolvent transaction:
(b) an insolvent security:
(c) an insolvent gift:
(d) an alienation of property with intent to defraud a creditor
to which section 60 of the Property Law Act 1952
applies.
(2) To initiate the cancellation of an irregular transaction to which
this section applies, the Assignee must, as soon as practicable,
serve a notice thatmeets the requirements set out in subsection
(3) on-
83
Part 3 cl 202 Insolvency Law Reform Bill
(a) the other party to the transaction; and
(b) any other party from whom the Assignee intends to
recover.
(3) The notice must-
(a) be in writing; and
(b) state the Assignee's postal, email, and street addresses;
and
(c) specify the irregular transaction to be cancelled; and
(d) describe the property or state the amount that the
Assignee wishes to recover; and
(e) state that the person named in the notice may object to
the cancellation of the transaction if that person sends
a written notice of objection to the Assignee within 20
working days after the notice has been served on that
person; and
(f) state that the transaction will be cancelled as against
the person named in the notice if that person does not
object; and
(g) state that if the person named in the notice does object,
the Assignee may apply to the Court for an order cancelling
the transaction.
(4) The irregular transaction is automatically cancelled as against
a person named in the notice, if that person has not objected,
within 20 working days after service of the notice on that person,
by sending a written notice of objection to the liquidator.
(5) The Court may, on the application of the Assignee, cancel the
irregular transaction in any case where a person named in the
notice has objected, within 20 working days after service of
the notice, by sending a notice of objection to the Assignee.
Compare: 1967 No 54 s 58(1)
203 Blank
204 Court may order re-transfer of property or payment of
value
(1) On the cancellation of an irregular transaction, the Court may
make an order for-
84
Insolvency Law Reform Bill Part 3 cl 207
(a) the re-transfer to the Assignee of any property of the
bankrupt, or any interest in that property, that was transferred
under the transaction; or
(b) payment to the Assignee of a sum of money that
the Court thinks appropriate, but the sum must not
be greater than the value of the property when the
transaction was cancelled.
(2) The Court may make any other order for the purpose of giving
effect to an order under subsection (1).
(3) An order under subsection (1) is in addition to any other rights
and remedies available to the Assignee, and this section does
not restrict those rights.
Compare: 1967 No 54 s 58(2), (3), (4)
205 Limits on recovery
The Court must not make an order under section 204 against
a person (A) if A proves that when A received the property-
(a) A acted in good faith; and
(b) a reasonable person in A's position would not have suspected
that the bankrupt was, or would become, unable
to pay his or her due debts; and
(c) A gave value for the property or altered A's position
in the reasonably held belief that the transfer of the
property to A was valid and would not be cancelled.
Compare: 1967 No 54 s 58(6)
206 Recovery by appointee
The provisions of sections 202 to 205 apply to the recovery of
property or its value by an appointee under Part 6 as if each
reference to the Assignee is a reference to the appointee acting
under Part 6.
207 Land Transfer Act 1952 does not limit sections 202 to 206
The Land Transfer Act 1952 does not limit sections 202 to
206.
Compare: 1967 No 54 s 58(7)
85
Part cl Insolvency Law Reform Bill
Transactions at undervalue
208 Assignee may recover difference in value
(1) Under section 209, the Assignee may recover from a person
(X), who is a party to a transaction with the bankrupt, the
amount C in the formula A - B = C, where-
(a) A is the value that X received from the bankrupt under
the transaction; and
(b) B is the value (if any) that the bankrupt received from
X under the transaction.
(2) In this section and in section 209, transaction includes the
giving of a guarantee by the bankrupt.
Compare: 1993 No 105 s 297(1)
209 When Assignee may recover difference
The Assignee may recover the difference in value (that is, C
in the formula in section 208) from X if-
(a) the bankrupt entered into the transaction with X within
2 years immediately before adjudication; and
(b) either-
(i) the bankrupt was unable to pay his or her due
debts when the bankrupt entered into the transaction;
or
(ii) the bankrupt became unable to pay his or her due
debts as a result of entering into the transaction.
Compare: 1993 No 105 s 297(1)
Bankrupt's contribution to another person's property
210 Court may order recipient to pay value to Assignee
(1) On the application of the Assignee, the Court may order the
recipient of a contribution by the bankrupt to the recipient's
property to pay the value of the contribution to the Assignee.
(2) The Court may make the order if-
(a) the bankrupt was not paid an adequate amount in money
or money's worth for the contribution; and
(b) the value of the bankrupt's assets was reduced by the
contribution; and
(c) the bankrupt made the contribution-
86
Insolvency Law Reform Bill Part 3 cl 211
(i) within 2 years immediately before adjudication;
or
(ii) within 5 years immediately before adjudication,
and the recipient is not able to prove that the
bankrupt, either at the time of the contribution or
at any later time before adjudication, was able to
pay the bankrupt's debts without the aid of the
contribution.
(3) For the purposes of this section and section 211, a bankrupt has
made a contribution to the recipient's property if the bankrupt
has-
(a) erected buildings on, or otherwise improved, land or
any other property of the recipient; or
(b) bought land or property in the recipient's name; or
(c) provided money to buy land or other property in the
recipient's name or on the recipient's behalf; or
(d) paid instalments for the purchase of, or towards the purchase
of, any land or any other property in the recipient's
name or on the recipient's behalf.
Compare: 1967 No 54 s 55(1), (2)
211 Court's powers in relation to bankrupt's contribution to
recipient's property
(1) The Court may ascertain the value of the bankrupt's contribution
(including any payments of legal expenses, interest, rates,
and other expenses or charges) for the purposes of section 210,
and order the recipient to pay it to the Assignee.
(2) The Court may order the recipient to pay less than the value
of the contribution, or refuse to order the recipient to pay
anything, if-
(a) the recipient acted in good faith and has altered its position
in the reasonably held belief that the bankrupt's
contribution was valid and that the recipient would not
be liable to repay it in full or in part; or
(b) in the Court's opinion, it is unfair that the recipient
should repay all or part of the contribution.
87
Part 3 cl 211 Insolvency Law Reform Bill
(3) If the Court orders that the recipient must repay the bankrupt's
contribution, the Court may also (in the same or a subsequent
order)-
(a) direct the Assignee to sell the whole or part of the relevant
property, and to convey or transfer it to the buyer;
and
(b) make vesting and other orders that are necessary for the
sale and conveyance or transfer of the property.
Compare: 1967 No 54 s 55(2)(a), (b)
212 How Assignee must use repayment of bankrupt's
contribution to property
The Assignee must use the money repaid under section 210
by the recipient of a contribution by the bankrupt to property,
or the proceeds of the sale of the property, as the case may be,
by taking the following steps in order:
(a) first, the Assignee must keep as much of the proceeds
as the Assignee needs, when added to the other assets in
the bankrupt's estate, to pay the creditors in full (including
interest under section 268); and
(b) second, if there is a surplus after the creditors have
been paid in full, the Assignee must pay as much of
the surplus to the recipient of the property to which the
bankrupt has contributed as the Assignee first retained;
and
(c) third, the Assignee must not pay anything to the bankrupt
before the Assignee has taken steps 1 and 2.
Compare: 1967 No 54 s 55(2)(c)
213 Land Transfer Act 1952 does not limit sections 210 to 212
The Land Transfer Act 1952 does not limit sections 210 to
212.
Compare: 1967 No 54 s 55(4)
88
Insolvency Law Reform Bill Part 3 cl 215
Subpart 8-Role and powers of Assignee
Powers of Assignee
214 Assignee's general powers
(1) The Assignee has the powers-
(a) necessary to carry out the functions and duties of the
Assignee under this Act; and
(b) conferred on the Assignee by this Act.
(2) In particular, the Assignee has the powers set out in Schedule
1.
Compare: 1967 No 54 s 71
215 Assignee's power of sale
(1) The Assignee may, on the terms the Assignee thinks appropriate,
-
(a) sell the whole or a part of the bankrupt's property by
public auction or public tender:
(b) buy in at an auction of the bankrupt's property:
(c) rescind or vary a contract for the sale of the bankrupt's
property:
(d) sell the whole of the bankrupt's property to 1 person:
(e) sell the bankrupt's property in parcels and in any order.
(2) The Assignee may surrender any shares of the bankrupt in a
building society in accordance with the rules of the society.
(3) The Assignee must not sell any of the bankrupt's property
until after the date fixed for the first creditors' meeting, but
this rule does not apply if-
(a) the property is perishable property or is likely to fall
rapidly in value; or
(b) in the Assignee's opinion, the sale of the property might
be prejudiced by delay; or
(c) expenses will be incurred by the delay, and before selling
the Assignee consults a creditor or creditors.
Compare: 1967 No 54 s 72(1), (3), (4)
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Part 3 cl 216 Insolvency Law Reform Bill
216 Assignee's power of sale by private contract
In addition to the powers conferred under section 215, but
subject to the provisions of this Act, the Assignee may sell the
following property of the bankrupt by private contract:
(a) perishable property or property that is likely to fall rapidly
in value:
(b) property that is unsold after being offered for sale by
public auction or public tender:
(c) property that the Assignee considers unnecessary or
inadvisable to sell by public auction or public tender,
because of its nature, situation, value, or other special
circumstance:
(d) property authorised by a resolution of creditors to be
sold by private contract, but in that case the Assignee
must sell the property in accordance with the authority
given by the creditors:
(e) company securities, New Zealand Government securities,
and local authority securities, if sold on a securitiesmarket
operated by a registered exchange registered
under the Securities Markets Act 1988.
Compare: 1967 No 54 s 72(2)
217 Title of purchaser from Assignee
The title of a purchaser of the bankrupt's property from the
Assignee under a document that is made in the exercise of the
Assignee's power of sale under section 215 or section 216-
(a) cannot be challenged except on the ground of fraud;
and
(b) is not affected by an absence of authority to sell, or the
improper or irregular exercise of the power of sale.
Compare: 1967 No 54 s 72(5)
218 Obligation to bank and power to invest money
(1) The Assignee must have a bank account and, as may be prescribed
by regulations made under this Act, must pay into that
account all money that the Assignee receives in that capacity.
(2) The Assignee may invest money that is not immediately
required to be paid out in the administration of a particular
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Insolvency Law Reform Bill Part 3 cl 221
estate in an investment of a type approved by the Auditor-
General, and must credit to that estate the interest or
dividends that accrue on the investment.
Compare: 1967 No 54 s 81
219 Assignee may assign right to sue under this Act
(1) The Assignee may, if the Court has first approved it, assign
any right to sue that is conferred by this Act.
(2) The application for approval may be-
(a) made by the Assignee or the proposed assignee; and
(b) opposed by a person who is a defendant to the
Assignee's action, if already begun, or a proposed
defendant.
Assignee's decisions
220 Assignee's discretion
(1) The Assignee must use his or her own discretion in the administration
of the bankrupt's property, but must have regard to
the resolutions of the creditors at creditors' meetings.
(2) The Assignee or a creditor may apply to the Court for directions
if the Assignee or creditor believes that a resolution of
the creditors-
(a) conflicts with this Act or any legal rule; or
(b) is unjust or unfair.
Compare: 1967 No 54 s 84
221 Assignee may apply for directions by Court
(1) The Assignee may apply to the Court for directions on any
question concerning the operation of this Act.
(2) An Assignee who acts under a direction of the Court discharges
his or her duty in relation to the question for which a
direction was sought, and it does not matter that subsequently
the direction is invalidated, overruled, set aside, or becomes
ineffective.
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Part 3 cl 221 Insolvency Law Reform Bill
(3) However, the Assignee is not protected by subsection (2) if, in
obtaining or acquiescing in the Court's direction, the Assignee
was guilty of-
(a) fraud; or
(b) deliberate concealment or misrepresentation.
Compare: 1967 No 54 s 85
222 Appeal from Assignee's decision
(1) A person (including the bankrupt or a creditor) who is
aggrieved by an act or decision of the Assignee may apply to
the Court.
(2) The application must be made-
(a) within 15 working days of the Assignee's act or decision;
or
(b) within the additional time that the Court allows.
(3) The Court may confirm, reverse, or modify the Assignee's act
or decision.
(4) A creditor who is aggrieved by the Assignee's decision rejecting
the creditor's proof of debt may make an application under
section 234.
Compare: 1967 No 54 s 86
Assignee's accounting records
223 Assignee must keep proper accounting records
(1) Every Assignee must-
(a) keep proper accounting records for each bankruptcy, in
the prescribed form; and
(b) verify those records by statutory declaration, when
required by the Court.
(2) A creditor or any person who has an interest may inspect the
Assignee's accounting records for a particular bankruptcy.
Compare: 1967 No 54 s 132(1), (2)
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Insolvency Law Reform Bill Part 3 cl 225
223A Assignee's final statement of accounts and statement of
financial position
(1) The Assignee must prepare a statement of accounts and statement
of financial position-
(a) as soon as practicable after the notice of the distribution
of the final dividend has been advertised; or
(b) when the whole of the bankrupt's property has been
realised, if there are insufficient assets.
(2) The statement of accounts and the statement of financial position
must-
(a) show in detail the receipts and payments in respect of
the bankrupt's estate; and
(b) be verified by a statutory declaration; and
(c) be filed in Court; and
(d) be able to be inspected without fee by any creditor or
other person with an interest in the bankruptcy.
(3) The Assignee must advertise that the statement of accounts
and statement of financial position has been filed.
Compare: 1967 No 54 s 132(2)-(5)
224 Auditor-General may audit Assignee's accounts
The Auditor-Generalmay, at the Auditor-General's discretion,
audit-
(a) the Assignee's accounting records for any bankruptcy:
(b) any statement of accounts and statement of financial
position prepared by the Assignee under section 223A:
(c) any account maintained by the Assignee for the purposes
of this Act.
Compare: 1967 No 54 s 132A
225 Assignee may return or destroy accounting records
After 2 years after the order of release made in a bankruptcy,
the Assignee may dispose of the accounting records deposited
with the Assignee for the purposes of the bankruptcy by-
(a) delivering them to the bankrupt or the bankrupt's personal
representative, if requested; or
(b) destroying or otherwise disposing of them.
Compare: 1967 No 54 s 136
93
Part cl Insolvency Law Reform Bill
Subpart 9-Proofs of debt
Provable debts
226 Meaning of provable debt and proof of debt
(1) A provable debt is a debt or liability that a creditor of the
bankrupt may prove in the bankruptcy.
(2) A proof of debt is the document that a creditor submits to the
Assignee for the purpose of proving the debt.
(3) A debt is proved when it is admitted by the Assignee.
227 What debts are provable debts
(1) A provable debt is a debt or liability that the bankrupt owes-
(a) at the time of adjudication; or
(b) after adjudication but before discharge, by reason of an
obligation incurred by the bankrupt before adjudication.
(2) A fine, penalty, sentence of reparation, or other order for the
payment of money that has been made following any conviction
or order made under section 106 of the Sentencing Act
2002-
(a) is not a provable debt; and
(b) is not discharged when the bankrupt is discharged from
bankruptcy.
Compare: 1967 No 54 s 87
Procedure for proving debt
228 Creditor must submit proof of debt
(1) A creditor, including a creditor who has a preferential claim,
who wishes to submit a proof of debt must submit a proof to
the Assignee within the time for submitting the proof that is
specified by the Assignee by notice to the creditor.
(2) The proof must comply with the formalities prescribed by
regulations made under this Act.
(3) A creditor must submit the proof in accordance with the procedure
prescribed by regulations made under this Act.
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Insolvency Law Reform Bill Part 3 cl 231
(4) The creditor must bear the costs of proving the debt, unless the
Court makes an order as to the creditor's costs under section
237.
(5) The creditor may amend or withdraw the proof of debt, but an
amended proof must comply with the formalities prescribed
for the original proof.
Compare: 1967 No 54 s 88(1), (2), (3), (5)
Role of Assignee in examining proofs of debt
229 Assignee must examine proofs of debt
(1) The Assignee must examine each proof of debt and the
grounds of the debt.
(2) After examining the proof of debt, the Assignee must, as soon
as is practicable, do any one or more of the following:
(a) admit it, in whole or in part:
(b) reject it, in whole or in part:
(c) require further evidence in support of it.
Compare: 1967 No 54 s 89(1)
230 Assignee must give creditor notice of grounds of rejection
If the Assignee rejects a proof of debt, the Assignee must as
soon as practicable give the creditor notice of the Assignee's
grounds for rejecting the proof.
Compare: 1967 No 54 s 89(3)
231 Assignee's power to obtain evidence of debt
(1) The Assignee may summon for examination, and examine (on
oath or otherwise), any of the following persons:
(a) a person who has submitted or made a proof of debt:
(b) a person who has made a declaration or statement as
part of a proof of debt:
(c) a person who is capable of giving evidence concerning
a proof of debt or the debt to which the proof relates.
(2) If a person (A), who has been summoned under this section,
fails to attend, or attends but refuses to be sworn or give
evidence, and has no reasonable excuse, the Court may-
95
Part 3 cl 231 Insolvency Law Reform Bill
(a) on the Assignee's application, by warrant have A
arrested and brought for examination by the Court; and
(b) order A to pay all the expenses arising out of A's arrest
and examination, if the Court thinks that A's evidence
was necessary for deciding whether the proof of debt in
question should be admitted or rejected.
Compare: 1967 No 54 s 89(2)
232 Notice to Assignee to admit or reject proof of debt
(1) The bankrupt or any creditor may give the Assignee notice to
admit or reject a proof of debt.
(2) If, after 10 working days after receiving the notice, the
Assignee has not made a decision admitting or rejecting
the proof of debt, on the application of the bankrupt or the
creditor the Court may-
(a) admit or reject the proof; or
(b) make any other order that it thinks appropriate.
Compare: 1967 No 54 s 89(6)
233 Court may cancel proof of debt
(1) The Court may make an order cancelling a proof of debt or
reducing its amount, if it considers that the proof was improperly
admitted.
(2) The Court may make the order on the application of the
Assignee, the bankrupt, or any creditor.
(3) The Court must not make an order under subsection (1) unless
the creditor who submitted the proof has been served with the
application.
Compare: 1967 No 54 s 89(5)
234 Court may reverse or modify Assignee's decision rejecting
proof of debt
(1) A creditor whose proof of debt has been rejected by the
Assignee may apply to the Court for an order modifying or
reversing the Assignee's decision.
96
Insolvency Law Reform Bill Part 3 cl 236
(2) The creditor must apply within 15 working days after the creditor
receives the Assignee's notice of rejection of the proof, or
within the additional time that the Court allows.
(3) The Court may-
(a) reverse or modify the Assignee's decision in whole or
in part; or
(b) confirm it.
(4) A creditor has no right to prove for a debt or liability that has
been rejected by the Assignee, unless the creditor has made
an application under this section.
Compare: 1967 No 54 s 89(4).
235 Parties to application to Court in relation to proof of debt
(1) This section applies to an application that is made under section
232, or section 233, or section 234.
(2) If the applicant is not the Assignee, the applicant must name
and serve the Assignee as a party to the proceeding.
(3) The bankrupt and any creditor may give notice to the Court
hearing the application, and, on doing so, become parties to
the proceeding.
Compare: 1967 No 54 s 89(7)
236 Which court may hear application in relation to proof
of debt
(1) If the proof of debt is for a sum of not more than $200,000,
an application under section 232, section 233, or section 234
may be made to the District Court.
(2) In that case, the provisions of the District Courts Act 1947 as
to appeals and the transfer of proceedings to the High Court
apply as if the application were an action and the amount of
the proof in dispute were the amount of a claim.
(3) If the proof of debt is for a sum of more than $200,000, an
application under section 232, section 233, or section 234 may
be made to the High Court.
(4) In that case, the decision of the High Court may be taken on
appeal to the Court of Appeal by-
97
Part 3 cl 236 Insolvency Law Reform Bill
(a) any party to the proceeding, if the High Court gives that
party leave to appeal:
(b) any person aggrieved.
Compare: 1967 No 54 s 89(8), (9)
237 Court may make order as to costs
On an application under section 232, section 233, or section
234, the court hearing the application may, if it thinks it appropriate,
order that-
(a) any costs of a creditor be added to the creditor's proof
of debt:
(b) any costs of any party to the proceeding be paid out of
the bankrupt's estate:
(c) any costs be paid by any party to the proceedings,
except the Assignee.
Compare: 1967 No 54 s 89(10)
Secured creditors
238 Secured creditor's options in relation to property subject
to security
(1) A secured creditor may-
(a) realise property subject to a security, if entitled to do so
(Option 1); or
(b) value the property subject to the security and prove in
the bankruptcy as an unsecured creditor for the balance
due (if any) after deducting the amount of the valuation
(Option 2); or
(c) surrender the security to the Assignee for the general
benefit of the creditors and prove in the bankruptcy as
an unsecured creditor for the whole debt (Option 3).
(2) A secured creditor may exercise Option 1 whether or not the
creditor has exercised Option 2.
Compare: 1993 No 105 s 305(1), (2)
98
Insolvency Law Reform Bill Part 3 cl 241
239 Assignee may require secured creditor to choose option
(1) The Assignee may at any time, by notice in writing, require a
secured creditor, within 20 working days after receipt of the
notice, to-
(a) choose 1 of the options in section 238; and
(b) if the creditor chooses Option 2 or Option 3, exercise
that option within the 20 working day period.
(2) A secured creditor who has been served with a notice under
subsection (1) and fails to comply-
(a) is treated as having surrendered the security to the
Assignee under Option 3 in section 238 for the general
benefit of the creditors; and
(b) may prove as an unsecured creditor for the whole debt.
Compare: 1993 No 105 s 305(8), (9)
240 Realisation of property subject to security
(1) A secured creditor who realises property subject to a security
may prove as an unsecured creditor for any balance due after
deducting the net amount realised.
(2) However, subsection (1) does not apply if the liquidator has
accepted a valuation and proof of debt under section 238.
(3) A secured creditor who realises property subject to a security
must account to the Assignee for any surplus remaining after
the following amounts have been paid:
(a) the amount of the debt:
(b) interest payable on the debt up to the time when it is
paid:
(c) any proper payments to the holder of any other security
in the property.
Compare: 1993 No 105 s 305(3)
241 Valuation of security and proof for balance due
(1) This section applies if a secured creditor values the property
subject to the security and proves as an unsecured creditor for
the balance due.
(2) The valuation and the proof must-
(a) be made in the prescribed form; and
99
Part 3 cl 241 Insolvency Law Reform Bill
(b) contain full particulars of the valuation and the debt;
and
(c) contain full particulars of the security, including the
date when it was given; and
(d) identify any documents that substantiate the debt and
the security.
(3) The creditor must produce any document in subsection (2)(d)
if required by the Assignee.
Compare: 1993 No 105 s 305(4), (5)
242 False claim by secured creditor
(1) A person commits an offence if that person-
(a) makes, or authorises the making of, a claim under section
241(1) that is false or misleading in a material particular
knowing that it is false or misleading; or
(b) omits, or authorises the omission of, from a claim under
section 241(1) any matter knowing that the omission
makes the claim false or misleading.
(2) A person who commits an offence under this section is liable
on conviction on indictment to imprisonment for a term not
exceeding 5 years or to a fine not exceeding $200,000 or both.
Compare: 1967 No 54 s 305(11)
243 Assignee's powers when secured creditor values property
subject to security and proves for balance
(1) If a secured creditor values the property subject to the security
and proves for the balance due, the Assignee must-
(a) accept the valuation and the proof; or
(b) reject the valuation or proof in whole or in part.
(2) If the Assignee rejects the valuation and proof, the creditor
may submit a revised valuation and proof within 10 working
days after receiving notice of the rejection.
(3) The Assignee may revoke or amend a decision rejecting a
valuation or proof, if the Assignee subsequently thinks that
the decision was wrong.
(4) If the Assignee accepts the valuation and proof, the Assignee
may, at any time before the creditor realises the property,
100
Insolvency Law Reform Bill Part 3 cl 246
redeem the security by paying the amount of the valuation
to the creditor.
(5) In subsection (4), the Assignee accepts the valuation and proof
if the Assignee-
(a) accepts the original or an amended valuation and proof:
(b) accepts a valuation and proof after amending or
revoking a decision to reject a valuation and claim.
Compare: 1993 No 105 s 305(6), (7)
244 Secured creditor who surrenders security may withdraw
surrender or submit new proof
(1) This section applies to a secured creditor who has surrendered
a security under Option 3 in section 238(1)(c) or under section
239(2).
(2) The creditor may, with the leave of the Court or the Assignee
and subject to the terms and conditions that the Court or the
Assignee imposes,-
(a) withdraw the surrender and rely on the security; or
(b) submit a new proof under section 238(1)(c) or section
239(2)(b).
(3) Subsection (2) does not apply if the Assignee has already realised
the property subject to the security.
Compare: 1993 No 105 s 305(10)
Proofs subject to uncertainty
245 Assignee may estimate amount of uncertain proof
If a proof is subject to a contingency, or is for damages, or, if
for some other reason, the amount of the proof is uncertain,
the Assignee may estimate the amount of the proof.
Compare: 1993 No 105 s 307(1); 1967 No 54 s 98
246 Application to Court to determine amount of uncertain
proof
The Court must determine the amount of an uncertain proof
on the application of-
(a) the Assignee, if the Assignee chooses not to estimate
the amount:
101
Part 3 cl 246 Insolvency Law Reform Bill
(b) a creditor, if the Assignee has estimated the amount and
the creditor is aggrieved by the estimate.
Compare: 1993 No 105 s 307(2); 1967 No 54 s 99
Proofs of debts payable after adjudication
247 Proof of debt payable 6 months or more after adjudication
(1) A proof of a debt that would, but for the bankruptcy, be payable
6 months or more after the date of adjudication is treated
as a proof for the present value of the debt.
(2) The present value of the debt is calculated by deducting interest
at the rate prescribed under section 87(3) of the Judicature
Act 1908 for the period from the date of adjudication to the
date when the debt would be payable.
Compare: 1993 No 105 s 309; 1967 No 54 s 95
Set-off
248 Mutual credit and set-off
(1) If there have been mutual credits, mutual debts, or other
mutual dealings between a bankrupt and another person,-
(a) an account must be taken of what is due from the 1
party to the other in respect of those credits, debts, or
dealings; and
(b) an amount due from the 1 party to the other must be set
off against an amount due from the other party; and
(c) only the balance of the account may be proved in the
bankruptcy, or is payable to the Assignee, as the case
may be.
(2) However, a person (A) may not claim the benefit of any set-off
against an amount due by the bankrupt if, when A gave credit
to the bankrupt, A had notice of an available act of bankruptcy
by the bankrupt.
(3) A creditor of the bankrupt who claims a set-off must declare
in the creditor's proof of debt that, when the creditor gave the
bankrupt credit, the creditor did not have notice of an available
act of bankruptcy by the bankrupt.
Compare: 1993 No 105 s 310(1); 1967 No 54 s 93
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Insolvency Law Reform Bill Part 3 cl 249
Set-off under netting agreement
249 Definitions relating to set-off under netting agreement
In sections 249 to 257, unless the context otherwise requires,-
Bank means the Reserve Bank of New Zealand
bilateral netting agreement means an agreement that provides,
in respect of 2 transactions between 2 persons to which
the agreement applies,-
(a) that on the occurrence of an event specified in the agreement,
all or any of those transactions must (or may, at
the option of a party) be terminated and-
(i) an account taken of all money due between the
parties in respect of the terminated transactions;
and
(ii) all obligations in respect of that money satisfied
by payment of the net amount due from or on
behalf of the party having a net debit to or on
behalf of the party having a net credit; or
(b) that each transaction is to be debited or credited to an
account with the effect that the rights and obligations of
each party that existed in respect of the relevant account
before the transaction are extinguished and replaced by
rights and obligations in respect of the net debit due
on the relevant account after taking into account that
transaction; or
(c) that amounts payable by each party to the other party
are to be paid or satisfied by payment of the net amount
of those obligations by the party having a net credit,
but does not include any bilateral netting agreement that is
part of a multilateral netting agreement
clearing house means a person that provides clearing or settlement
services in respect of financial transactions between
parties to a multilateral netting agreement
multilateral netting agreementmeans an agreement that provides
for the settlement between more than 2 persons, of payment
obligations arising under transactions that are subject to
the agreement, and that provides, in respect of transactions
to which it relates, that debits and credits arising between the
103
Part 3 cl 249 Insolvency Law Reform Bill
parties are to be brought into account so that amounts payable
to each party are satisfied by-
(a) payment by or on behalf of each party having a net debit
to or on behalf of a clearing house (whether as agent or
as principal) or a party having a net credit; and
(b) receipt by or on behalf of each party having a net credit
from or on behalf of a clearing house (whether as agent
or as principal) or a party having a net debit
netted balance means any amount calculated under a netting
agreement as the net debit payable by or on behalf of a party
to the agreement to or on behalf of another party to the agreement
in respect of all or any transaction to which the netting
agreement applies
netting agreement means a bilateral netting agreement or a
recognised multilateral netting agreement
recognised clearing house means a clearing house declared
under section 310K of the Companies Act 1993 to be a recognised
clearing house
recognised multilateral netting agreement means a multilateral
netting agreement that is contained in, or is subject to,
the rules of a recognised clearing house.
Compare: 1967 No 54 s 93A
250 Application of set-off under netting agreement
(1) Sections 249 to 257 apply-
(a) to a netting agreement-
(i) made in or evidenced by writing; and
(ii) in respect of which the application of sections
249 to 257 has not been expressly excluded; and
(iii) whether made before or after the commencement
of this section; and
(b) to all obligations under a netting agreement (whether
those obligations are payable in New Zealand currency
or in some other currency).
(2) Sections 249 to 257 apply despite-
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Insolvency Law Reform Bill Part 3 cl 253
(a) any disposal of rights under a transaction that is subject
to a netting agreement in contravention of a prohibition
in the netting agreement; or
(b) the creation of a security or other interest in respect of
the rights referred to in paragraph (a) in contravention
of a prohibition in the netting agreement.
Compare: 1967 No 54 s 93B
251 Calculation of netted balance
If a person who is a party to a netting agreement is bankrupt,-
(a) any netted balance payable by or to the bankrupt must
be calculated in accordance with the netting agreement;
and
(b) that netted balance constitutes the amount that may be
claimed in the bankruptcy or is payable to the bankrupt,
as the case may be, in respect of the transactions that
are included in the calculation.
Compare: 1967 No 54 s 93C
252 Mutuality required for transactions under bilateral
netting agreements
Sections 249 to 257 apply to transactions that are subject to a
bilateral netting agreement only if those transactions constitute
mutual credits or mutual debts.
Compare: 1967 No 54 s 93D
253 When mutuality required for transactions under
recognised multilateral netting agreements
(1) Sections 249 to 257 apply to transactions that are subject to
a recognised multilateral netting agreement, whether or not
those transactions constitute mutual creditor or mutual debts.
(2) Despite subsection (1), sections 249 to 257 do not apply to
transactions that are subject to a recognised multilateral netting
agreement if-
(a) those transactions do not constitute mutual credits or
mutual debts; and
(b) a party to any of those transactions is acting as a trustee
for another person; and
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Part 3 cl 253 Insolvency Law Reform Bill
(c) the party acting as trustee is not authorised by the terms
of the trust of which the party is a trustee to enter into
the transaction.
Compare: 1967 No 54 s 93E
254 Application of set-off under section 248 to transaction
subject to netting agreements
(1) Section 248 does not apply to transactions that are subject to
a netting agreement to which sections 249 to 257 apply.
(2) However, a netted balance is to be treated as an amount to
which section 248 applies if the bankrupt and the other party
to the netting agreement have mutual credits or mutual debts
between them that are not subject to the netting agreement.
Compare: 1967 No 54 s 93F
255 Transactions under netting agreement and insolvent
transactions
(1) Nothing in sections 249 to 257 prevents the operation of section
190 in relation to any transaction to which a netting agreement
applies.
(2) For the purposes of section 190, the following are obligations
incurred:
(a) a transaction entered into by a bankrupt under a netting
agreement if the effect of the transaction is to reduce
any netted balance payable by or to the bankrupt:
(b) a netting agreement entered into by a bankrupt to the
extent the effect of entering into the netting agreement
is to reduce any amount that was owing by or to the
bankrupt at the time the bankrupt entered into the agreement.
Compare: 1967 No 54 s 93G
256 Set-off under netting agreement not affected by notice
under section 202(2)
The filing of a notice under section 202(2) in respect of a
transaction that is subject to a netting agreement does not
affect the operation of section 251 in respect of the transaction,
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Insolvency Law Reform Bill Part 3 cl 259
and that section continues to apply to the transaction until the
transaction is set aside under section 202.
Compare: 1967 No 54 s 93H
257 Disclaimer of onerous property and termination of
netting agreement not permitted
The Assignee must not-
(a) disclaim, under section 115 or section 123, any property
of a bankrupt that relates to a transaction under a netting
agreement:
(b) terminate, under section 182, a netting agreement or
any contract of a bankrupt that constitutes a transaction
under a netting agreement.
Compare: 1967 No 54 s 93I
Interest
258 Pre-adjudication interest
A creditor may claim interest up to the date of adjudication,-
(a) in the case of contract debt interest, at the rate specified
in the contract that provides for interest on the debt; or
(b) in the case of judgment debt interest, at the rate payable
on the debt.
Compare: 1993 No 105 s 311(1)
259 Post-adjudication interest at prescribed rate if surplus
remains
(1) The Assignee must pay interest on all accepted proofs of debt
at the prescribed rate if there are surplus assets left after the
Assignee has paid the proofs.
(2) The Assignee must pay interest from the date of the commencement
of the bankruptcy to the date when each proof is
paid.
107
Part 3 cl 259 Insolvency Law Reform Bill
(3) If the surplus is not enough to pay interest in full on all proofs,
payment of interest must abate rateably among them all.
Example
A and B are the only creditors of the bankrupt C. A's contract with
C provided for interest of 20%, but B's contract did not provide
for interest. C's bankruptcy commenced on 1 April 2002. At that
date-(1) C owed A $1,000 plus $100 contractual debt interest; and
(2) C owed B $2,000 but no interest. A can prove in the bankruptcy
for $1,100 and B for $2,000. The Assignee pays their claims in full
on 1 April 2003, 1 year after the commencement of the bankruptcy.
If there are surplus assets after the Assignee has paid the claims of
A and B in full, the Assignee must use the surplus to pay interest
on both debts for the period from 1 April 2002 to 1 April 2003. If
there is enough, and assuming that the prescribed rate is 10%, the
Assignee must pay A $110 and B $200 in post-adjudication interest.
Assume that the Assignee has a surplus of only $155. In that case
A and B share pro rata, so that A is paid $55 in post-adjudication
interest, and B is paid $100.
Compare: 1993 No 105 s 311(2)
260 Additional post-adjudication interest on contract or
judgment debt if surplus remains
(1) If there is a surplus after the Assignee has paid post-adjudication
interest at the prescribed rate under section 259, the
Assignee must pay additional post-adjudication interest on
admitted proofs for a contract debt or judgment debt, by making
up,-
(a) in the case of a contract debt, the difference between the
prescribed rate and the rate specified in the contract:
(b) in the case of a judgment debt, the difference between
the prescribed rate and the rate payable on the debt.
(2) The Assignee must pay interest from the date of the commencement
of the bankruptcy to the date when each proof is
paid.
(3) If the surplus is not enough to pay additional post-adjudication
interest in full on the proofs eligible for that interest, payment
of interest must abate rateably among them all.
Compare: 1993 No 105 s 311(3); 1967 No 54 s 94
108
Insolvency Law Reform Bill Part 3 cl 265
261 Meaning of prescribed rate
In sections 259 and 260, prescribed rate means the rate of
interest prescribed from time to time under section 87(3) of
the Judicature Act 1908.
Compare: 1993 No 105 s 311(4)
Miscellaneous provisions relating to proofs of debt
262 Creditor must deduct trade discounts
A creditor must deduct from the creditor's proof of debt any
trade discount that the creditor would have given a debtor if
the debtor had not become bankrupt.
Compare: 1967 No 54 s 92
263 Proof when security void
If a creditor's security is wholly or partly void under the provisions
of this or any other Act, the creditor may prove as an
unsecured creditor,-
(a) if the security is wholly void, for the whole of the debt;
or
(b) if the security is partly void, to the extent that the debt
is unsecured.
Compare: 1967 No 54 s 96
264 Judgment creditor may prove for costs
A person who obtained an order for costs against the bankrupt
before adjudication may prove for the amount of the costs
when the costs are fixed, even if the amount is fixed only after
adjudication.
Compare: 1967 No 54 s 100
265 Company may prove for unpaid calls
(1) This section applies if the bankrupt, at the time of adjudication,
is a shareholder of a company that has not been put into
liquidation.
(2) The company may prove for-
(a) the amount of unpaid calls on the bankrupt made before
adjudication in respect of the bankrupt's shares; and
109
Part 3 cl 265 Insolvency Law Reform Bill
(b) the value of the liability to calls to be made in the period
of 1 year after adjudication.
(3) The value referred to in subsection (2)(b) must be estimated-
(a) as agreed by the Assignee and the company; or
(b) if the Assignee and the company cannot agree, as
directed by the Court.
(4) This section does not affect the provisions of sections 103 and
268 of the Companies Act 1993 in the event that the companny
is put into liquidation.
Compare: 1967 No 54 ss 101(1), 102
266 When surety for bankrupt may prove
(1) This section applies if a person (A)-
(a) is, at the time of adjudication, surety or liable for a debt
or liability of the bankrupt; and
(b) discharges the debt or liability, even after adjudication.
(2) A has the benefit of the rules in subsections (3) and (4).
(3) If the creditor in question has submitted a proof of debt for the
debt or liability, A may stand in the creditor's place in respect
of the proof.
(4) If the creditor in question has not submitted a proof of debt
for the debt or liability, A may-
(a) prove for the payment that A hasmade as if the payment
were a debt, without undoing dividends already paid to
the creditor in the bankruptcy; and
(b) receive dividends paid subsequently.
Compare: 1967 No 54 s 103
Subpart 10-Distribution of assets
267 Priority of payments for distribution of bankrupt's assets
(1) The Assignee must pay, out of the money received by him
or her by the realisation of the property of the bankrupt, the
preferential claims set out in section 268 to the extent and in
the order of priority specified in that section and sections 269
to 273.
110
Insolvency Law Reform Bill Part 3 cl 268
(2) After paying the preferential claims in accordance with subsection
(1), the Assignee must pay any remaining money to
the general creditors in accordance with section 274.
(3) After paying the general creditors in accordance with subsection
(2), the Assignee must pay any remaining money to the
bankrupt in accordance with section 275.
(4) Any money received by the Assignee by the realisation of
the property of the bankrupt that is not able to be paid in
accordance with subsections (1) to (3), must be paid to Public
Trust in accordance with section 276.
(5) Other than as set out in section 269(1)(b) and (3), subsection
(1) is subject to-
(a) the powers of secured creditors referred to in section
4(c); and
(b) any other enactment.
Preferential claims
268 Priority of payments to preferential creditors
(1) The Assignee must first pay, in the order of priority in which
they are listed,-
(a) the fees and expenses properly incurred by the Assignee
in carrying out the duties and exercising the powers of
the Assignee and the remuneration of the Assignee; and
(b) the reasonable costs of a creditor in procuring the order
of adjudication, including the reasonable costs incurred
between solicitor and client in procuring the order,
inclusive of and subsequent to the preparation and
filing of the creditor's application for adjudication; and
(c) to any creditor who protects or preserves property of the
bankrupt for the benefit of the bankrupt's creditors by
the payment of money or the giving of an indemnity,-
(i) the amount received by the Assignee by the realisation
of that property, up to the value of that
creditor's unsecured debt; and
(ii) the amount of the costs incurred by that creditor
in protecting or preserving that property.
111
Part 3 cl 268 Insolvency Law Reform Bill
(2) After paying the claims referred to in subsection (1), the
Assignee must next pay, to the extent that they remain unpaid,
the following claims:
(a) subject to section 270(1), all wages or salary of any
employee, whether or not earned wholly or in part by
way of commission, and whether payable for time or
for piece work, in respect of services provided to the
bankrupt during the 4 months before the adjudication:
(b) subject to section 270(1), any holiday pay payable to an
employee on the termination of his or her employment
before, or because of, the adjudication:
(c) subject to section 270(1), any compensation for
redundancy owed to an employee that accrues before,
or because of, the adjudication:
(d) subject to section 270(1), amounts deducted by the
bankrupt from the wages or salary of an employee in
order to satisfy obligations of the employee (including
amounts payable to the Commissioner of Inland
Revenue in accordance with section 163(1) of the
Child Support Act 1991 and section 167(2) of the Tax
Administration Act 1994 as applied by section 25 of
the Student Loan Scheme Act 1992):
(e) subject to section 270(1), any reimbursement or payment
provided for, or ordered by, the Employment Relations
Authority, the Employment Court, or the Court
of Appeal under section 123(b) or section 128 of the
Employment Relations Act 2000, to the extent that the
reimbursement or payment does not relate to any matter
set out in section 123(c) of the Employment Relations
Act 2000, in respect of wages or other money or remuneration
lost during the 4 months before the adjudication:
(f) amounts that are preferential claims under section
167(2) and (3):
(g) all sums which by any other enactment are required to
be paid in accordance with the priority established by
this subsection.
112
Insolvency Law Reform Bill Part 3 cl 269
(3) After paying the claims referred to in subsection (2), the
Assignee must next pay all sums, for which a buyer is a creditor
in the bankruptcy under section 11 of the Layby Sales Act
1971,-
(a) paid by the buyer to a seller on account of the purchase
price of goods; or
(b) to which the buyer is or becomes entitled to receive
from a seller under section 9 of the Layby Sales Act
1971.
(4) After paying the claims referred to in subsection (3), the
Assignee must next pay the amount of any costs referred to in
section 320(4)(c).
(5) After paying the claims referred to in subsection (4), the
Assignee must next pay, to the extent that it remains unpaid
to the Commissioner of Inland Revenue or to the Collector of
Customs, as the case may require, the amount of-
(a) tax payable by the bankrupt in the manner required by
Part 3 of the Goods and Services Tax Act 1985; and
(b) tax deductions made by the bankrupt under the PAYE
rules of the Income Tax Act 1994; and
(c) non-resident withholding tax deducted by the bankrupt
under the NRWT rules of the Income Tax Act 1994;
and
(d) resident withholding tax deducted by the bankrupt
under the RWT rules of the Income Tax Act 1994; and
(e) duty payable within the meaning of section 2(1) of the
Customs and Excise Act 1996.
269 Conditions to priority of payments to preferential
creditors
(1) The claims listed in each of subsections (2), (3), (4), and (5) of
section 268-
(a) rank equally among themselves and, subject to any
maximum payment level specified in any Act or regulations,
must be paid in full, unless the property of
the bankrupt is insufficient to meet them, in which case
they abate in equal proportions; and
113
Part 3 cl 269 Insolvency Law Reform Bill
(b) so far as the property of the bankrupt available for payment
of those claims is insufficient to meet them,-
(i) have priority over the claims of any person under
a security interest to the extent that the security
interest-
(A) is over all or any part of the bankrupt's
accounts receivable and inventory or all
or any part of either of them; and
(B) is not a purchase money security interest;
and
(C) does not arise from the transfer of an
account receivable for which new value
is provided by the transferee for the
acquisition of that account receivable
(whether or not the transfer of the
account receivable secures payment or
performance of an obligation); and
(ii) must be paid accordingly out of any accounts
receivable or inventory subject to that security
interest (or their proceeds).
(2) For the purposes of subsection (1)(b), the terms account
receivable, inventory, new value, proceeds, purchase
money security interest, and security interest have the
same meanings as in the Personal Property Securities Act
1999.
(3) To the extent that the claims to which subsection (1) applies
are paid out of property referred to in paragraph (b) of that
subsection, the amount so paid is an unsecured debt due by
the bankrupt to the secured party.
270 Provisions concerning preferential payments to employees
(1) The total sum to which priority is to be given under any, or all,
of paragraphs (a) to (e) of section 268(2) must not, in the case of
any one employee, exceed $15,000 or any greater amount that
is prescribed under subsection (2) at the date of adjudication.
(2) The sum stated in subsection (1) must be adjusted as follows:
(a) subject to paragraph (d), an adjustment must be made,
by the Governor-General by Order in Council, after the
114
Insolvency Law Reform Bill Part 3 cl 270
3-year period starting on 1 July 2003 and ending on
30 June 2006 and after every 3-year period following
that (an adjustment period):
(b) subject to paragraph (d), the Order in Council must
be made within 3 months of the end of an adjustment
period:
(c) each adjustment must reflect any overall percentage
increase, over the relevant adjustment period, in average
weekly earnings (total, private sector), calculated
by reference to the last Quarterly Employment Survey
published by Statistics New Zealand (or, if that survey
ceases to be published, a survey certified by the Government
Statistician as an equivalent to that survey) within
the relevant adjustment period:
(d) if, in an adjustment period, there is no change, or an
overall decrease, in the percentage movement in average
weekly earnings (total, private sector), as so calculated,
no adjustment may be made for that adjustment
period:
(e) if, in accordance with paragraph (d), no adjustment is
made, the next adjustment made for any succeeding
adjustment period must reflect any overall percentage
increase in average weekly earnings (total, private sector)
between the date of the last adjustment and the end
of the relevant adjustment period for which the adjustment
is to be made:
(f) all adjustments are cumulative and must be rounded to
the nearest $20:
(g) any correction to the Quarterly Employment Survey
upon which an adjustment is based must be disregarded
until the adjustment that takes effect in the following
adjustment period which must reflect the corrected
information in the calculation of that adjustment and
must otherwise be made in accordance with this subsection.
(3) The sum stated in subsection (1), or any greater amount that is
prescribed under subsection (2), on the date on which a debtor
is adjudicated bankrupt, continues to apply to that bankruptcy
115
Part 3 cl 270 Insolvency Law Reform Bill
regardless of any change to that sum that is prescribed after
the date on which the debtor is adjudicated bankrupt.
(4) For the purposes of this section and section 268,-
(a) remuneration in respect of a period of holiday or of
absence from work through sickness or other good
cause is to be treated as wages in respect of services
rendered to the bankrupt during that period:
(b) employee means any person of any age employed by
an employer to do any work for hire or reward under a
contract of service (including a homeworker as defined
in section 5 of the Employment Relations Act 2000):
(c) holiday pay, in relation to a person, means all sums
payable to that person by the bankrupt under Subpart
1 of Part 2 of the Holidays Act 2003, and includes all
sums which by or under any other enactment or any
award, agreement, or contract of service are payable to
that person by the bankrupt as holiday pay.
271 Subrogation of persons if payment has been made
If a payment has been made to a person (A) on account of
any preferential claim specified in section 268 out of money
advanced by some other person (B) for that purpose, then B
has, in the bankruptcy, the same right of priority in respect of
the money so advanced as A would have if the payment had
not been made.
272 Priority given to person who distrains on goods
If a landlord or other person has distrained on goods or effects
of the bankrupt during the 20 working days before the adjudication,
the preferential claims set out in section 268 are a first
charge on the goods or effects so distrained on, or the proceeds
from their sale; but if any money is paid to a claimant under
that charge, the landlord or other person has the same rights
of priority as that claimant.
273 Creditors to have priority over creditors of joint bankrupt
If a person (A) is a partner of a firm and is adjudged bankrupt,
any creditors to whom A is indebted jointly with the other
116
Insolvency Law Reform Bill Part 3 cl 276
partners of the firm must not receive any money obtained
from the realisation of the separate property of A until all the
separate creditors have had their claims paid in full.
Payments to general creditors and to bankrupt
274 Payment of remaining money to general creditors
(1) After paying preferential claims in accordance with sections
268 to 273, the Assignee must apply the money received by
him or her by the realisation of the property of the bankrupt
in satisfaction of all other claims.
(2) The claims referred to in subsection (1) rank equally among
themselves and must be paid in full, unless the money is insufficient
to meet them, in which case they abate in equal proportions.
(3) If, before the date of adjudication, a creditor agrees to accept
a lower priority in respect of a debt than that which it would
otherwise have under this section, nothing in this section prevents
the agreement from having effect according to its terms.
275 Payment of surplus to bankrupt
(1) After paying the claims referred to in section 274, the Assignee
must pay any surplus to the bankrupt.
(2) This section is subject to section 212.
Undistributed money paid to Public Trust
276 Definition of undistributed money
In sections 276A to 276G, undistributed money means any
money that-
(a) was received by the Assignee by the realisation of the
property of the bankrupt; and
(b) remains after the Assignee deducts the costs of obtaining
his or her release under sections 388A to 388C, if
applicable; and
(c) is required to be paid to any person under sections 268
to 275, but is not able to be distributed for any reason.
117
Part 3 cl 276A Insolvency Law Reform Bill
276A Undistributed money to be paid to Public Trust
The Assignee must pay any undistributed money to Public
Trust.
276B Public Trust to hold undistributed money
(1) Public Trust must hold any undistributed money paid to it
subject to the claim of any person who appears to be entitled
to that money.
(2) Undistributed money paid to Public Trust is held by Public
Trust subject to-
(a) this Act; and
(b) the Public Trust Act 2001; and
(c) any other enactment relating to Public Trust.
(3) If there is any inconsistency between the provisions of this
Act and any provisions of the Public Trust Act 2001 or any
other enactment relating to Public Trust, this Act prevails.
276C Public Trust to pay undistributed money to bankruptcy
surplus account
(1) After the expiry of 12 months from the date on which undistributed
money is paid to Public Trust, Public Trustmust transfer
any undistributed money that has not been claimed by a
person into a bankruptcy surplus account.
(2) Undistributed money transferred into a bankruptcy surplus
account-
(a) is deemed to be one common and general fund; and
(b) may be applied without discrimination in accordance
with section 276D.
276D Application of undistributed money held in bankruptcy
surplus account
Undistributed money held in the bankruptcy surplus account
may be used as follows:
(a) for distribution, in relation to the bankruptcy from
which the undistributed money came, to any person
who remains to be paid as set out in section 276(c); and
118
Insolvency Law Reform Bill Part 3 cl 276G
(b) for the purposes of this Act, to the extent and in the
manner allowed by this Act; and
(c) subject to section 276E, to replace, to the extent of the
deficiency, any money misappropriated by an Assignee
or any person employed under the provisions of this
Act (other than sections 312 to 344); and
(d) subject to section 276F, to meet the costs of court
proceedings, obtaining legal advice, or employing an
accountant or other experts in circumstances where the
creditors of a bankrupt are unable to pay those costs, or
it would be unfair or inequitable that they should do so.
276E Requisition of Minister required for payment under
section 276D(c)
Public Trust may only pay undistributed money out of the
bankruptcy surplus account under section 276D(c) upon the
requisition of theMinister of the Crownwho, under the authority
of any warrant or with the authority of the Prime Minister,
is for the time being responsible for the administration of this
Act.
276F Approval of Official Assignee required for payment
under section 276D(d)
Public Trust may only pay undistributed money out of the
bankruptcy surplus account under section 276D(d) with the
approval of the Official Assignee for New Zealand and subject
to any conditions he or she may impose.
276G Matters concerning bankruptcy surplus account
(1) Subject to sections 276C to 276F, the investment, realisation,
and disposition of undistributed money held in the bankruptcy
surplus account, and any profits accruing from that money, is
subject to the provisions of the Public Trust Act 2001.
(2) Undistributed money may be paid out of the bankruptcy surplus
account under section 276D(c) or section 276D(d) without
further appropriation than this Act.
119
Part 3 cl 276G Insolvency Law Reform Bill
(3) Public Trust may make a payment out of the bankruptcy
surplus account without being concerned to see or inquire
whether or not Public Trust received any undistributed money
or sufficient undistributed money on account of the bankrupt
in respect of whom the application for payment relates whenever
an application for a payment out of that account is made
to Public Trust under section 276D-
(a) by requisition of the Minister of the Crown who, under
the authority of any warrant or with the authority of the
Prime Minister, is for the time being responsible for the
administration of this Act; or
(b) with the approval of the chief executive of State that,
with the authority of the Prime Minister, is for the time
being responsible for the administration of this Act; or
(c) by an Official Assignee for New Zealand.
Part 4
End of bankruptcy
Subpart 1-Discharge
Automatic discharge
277 Automatic discharge 3 years after adjudication
(1) A bankrupt is automatically discharged from bankruptcy 3
years after adjudication, but may apply to be discharged earlier.
(2) However, a bankrupt is not automatically discharged if-
(a) the Assignee or a creditor has objected under section
279 and the objection has not been withdrawn at the
date when 3 years after adjudication elapses; or
(b) the bankrupt has to be publicly examined under section
168 and has not passed that examination; or
(c) the bankrupt is undischarged from an earlier bankruptcy.
Compare: 1967 No 54 s 107(1), (2), (6)
120
Insolvency Law Reform Bill Part 4 cl 281
278 Effect of automatic discharge
The automatic discharge of the bankrupt has the same effect
as if the Court made an order for the bankrupt's discharge.
Compare: 1967 No 54 s 107(7)
279 Objection to automatic discharge
(1) The Assignee or, with the permission of the Court, a creditor
may object to the bankrupt's automatic discharge.
(2) The objection must be made in the prescribed manner.
Compare: 1967 No 54 s 107(3)
280 Objection may be withdrawn
(1) An objection to the automatic discharge of the bankrupt may
be withdrawn in the prescribed manner.
(2) The bankrupt is automatically discharged on the withdrawal
of the objection if-
(a) 3 years has elapsed after adjudication; and
(b) there is no other objection to the discharge that has not
been withdrawn.
Compare: 1967 No 54 s 107(4), (5)
Application for discharge
281 Bankrupt may apply for discharge
(1) The bankrupt may at any time apply to the Court for an order
of discharge.
(2) However, if the Court has previously refused an application
by the bankrupt for a discharge, and has specified the earliest
date when the bankrupt may again apply, the bankrupt must
not apply before that date.
(3) The hearing of the application must be in accordance with
section 172.
Compare: 1967 No 54 s 108
121
Part cl Insolvency Law Reform Bill
Examination concerning discharge
282 When bankrupt must be examined concerning discharge
(1) The Assigneemust summon the bankrupt to be publicly examined
by the Court concerning his or her discharge, and the
Court must conduct the examination, if-
(a) the Assignee or a creditor has objected to the bankrupt's
automatic discharge; or
(b) the bankrupt is due for automatic discharge but is still
undischarged from an earlier bankruptcy; or
(c) the bankrupt has been required to be publicly examined
under section 168 and has not passed that examination.
(2) The Assignee must summon the bankrupt as soon as practicable
after the expiry of 3 years from the date of adjudication.
(3) Sections 168 to 176, so far as they are applicable and with the
necessary modifications, apply to a public examination under
this section.
Compare: 1967 No 54 s 109(1), (3)
283 Assignee's report
(1) The Assignee must prepare a report and file it in the Court
when-
(a) the bankrupt has applied under section 281 for a
discharge; or
(b) the Assignee has summoned the bankrupt to be examined
under section 282.
(2) The Assignee must report as to-
(a) the bankrupt's affairs; and
(b) the causes of the bankruptcy; and
(c) the bankrupt's performance of his or her duties under
this Act; and
(d) the manner in which the bankrupt has obeyed orders of
the Court; and
(e) the bankrupt's conduct before and after adjudication;
and
(f) any other matter that would assist the Court in making
a decision as to the bankrupt's discharge.
Compare: 1967 No 54 s 109(2)
122
Insolvency Law Reform Bill Part 4 cl 286
284 When creditor must give notice of opposition to discharge
(1) A creditor must give notice to the Assignee and the bankrupt
if the creditor intends to oppose the bankrupt's discharge on a
ground that is not mentioned in the Assignee's report.
(2) The notice must-
(a) set out the ground or grounds for opposing the discharge;
and
(b) be given within the prescribed time.
Compare: 1967 No 54 s 109(4)
285 Court may grant or refuse discharge
(1) When the Court hears an application under section 281 for
discharge, or conducts the examination of the bankrupt under
section 282, the Court may, having regard to all the circumstances
of the case,-
(a) immediately discharge the bankrupt; or
(b) discharge the bankrupt on conditions (which may
include a condition that the bankrupt consents to any
judgment or order for the payment of any sum of
money); or
(c) discharge the bankrupt but suspend the order for a
period; or
(d) discharge the bankrupt, with or without conditions, at a
specified future date; or
(e) refuse an order of discharge, in which case the Court
may specify the earliest date when the bankrupt may
apply again for discharge.
(2) If the Court discharges the bankrupt on the condition that the
bankrupt consents to any judgment, and the bankrupt does
consent, the Court may vary the judgment as it thinks appropriate.
Compare: 1967 No 54 s 110(1), (3)
286 Court may restrict bankrupt from engaging in business
after discharge
(1) The Court, when it makes an order of discharge or at any
earlier time, may prohibit the bankrupt after discharge from
123
Part 4 cl 286 Insolvency Law Reform Bill
doing any or all of the following things without the Court's
permission:
(a) entering into, carrying on, or taking part in the management
or control of any business or class of business:
(b) being a director of, or being concerned in, or taking
part, directly or indirectly in, the management of any
company:
(c) being employed by a relative of the bankrupt:
(d) being employed by a company, trust, trustee, or incorporated
society that is managed or controlled by a relative
of the bankrupt.
(2) The Court may-
(a) prohibit the bankrupt for a specified period, or without
a time limit:
(b) at any time vary or cancel the prohibition.
Compare: 1967 No 54 s 111
287 Court may reverse order of discharge
(1) The Court may, on the application of the Assignee or a creditor,
reverse the discharge of a bankrupt at any time before-
(a) 2 years after the discharge, in the case of an absolute
discharge:
(b) 2 years after the discharge takes effect, in the case of a
discharge that is conditional or suspended.
(2) When the Court reverses a discharge, the Court may then, or
at any time after, make a new order of discharge, whether
absolute, suspended, or conditional.
Compare: 1967 No 54 s 112(1), (4)
288 Grounds for reversing discharge
(1) The Court may reverse a discharge if-
(a) the bankrupt has been given notice of the application
(including the grounds relied on by the applicant); and
(b) the Court is satisfied that facts have been established
that-
(i) were not known to the Court when it made the
order of discharge; and
124
Insolvency Law Reform Bill Part 4 cl 291
(ii) had the Court known of them, it would have been
justified in refusing a discharge or discharging
the bankrupt on conditions.
(2) The Court must not reverse a discharge if the facts relied on
by the applicant, at the time when the Court made an order
discharging the bankrupt,-
(a) were known to the applicant; or
(b) could have been known if the applicant had inquired
with reasonable diligence.
Compare: 1967 No 54 s 112(1), (2)
289 Effect of reversal of discharge
(1) The reversal of a discharge does not prejudice or affect the
rights or remedies that any person other than the bankrupt
would have had if the discharge had not been reversed.
(2) Property that has been acquired by the bankrupt after discharge
and that is vested in the bankrupt at the date of the reversal-
(a) vests in the Assignee subject to any encumbrances; and
(b) must be applied by the Assignee to pay debts that the
bankrupt has incurred since the date of discharge.
Compare: 1967 No 54 s 112(3)
290 Bankrupt may apply for absolute discharge if conditions
of discharge too onerous
(1) A bankrupt who cannot comply with any or all of the conditions
of his or her discharge may apply to the Court for an
absolute discharge.
(2) The Court may discharge the bankrupt absolutely if the Court
is satisfied that the bankrupt's inability is due to circumstances
for which the bankrupt should not reasonably be held responsible.
Compare: 1967 No 54 s 113
291 Debts from which bankrupt is released on discharge
(1) On discharge, the bankrupt is released from all debts provable
in the bankruptcy except those listed in subsection (2).
(2) The bankrupt is not released from the following debts:
125
Part 4 cl 291 Insolvency Law Reform Bill
(a) any debt or liability incurred by fraud or fraudulent
breach of trust to which the bankrupt was a party:
(b) any debt or liability for which the bankrupt has obtained
forbearance through fraud to which the bankrupt was a
party:
(c) any judgment debt or amount payable under any order
for which the bankrupt is liable under sections 143 or
285:
(d) any amount payable under a maintenance order under
the Family Proceedings Act 1980:
(e) any amount payable under the Child Support Act 1991.
Compare: 1967 No 54 s 114
292 Discharge conclusive evidence of bankruptcy
A discharge is conclusive evidence of the bankruptcy and of
the validity of the proceedings in the bankruptcy.
Compare: 1967 No 54 s 115
293 Discharge does not release partners and others
A discharge does not release any person who, at the date of
adjudication, was-
(a) a business partner of the bankrupt; or
(b) a co-trustee with the bankrupt; or
(c) jointly bound or had made any contract with the bankrupt;
or
(d) a surety or in the nature of a surety for the bankrupt.
Compare: 1967 No 54 s 116
294 Discharged bankrupt must assist Assignee
A discharged bankrupt must assist the Assignee, as required
by the Court or the Assignee, in the realisation and distribution
of the bankrupt's property that is vested in the Assignee.
Compare: 1967 No 54 s 117
295 Publication of information regarding bankrupt's
discharge
(1) The Assignee may publish, in the prescribed manner, the fact
that the Court has-
126
Insolvency Law Reform Bill Part 4 cl 296
(a) refused a bankrupt a discharge; or
(b) discharged a bankrupt but suspended the discharge.
(2) The chief executive of the department of State that, with the
authority of the Prime Minister, is for the time being responsible
for the administration of this Act may, as the chief executive
thinks appropriate, publish a list of undischarged bankrupts.
(3) The Crown and the chief executive cannot be sued for any
publication made under this section in good faith and with
reasonable care.
Compare: 1967 No 54 s 118
Subpart 2-Annulment
296 Court may annul adjudication
(1) The Court may, on the application of the Assignee or any
person interested, annul the adjudication if-
(a) the Court considers that the bankrupt should not have
been adjudicated bankrupt; or
(b) the Court is satisfied that the bankrupt's debts have been
fully paid or satisfied; or
(c) the Court considers that the liability of the bankrupt
to pay his or her debts should be revived because there
has been a substantial change in the bankrupt's financial
circumstances since the date of adjudication; or
(d) the Court has approved a composition under Subpart 1
of Part 5 of this Act.
(2) In the case of an application on 1 of the grounds specified
in subsection (1)(a) to (c) by an applicant who is not the
Assignee,-
(a) a copy of the application must served on the Assignee
in the manner and within the time that the Court directs;
and
(b) the Assignee may appear on the hearing of the application
as if the Assignee were a party to the proceeding.
(3) The adjudication is annulled-
(a) from the date of adjudication, in the case of an application
on the ground specified in subsection (1)(a):
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Part 4 cl 296 Insolvency Law Reform Bill
(b) from the date of the Court's order of annulment, in the
case of an application on 1 of the grounds specified in
subsection (1)(b) to (d).
(4) In the case of an application for annulment on the ground
that the adjudication should not have been made because of a
defect in form or procedure, subject to section 396, the Court
may, in addition to annulling the adjudication, exercise its
powers to correct the defect and order that the application for
adjudication be reheard as if no adjudication had been made.
(5) If the Court annuls the adjudication on 1 of the grounds specified
in subsection (1)(a) to (c),-
(a) the Court may, on the Assignee's application, fix an
amount as reasonable remuneration for the Assignee's
services and order that it be paid, in addition to any
costs that may be awarded:
(b) the fee must be paid into the Crown Bank Account:
(c) the Assignee is not entitled to remuneration under section
387 for those services.
Compare: 1967 No 54 s 119
297 When Assignee may annul adjudication
(1) The Assigneemay annul an adjudication on any of the grounds
specified in subsection (2) if the adjudication was made on a
debtor's application.
(2) The grounds for annulment by the Assignee are-
(a) the Assignee considers that the bankrupt should not
have been adjudicated bankrupt; or
(b) the Assignee is satisfied that the bankrupt's debts have
been fully paid or satisfied; or
(c) the Assignee considers that the liability of the bankrupt
to pay his or her debts should be revived because there
has been a substantial change in the bankrupt's financial
circumstances since the date of adjudication; or
(d) the Court has approved a composition under Subpart 1
of Part 5.
(3) The Assignee may annul the adjudication on the application
of any person interested or on the Assignee's own initiative.
128
Insolvency Law Reform Bill Part 5 cl 299
(4) The adjudication is annulled-
(a) from the date of adjudication, in the case of an application
on the ground specified in subsection (2)(a):
(b) from the date of the Assignee's order of annulment, in
the case of an application on 1 of the grounds specified
in subsection (2)(b) to (d).
298 Effect of annulment
(1) On annulment of the adjudication, all property of the bankrupt
vested in the Assignee on bankruptcy and not sold or disposed
of by the Assignee revests in the bankrupt without the necessity
for any conveyance, transfer, or assignment.
(2) Any contract, sale, disposition, or payment duly made or anything
duly done by the Assignee before the annulment-
(a) is not prejudiced or affected as to validity by the annulment;
and
(b) has effect as if it had been made or done by the bankrupt
while no adjudication was in force.
Compare: 1967 No 54 s 120
Part 5
Compositions, proposals, summary instalment orders,
and no asset procedure
Subpart 1-Composition during bankruptcy
299 Creditors may accept composition by passing preliminary
resolution
(1) The creditors of a bankrupt may accept a composition in satisfaction
of the debts due to them from the bankrupt by passing a
special resolution (the preliminary resolution) that contains
the terms of the composition.
(2) If there is more than 1 class of creditor, the delay of 1 class in
accepting, or the failure of 1 class to accept, does not prevent
any other of the classes from accepting the composition.
Compare: 1967 No 54 ss 121(1), 125(3)
129
Part 5 cl 300 Insolvency Law Reform Bill
300 Confirming resolution
(1) The composition is ineffective unless the creditors confirm the
composition by a special resolution (the confirming resolution).
(2) The creditors may confirm the composition on terms that vary
from the terms contained in the preliminary resolution, if the
final terms are at least as favourable to the creditors as the
terms set out in the preliminary resolution.
(3) The notice of the meeting to pass the confirming resolution
must-
(a) state generally the terms of the proposal for composition;
and
(b) be accompanied by a report by the Assignee on the
proposal.
(4) If the proposal for composition provides for the payment in
full of all creditors whose respective debts do not exceed a certain
amount, that class of creditors must not be counted either
in number or value for the purpose of counting the requisite
majority of creditors for passing the confirming resolution.
Compare: 1967 No 54 s 121(2), (3), (4)
301 Compositions with members of partnership
(1) If the members of a partnership have been adjudicated bankrupt,
the joint creditors and each class of separate creditors
may make separate compositions.
(2) In that case, the majorities of creditors required for passing
the confirming resolution are the separate majorities of each
class, but otherwise the joint and separate creditors must be
counted as 1 body for voting.
Compare: 1967 No 54 125(2)
302 Court must approve composition
(1) The Court must approve the composition if it is to be binding.
(2) The composition approved by the Court binds all the creditors
in respect of provable debts due to them by the bankrupt.
(3) The Court may refuse to approve the composition if it considers
that-
130
Insolvency Law Reform Bill Part 5 cl 304
(a) section 299 or section 300 has not been complied with;
or
(b) the terms of the composition are not reasonable or are
not calculated to benefit the general body of creditors;
or
(c) the bankrupt is guilty of misconduct that justifies the
Court in refusing, qualifying, or suspending the bankrupt's
discharge; or
(d) for any other reason it should not approve the composition.
(4) The Court must not approve the composition if it does not
provide for the payment, before any other debts are paid, of
those debts that have priority under subpart 10 of Part 3.
(5) The Court's approval is conclusive as to the validity of the
composition.
Compare: 1967 No 54 s 122(3), (4), (5), (7)
303 Procedure for Court approval of composition
(1) The bankrupt or the Assignee may apply to the Court to
approve the composition.
(2) Notice of the application must be given to each creditor.
(3) Before approving the composition, the Court must-
(a) receive a report by the Assignee as to the terms of the
composition and the bankrupt's conduct; and
(b) hear any objection by or on behalf of a creditor.
(4) When it approves the composition, the Court may correct or
supply any formal or accidental error or omission, but must
not alter the substance of the composition.
Compare: 1967 No 54 s 122(1), (2), (6)
304 Deed of composition
(1) As soon as practicable after the Court has approved a composition,
-
(a) the bankrupt and the Assignee must execute a deed of
composition for putting the proposal into effect; and
(b) the Assignee must apply to the Court for confirmation
of the deed.
131
Part 5 cl 304 Insolvency Law Reform Bill
(2) If it is satisfied that the deed confirms with the composition
that it has earlier approved, the Court must-
(a) direct that the deed is entered and filed in the Court;
and
(b) annul the adjudication.
(3) The deed must not be entered and filed in the Court unless the
prescribed commission has been paid to the Assignee.
(4) The annulment under subsection (2) does not revest the bankrupt's
property in the bankrupt in accordance with section
298(1).
Compare: 1967 No 54 ss 123(1), (2), 125(5)
305 Effect of deed
When the Court has confirmed the deed and annulled the adjudication,
-
(a) the deed binds all the creditors in all respects as if they
had each executed the deed; and
(b) subject to the provisions of the Land Transfer Act 1952,
the bankrupt's property to which the deed relates vests
and must be dealt with as provided in the deed.
Compare: 1967 No 54 s 123(2)
306 Bankrupt remains liable for unpaid balances of certain
debts
(1) A bankrupt who makes a composition with his or her creditors
remains liable for the unpaid balance of a debt if-
(a) the bankrupt, by means of fraud,-
(i) incurred or increased the debt; or
(ii) on or before the date of the composition, obtained
forbearance on the debt; and
(b) the creditor who has been defrauded has not agreed to
the composition.
(2) In subsection (1)(b) a creditor does not agree to the composition
merely by proving the debt and accepting payment of a
distribution of the assets in the estate.
Compare: 1967 No 54 s 125(4)
132
Insolvency Law Reform Bill Part 5 cl 308
307 Deadlines for steps to approve composition and execute
deed
(1) The deadlines for steps to approve the composition and execute
the deed are-
(a) the confirming resolution must be passed within 1
month after the preliminary resolution is passed:
(b) the Court must approve the composition within 1 month
after the confirming resolution is passed:
(c) the bankrupt must execute the deed of composition
within 5 working days after the Court approves the
composition or, if the Court allows the bankrupt additional
time, within that time.
(2) If any of the deadlines is not kept,-
(a) immediately on the expiry of the deadline, the proceedings
in the bankruptcy resume as if there had been no
confirming resolution; and
(b) none of the periods specified in subsection (1) counts
in the calculation of a period of time for any purpose of
this Act.
Compare: 1967 No 54 s 125(1)
308 Procedure following Court approval of deed
(1) The Registrar of the Court must, after entering the deed of
composition,-
(a) endorse on the deed that it has been entered and filed
in the Court; and
(b) if requested by the Assignee, deliver the deed to the
Assignee.
(2) The Assignee, as soon as practicable after the deed has been
entered,-
(a) must take all steps necessary to have any vesting provided
for in the deed registered or recorded in the appropriate
registry or office, and must then return the deed
to the file of the Court; and
(b) must, subject to the provisions of the deed, give possession
to the bankrupt or the trustee under the composition,
as the case may be, of-
(i) the bankrupt's property; or
133
Part 5 cl 308 Insolvency Law Reform Bill
(ii) so much of the bankrupt's property as the
Assignee possesses and that under the composition
revests in the bankrupt or the trustee.
Compare: 1967 No 54 s 123(3), (4)
309 Enforcement of composition
The Court may,-
(a) on the application of a person aggrieved, order that
default in payment of any composition approved by the
Court be remedied:
(b) on the application of a person interested, enforce the
provisions of any composition approved by the Court.
Compare: 1967 No 54 s 124(1), (2)
310 Court's exclusive jurisdiction
(1) After the preliminary resolution has been passed, the Court
continues to have exclusive jurisdiction in relation to the composition
and the deed of composition, and their administration.
(2) On an application under subsection (1), the Court may-
(a) for the purpose of summoning and examining the
bankrupt and witnesses, direct the proceeding as if it
were a proceeding under Subpart 5 of Part 3:
(b) make the order or orders that it thinks appropriate,
including an order as to the costs of the application.
Compare: 1967 No 54 s 124(3), (4)
311 Law and practice in bankruptcy applies to deed
The Court must decide a question arising under the deed of
composition according to the law and practice of bankruptcy,
if the law and practice of bankruptcy is relevant.
Compare: 1967 No 54 s 124(5)
Subpart 2-Proposals
312 Meaning of debt etc
(1) In this Subpart, unless the context otherwise requires,-
debt means a debt that would be provable in the insolvent's
bankruptcy
134
Insolvency Law Reform Bill Part 5 cl 314
insolvent means a person who is not bankrupt, but who is
unable to pay his or her debts as they become due.
(2) The debt of an insolvent is provable under this Subpart.
Compare: 1967 No 54 s 139
313 Insolvent may make proposal
(1) An insolventmay make a proposal to creditors for the payment
or satisfaction of the insolvent's debts.
(2) The proposal may include all or any of the following:
(a) an offer to assign all or any of the insolvent's property
to a trustee for the benefit of the creditors:
(b) an offer to pay the insolvent's debts by instalments:
(c) an offer to compromise the insolvent's debts at less than
100 cents in the dollar:
(d) an offer to pay the insolvent's debts at some time in the
future:
(e) any other offer for an arrangement for the satisfaction
of the insolvent's debts.
(3) The proposal may include any other conditions for the benefit
of the creditors and may be accompanied by a security or
guarantee.
Compare: 1967 No 54 s 140(1), (2), (3)
314 Form of proposal
(1) The proposal must be-
(a) in the prescribed form; and
(b) accompanied by a statement of affairs that is in the
prescribed form and verified by affidavit.
(2) The statement of affairs must set out the following information:
(a) the insolvent's assets, debts, and liabilities:
(b) the name, address, and occupation of each of the insolvent's
creditors:
(c) the securities (if any) held by each creditor.
(3) The proposal must-
(a) be signed by the insolvent; and
135
Part 5 cl 314 Insolvency Law Reform Bill
(b) have endorsed on it the name of a person (A) who is
willing to act as a trustee for the creditors; and
(c) include a statement by A that A is willing to act.
Compare: 1967 No 54 s 140(4), (5)
315 Proposal must be filed in Court
(1) The proposal must be filed in the office of the Court nearest
to where the insolvent lives.
(2) The insolvent may not, while waiting for the decision of the
creditors and the Court, withdraw the proposal or any security
or guarantee tendered with it, unless the insolvent obtains the
permission of the Court.
(3) The time when the proposal is filed in Court is the time when
the claims of creditors are determined.
(4) If the creditors at a meeting under section 317 do not accept
the proposal,-
(a) the chairperson of the meeting must return the proposal
to the Court with his or her signed endorsement "Not
accepted by creditors"; and
(b) the Registrar must cancel the proposal.
Compare: 1967 No 54 s 140(5), (6), (7), (8)
316 Provisional trustee
The trustee named in the proposal becomes the provisional
trustee when the proposal is filed.
Compare: 1967 No 54 s 141(1)
317 Provisional trustee must call meeting of creditors
(1) The provisional trustee must, as soon as practicable, call a
meeting of creditors by posting to every known creditor at the
creditor's last known address-
(a) a notice of the date, time, and place of the meeting:
(b) a summary of the insolvent's assets and liabilities:
(c) a copy of the proposal and particulars of any security
or guarantee:
(d) a form of proof of debt:
(e) a postal vote in the prescribed form.
136
Insolvency Law Reform Bill Part 5 cl 320
(2) A creditor who has proved a claim in the prescribed manner
may vote on the proposal by sending a postal vote that reaches
the provisional trustee before or at the meeting.
(3) If the provisional trustee receives a postal vote before or at the
meeting, the postal vote has effect as if the creditor had been
present and voted at the meeting.
Compare: 1967 No 54 s 141(2), (3)
318 Procedure at meeting of creditors
(1) The provisional trustee is the chairperson of the meeting of
creditors, unless the creditors elect their own chairperson.
(2) The creditors may-
(a) examine the insolvent:
(b) accept the proposal with or without amendments or
modification, by passing a resolution that sets out the
proposal in its final form:
(c) confirm the provisional trustee as trustee, or appoint
another person who is willing to act as trustee, in which
case that person becomes the trustee.
(3) The resolution accepting the proposal must be decided by a
majority in number and three-fourths in value of the creditors
who-
(a) vote; and
(b) are personally present or are represented at the meeting
by a person specified in section 319 or have voted by
postal vote.
(4) If the insolvent consents, the creditors may include in the
proposal terms for the supervision of the insolvent's affairs.
Compare: 1967 No 54 s 142
319 Who may represent creditors
A person who may represent a creditor under section 89 may
represent a creditor at a meeting to consider a proposal.
320 Court must approve proposal
(1) After the proposal has been accepted by the creditors, the
trustee must, as soon as practicable,-
137
Part 5 cl 320 Insolvency Law Reform Bill
(a) apply to the Court for approval of the proposal; and
(b) send notice of the hearing of the application in the prescribed
form to the insolvent and to each known creditor.
(2) The Court must, before approving a proposal, hear any objection
that is made by or on behalf of a creditor.
(3) The Court may refuse to approve the proposal if it considers
that-
(a) the provisions of this Subpart have not been complied
with; or
(b) the terms of the proposal are not reasonable or are not
calculated to benefit the general body of creditors; or
(c) for any reason it is not expedient that the proposal be
approved.
(4) The Court must not approve a proposal if it does not provide
for the payment, before any other debts are paid, of-
(a) those debts that would have priority under this Act if
the insolvent was adjudicated bankrupt; and
(b) the trustee's fees and expenses that are properly
incurred by the trustee in respect of the proposal; and
(c) costs incurred by a person other than the insolvent in
organising and conducting a meeting of creditors for
the purpose of voting on a proposal.
(5) When it approves the proposal, the Court may correct or supply
any formal or accidental error or omission, but must not
alter the substance of the proposal.
Compare: 1967 No 54 s 143(1), (2), (3), (4), (6); 1993 No 105 s 234(c)
321 Effect of Court approval
(1) A proposal that is approved by the Court is binding on all the
creditors whose debts are provable under this subpart and are
affected by the terms of the proposal.
(2) The Court's approval is conclusive as to the validity of the
proposal.
Compare: 1967 No 54 s 143(5), (7)
138
Insolvency Law Reform Bill Part 5 cl 324
322 Creditor must not take enforcement steps without Court's
permission
(1) A creditor whose debt is provable under this subpart must not
take any of the steps listed in subsection (2) in respect of the
debt-
(a) after the Court has approved the proposal; and
(b) while the proposal remains in force.
(2) The steps referred to in subsection (1) are-
(a) filing a creditor's application for the insolvent's adjudication:
(b) proceeding with a creditor's application for the insolvent's
adjudication that was filed before the proposal
was filed:
(c) enforcing any civil remedy against the insolvent's person
or property:
(d) beginning any legal proceedings in respect of the debt.
(3) However, a creditor may take any of the steps listed in subsection
(2) with the permission of the Court given on the terms
that the Court thinks appropriate.
Compare: 1967 No 54 s 144(1)
323 Duty of insolvent
After the Court has approved the proposal, the insolvent must
do everything that is necessary to put the proposal into effect.
Compare: 1967 No 54 s 143(8)
324 Duties of trustee
(1) After the Court has approved the proposal, the trustee must-
(a) take control of the property that is the subject of the
proposal; and
(b) administer and distribute that property according to the
terms of the proposal; and
(c) generally give effect to the proposal.
(2) The trustee may sell the property-
(a) according to the terms of the proposal, if it specifies the
method of sale; or
139
Part 5 cl 324 Insolvency Law Reform Bill
(b) according to section 215 or section 216, if the proposal
does not specify the method of sale.
Compare: 1967 No 54 s 144(2)
325 Trustee must file 6-monthly summary of receipts and
payments
(1) The trustee must file with the Registrar a summary of receipts
and payments.
(2) The trustee must file the summary-
(a) for each 6-month period following Court approval of
the proposal, within 1 month after the end of the period;
and
(b) for the period between the end of the last 6-month
period and the date when the trustee stops acting as
trustee, within 1 month after the trustee has stopped
acting.
(3) The abstract must-
(a) be in the prescribed form; and
(b) show the trustee's receipts and payments during the
period to which it relates; and
(c) show the total amount of the trustee's receipts and payments
for all the preceding 6-month periods after the
trustee's appointment.
Compare: 1967 No 54 s 144(3), (4)
326 Cancellation or variation of proposal
(1) At any time after it has approved the proposal, the Court may,
if it is satisfied that 1 or more of the grounds listed in subsection
(2) apply,-
(a) on the application of the trustee or any creditor, vary or
cancel the proposal:
(b) if asked to do so by the applicant or any other creditor,
adjudicate the insolvent bankrupt.
(2) The grounds referred to in subsection (1) are-
(a) the insolvent's statement of affairs accompanying the
proposal did not substantially set out the true position
or the insolvent gave wrong or misleading replies at his
or her examination, and it was unlikely that the proposal
140
Insolvency Law Reform Bill Part 5 cl 328
would have been accepted if the insolvent had disclosed
the true facts:
(b) the insolvent has failed to carry out or comply with the
terms of the proposal:
(c) the creditors generally will suffer injustice or undue
delay if the proposal proceeds:
(d) for any other reason the proposal ought to be varied or
cancelled.
(3) On cancellation of the proposal, unless the Court orders otherwise,
all property of the insolvent vested in the trustee and not
sold or disposed of by the trustee vests, without the necessity
for any conveyance, transfer, or assignment,-
(a) in the insolvent; or
(b) if the Court cancels the proposal and adjudicates the
insolvent bankrupt, in the Assignee.
(4) An order cancelling the proposal, or cancelling the proposal
and adjudicating the insolvent bankrupt, does not prejudice or
affect the validity of any contract, sale, disposition, or payment
duly made or anything duly done under the proposal
while it was in force.
(5) If the insolvent files an application for his or her own adjudication,
the proposal is cancelled as if it was cancelled by the
Court.
Compare: 1967 No 54 s 145
Subpart 3-Summary instalment orders
327 Summary instalment order
A summary instalment order is an order by the Assignee that
the debtor pay his or her debts-
(a) in instalments or otherwise; and
(b) in full or to the extent that the Assignee considers practicable
in the circumstances of the case.
Compare: 1967 No 54 s 146(4)
328 Who may apply for order
The Assignee may make a summary instalment order on the
application of-
141
Part 5 cl 328 Insolvency Law Reform Bill
(a) the debtor; or
(b) a creditor, with the debtor's consent.
Compare: 1967 No 54 s 146(1)
329 Form of application
(1) An application for a summary instalment order must be in the
prescribed form.
(2) An application by the debtor-
(a) must state whether the debtor proposes to pay the creditors
in full; or
(b) if not, must state the amount in the dollar that the debtor
proposes to pay; and
(c) must state the total amount of the weekly or other instalments
that the debtor proposes to pay; and
(d) must contain the following information:
(i) details of the debtor's property:
(ii) the names and addresses of each creditor:
(iii) the amount and nature of each of the creditors'
debts:
(iv) whether any of the debts are secured and the
value of the security:
(v) whether any of the debts are guaranteed by any
person:
(vi) the amount of the debtor's earnings:
(vii) the name and address of the debtor's employer,
if any:
(viii) any other matter that may be prescribed.
Compare: 1967 No 54 s 146(2)
330 Assignee may make summary instalment order
(1) The Assignee may make a summary instalment order if the
Assignee is satisfied that-
(a) the debtor's total unsecured debts that would be provable
in the debtor's bankruptcy are not more than
$40,000; and
(b) the debtor is unable immediately to pay those debts.
142
Insolvency Law Reform Bill Part 5 cl 332
(2) Before making the order, the Assignee must allow the debtor
or a creditor to make representations, if the debtor or creditor
wants to do so.
(3) A summary instalment order is not invalid if the total amount
of the debts proved is more than the amount specified in subsection
(1)(a), but in that case-
(a) the supervisor appointed under section 332 may refer
the matter to the Assignee; and
(b) the Assignee may, if the Assignee thinks appropriate,
cancel the order.
(4) The amount in subsection (1)(a) may be varied by the Governor-
General by Order in Council to take account of increases
in the Consumers Price Index.
Compare: 1967 No 54 s 146(4), (8), (13)
331 Additional orders
In addition to an order for the payment of the debts in instalments,
the Assignee may make orders-
(a) regarding the debtor's future earnings or income:
(b) regarding the disposal of goods that the debtor owns or
possesses:
(c) giving the supervisor appointed under section 332
power to-
(i) direct the debtor's employer to pay all or part of
the debtor's earnings to the supervisor; and
(ii) supervise payment, out of the debtor's earnings
or income, the reasonable living expenses of the
debtor and his or her relatives.
Compare: 1967 No 54 s 146(8), (9)
332 Appointment of supervisor
(1) A summary instalment order must appoint a suitable and willing
person to supervise compliance by the debtor with the
terms of the order.
(2) The Assignee may dispense with the appointment of a supervisor
if the Assignee thinks it appropriate, and in that case-
(a) the provisions of this subpart apply as if the debtor was
the supervisor, except for section 333; and
143
Part 5 cl 332 Insolvency Law Reform Bill
(b) section 333 applies as if the Assignee was the supervisor.
(3) The Assignee may, if the Assignee thinks appropriate, require
the supervisor to provide a bond to secure the supervisor's
performance of his or her obligations under the Act, and must
specify the amount of the bond and the person to whom it
must be given.
Compare: 1967 No 54 s 146(5), (6), (7)
333 Role of supervisor
(1) The supervisor must supervise the debtor's compliance with
the terms of the summary instalment order and any other
orders made under section 331.
(2) The supervisor may charge remuneration for carrying out his
or her duties as supervisor that is fixed under subsection (3) or
charged according to rates prescribed under that subsection.
(3) The Governor-General may, by Order in Council, make regulations
that fix or prescribe the amount or rates of remuneration
chargeable under subsection (2).
334 Period of instalments
(1) The Assignee must not make a summary instalment order for
the payment of instalments spread over a period of more than
3 years from the date of the order.
(2) However, the Assignee may, if the Assignee considers there
are special circumstances to justify it, make an order for the
payment of instalments spread over a period of up to 5 years
from the date of the order.
Compare: 1967 No 54 s 146(12)
335 Variation or discharge of order
The debtor or any creditor or the supervisor may at any time
apply to the Assignee to vary or discharge a summary instalment
order, and the Assignee may make an order as the
Assignee thinks appropriate.
Compare: 1967 No 54 s 146(14)
144
Insolvency Law Reform Bill Part 5 cl 338
336 Effect of order
All instalments payable under a summary instalment order
must be paid in the prescribed manner.
Compare: 1967 No 54 s 146(11)
337 Proceedings against debtor
(1) In this section, proceeding means any proceeding against the
person or property of the debtor in respect of a debt that has
been-
(a) shown in the debtor's application for the summary
instalment order; or
(b) included in the summary instalment order; or
(c) notified to the supervisor.
(2) After the summary instalment order has been made, a person
must not begin or continue a proceeding unless-
(a) the Assignee gives permission for a creditor to begin
or continue the proceeding (in which case the Assignee
may impose any conditions that the Assignee thinks
appropriate); or
(b) the debtor is in default under the order.
(3) In the case of a proceeding in a District Court, unless subsection
(2) applies, the Court-
(a) must halt the proceeding on receiving notice of the
order; and
(b) may allow all or part of the creditor's costs incurred up
to the time of the Court's notification, and may certify
accordingly for the purpose of the creditor proving the
debt under this Subpart.
Compare: 1967 No 54 s 148
338 Supervisor must give notice of summary instalment order
to creditors
The supervisor must send a notice of the summary instalment
order to every creditor-
(a) known to the supervisor; or
(b) whose name is shown on the debtor's application for
the order; or
145
Part 5 cl 338 Insolvency Law Reform Bill
(c) who has proved a debt under section 339.
Compare: 1967 No 54 s 147(a)
339 Proof of debt
(1) A creditor, who has proved his or her debt before the supervisor,
is entitled to be included as a creditor in the administration
of the debtor's estate under the summary instalment order for
the amount of the debt.
(2) A creditor may object to the supervisor's acceptance or rejection
of a proof by applying to the Assignee.
(3) If a creditor objects under subsection (2), the Assignee may
give directions as the Assignee thinks appropriate as to the
acceptance or rejection of the proof.
(4) A person who becomes a creditor of the debtor after the order
has beenmade, andwho proves a debt before the supervisor,-
(a) may elect to be included in the administration of the
debtor's estate; and
(b) in that case, may be paid a dividend under the order
only after creditors who became creditors of the debtor
before the order was made and who have been included
as a creditor in the administration have been paid under
the order.
Compare: 1967 No 54 s 147(b), (c), (d)
340 Payment of debtor's earnings to supervisor
(1) This section applies if the supervisor, under a power given
by a summary instalment order made by the Assignee, directs
the debtor's employer to pay the debtor's earnings, or part of
them, to the supervisor.
(2) The amounts that the employer must pay to the supervisor are
recoverable as a debt from the employer, and the supervisor's
receipt is a complete discharge to the employer for the debt.
(3) Payment by the employer in contravention of the supervisor's
direction to pay the supervisor discharges the liability of the
employer to the supervisor for the amount of the payment only
if it is made-
(a) with the consent of the supervisor or the Assignee; or
146
Insolvency Law Reform Bill Part 5 cl 343
(b) to a person who is not the debtor and who has a better
legal claim to it than the debtor.
Compare: 1967 No 54 s 146(10)
341 Distribution of money paid by debtor
(1) The supervisor must distribute the money paid by the debtor
under the summary instalment order in the following order:
(a) first, payment of the costs of administration in accordance
with the prescribed scale:
(b) second, if applicable, the taxed costs of the creditor who
applied for the order:
(c) third, payment of the debts in accordance with the order:
(d) fourth, payment of any surplus to the debtor.
(2) The debtor is discharged from the unsecured debts to which
the order relates if the supervisor pays, from the money
received under the order, the amounts in subsection (1)(a) to
(c) in full.
Compare: 1967 No 54 s 149
342 Default by debtor
(1) A debtor who defaults in paying any sum due under a summary
instalment order is presumed, unless the contrary is proved,
to have-
(a) been able to pay the sum from the date of the order; and
(b) refused or neglected to pay it.
(2) If the debtor defaults in making payment in accordance with
the order, unless a District Court orders otherwise,-
(a) a proceeding that has been halted under section 337 may
begin or continue:
(b) any period during which a proceeding was halted under
section 337 must be added to any period of limitation
that applies to the proceeding.
Compare: 1967 No 54 s 150
343 Offence of obtaining credit
(1) A person (A) commits an offence if-
147
Part 5 cl 343 Insolvency Law Reform Bill
(a) A is a debtor in respect of whom a summary instalment
order has been made; and
(b) before all creditors have been paid all amounts to which
they are entitled under the order, A-
(i) alone or jointly with another person, obtains for
the time being credit of $100 or more; or
(ii) incurs liability for the time being to any person of
$100 or more for the purpose of obtaining credit
for another person; or
(iii) enters into a hire purchase agreement under
which A is liable to pay $100 or more.
(2) It is a defence if A proves-
(a) in a case to which subsection (1)(b)(i) applies, that
before obtaining the credit of $100 A informed the
person giving the credit that A was affected by a
summary instalment order:
(b) in a case to which subsection (1)(b)(ii) applies, that
before A incurred the liability of $100 the person giving
the credit was informed that A was affected by a
summary instalment order.
(3) A person who commits an offence under this section is liable
on summary conviction to imprisonment for a term not
exceeding 1 year or a fine not exceeding $5,000 or both.
(4) No matter what section 14 of the Summary Proceedings Act
1957 says, an information for an offence under this section
may be laid at any time within 2 years after the time when the
matter of the information arose.
Compare: 1967 No 54 s 151
344 Rules for summary instalment orders
The Governor-General may, by Order in Council, make rules
providing for any matters contemplated by this subpart, necessary
for its administration, or necessary for giving it full
effect.
Compare: 1967 No 54 s 152
148
Insolvency Law Reform Bill Part 5 cl 348
Subpart 4-No asset procedure
345 Introduction to this subpart
This subpart sets out a procedure for dealing with a debtor
who has no realisable assets.
Entry to no asset procedure
346 Application for entry to no asset procedure
(1) A debtor who meets the criteria set out in section 347 may
apply to the Assignee for entry to the no asset procedure.
(2) A debtor applies for entry to the no asset procedure by completing
and filing with the Assignee the following documents:
(a) an application in the prescribed form; and
(b) a statement in the prescribed form of the debtor's
affairs.
347 Criteria for entry to no asset procedure
(1) The Assignee may admit a debtor to the no asset procedure if
the Assignee is satisfied on reasonable grounds that-
(a) the debtor has no realisable assets; and
(b) the debtor has not previously been admitted to the no
asset procedure; and
(c) the debtor has debts that are not less than $1,000 and
not more than $40,000; and
(d) under a means test prescribed by regulation, the debtor
does not have the means of repaying any amount
towards those debts.
(2) In this section, realisable assets does not include the assets
that a bankrupt is allowed to retain under section 154.
(3) The amounts in subsection (1)(c)may be varied by theGovernor-
General by Order in Council to take account of increases
in the Consumers Price Index.
348 Debtor disqualified from entry to no asset procedure in
certain cases
The Assigneemust not admit a debtor to the no asset procedure
if the Assignee believes, on reasonable grounds, that-
149
Part 5 cl 348 Insolvency Law Reform Bill
(a) the debtor has concealed assets with the intention of
defrauding his or her creditors, for example, by transferring
property to a trust; or
(b) the debtor has engaged in conduct that would, if the
bankrupt were adjudicated bankrupt, constitute an
offence under this Act; or
(c) the debtor has incurred a debt or debts knowing that the
debtor does not have the means to repay them; or
(d) a creditor intends applying for the debtor's adjudication
as a bankrupt and it is likely that the outcome for the
creditor if the debtor is adjudicated bankrupt will be
materially better than if the debtor is admitted to the no
asset procedure.
349 Assignee must advertise application and notify creditors
If a debtor has applied to the Assignee for entry to the no asset
procedure, the Assignee must as soon as practicable-
(a) advertise the application in the prescribed manner; and
(b) send a summary of the debtor's assets and liabilities to
each known creditor of the debtor.
350 Creditor may object to debtor's entry to no asset
procedure
(1) A creditor may object to the debtor's entry to the no asset
procedure on the ground that-
(a) the debtor does not meet the criteria for entry; or
(b) there are reasonable grounds for the Assignee to conclude
that the debtor is disqualified under section 348.
(2) A creditor must object within 20 working days after the
Assignee first sent a summary of the debtor's assets and
liabilities to creditors.
(3) The Assignee must investigate the ground or grounds for the
creditor's objection, and must refer the creditor's objection to
the debtor for a response, unless it is not practicable to do so.
(4) The Assignee must-
(a) decide within 20 working days after receiving the creditor's
objection whether to uphold it or not; and
150
Insolvency Law Reform Bill Part 5 cl 353
(b) notify the debtor and creditor of the decision as soon as
practicable.
351 When debtor admitted to no asset procedure
(1) A debtor is admitted to the no asset procedure when the
Assignee sends the debtor a written notice in the prescribed
form.
(2) The Assignee must not send that notice to the debtor-
(a) before the time for a creditor to object has elapsed; or
(b) if a creditor has objected, before the Assignee has notified
the creditor that the Assignee has not upheld the
objection.
Effect of entry to no asset procedure
352 Creditors may not enforce debts
(1) A creditor (C) of a debtor (D) must not, after D has been
admitted to the no asset procedure, begin or continue any step
to recover or enforce a debt-
(a) that D owes C at the time when D is admitted to the no
asset procedure; and
(b) that would be provable in D's bankruptcy, if D were
adjudicated bankrupt.
(2) However, subsection (1) does not apply to the following debts,
which remain enforceable:
(a) a fine, penalty, sentence of reparation, or other order for
the payment of money, that has been made following
any conviction or order made under section 106 of the
Sentencing Act 2002:
(b) any amount payable under a maintenance order under
the Family Proceedings Act 1980:
(c) any amount payable under the Child Support Act 1991:
(d) a loan balance under the student loan scheme established
by the Student Loan Scheme Act 1992.
353 Debtor's duties after entry to no asset procedure
(1) The Assignee may require the debtor, and the debtor must
comply with any reasonable request, to provide assistance,
151
Part 5 cl 353 Insolvency Law Reform Bill
documents, and information necessary for applying the no
asset procedure to the debtor.
(2) The debtor must notify the Assignee as soon as practicable
of any change in the debtor's circumstances that would allow
the debtor to repay an amount towards the debts referred to in
section 352(1).
(3) The debtor must not obtain credit (including hire purchase
credit), either alone or jointly with another, of more than $100
without first informing the credit provider that the debtor is
subject to the no asset procedure.
Termination and discharge
354 Termination
A debtor's participation in the no asset procedure terminates
when-
(a) the debtor is discharged under section 357; or
(b) the Assignee terminates it under section 355; or
(c) the debtor applies for his or her own adjudication; or
(d) a creditor who is entitled to do so (for example, because
the creditor's debt is enforceable as a debt specified in
section 352(2)) applies for the debtor's adjudication.
355 When Assignee may terminate
(1) The Assignee may terminate a debtor's participation in the no
asset procedure if-
(a) the debtor was wrongly admitted to the no asset procedure,
for example, because the debtor concealed assets
or misled the Assignee; or
(b) the debtor requests termination, and the Assignee
is satisfied that the debtor's financial circumstances
have changed, enabling the debtor to repay an amount
towards his or her debts.
(2) The Assignee terminates a debtor's participation in the no
asset procedure by sending the debtor a written notice in the
prescribed form to the debtor's last known address, and the
termination is effective when the notice is sent, whether or
not the debtor receives it.
152
Insolvency Law Reform Bill Part 6 cl 358
(3) The Assigneemust as soon as practicable send a written notice
of the termination to each creditor of the debtor known to the
Assignee.
356 Effect of termination
Except in the case of termination by discharge under section
357, the debtor's debts that became unenforceable on the
debtor's entry to the no asset procedure become again enforceable
on termination of the debtor's participation in the no asset
procedure.
357 Discharge
(1) The debtor is automatically discharged from the no asset procedure
12 months after the date when the debtor was admitted
to it.
(2) On discharge, the debtor's debts that became unenforceable
on the debtor's entry to the no asset procedure are cancelled,
and the debtor is not liable to repay any part of the debts,
including any penalties and interest that may have accrued.
Part 6
Insolvent deceased estates
358 Interpretation
(1) In this Part, unless the context otherwise requires,-
administration, in relation to the will or estate of a deceased
person, has the same meaning as in the Administration Act
1969
administrator means an administrator within the meaning of
the Administration Act 1969
appointee means an appointee under section 367(2)
beneficiary means a person who is beneficially interested in
the deceased's estate
estate, in relation to a deceased debtor, means that part of the
debtor's estate that is available for distribution under section
373.
153
Part 6 cl 358 Insolvency Law Reform Bill
(2) This subpart does not affect-
(a) any property of a deceased person that does not form
part of his or her estate as defined in subsection (1); or
(b) the administration of that property.
(3) The administrator of the property of a deceased person (D) that
does not form part of D's estate as defined in subsection (1)
is, and (whether or not there is an administrator) the appointee
is not,-
(a) D's executor or administrator for the purposes of section
6 of the Deaths by Accidents Compensation Act
1952:
(b) D's personal representative for the purposes of section
48 of the Trustee Act 1956.
Compare: 1967 No 54 s 153
Application and order that estate be administered under this Part
359 Court may order that estate be administered under this
subpart
(1) The Court may order that the estate of a deceased debtor be
administered under this Part on the application,-
(a) under section 360, of the administrator or a person who
is applying to the Court for a grant of administration:
(b) under section 361, of-
(i) a creditor who has produced evidence establishing
a debt due to the creditor; or
(ii) a beneficiary.
(2) The Court may refuse to make the order if it is satisfied that-
(a) there is a reasonable probability that the estate will be
enough for payment of the deceased's debts; and
(b) the creditors will not be prejudiced by the estate being
administered in the normal way.
360 Application by administrator, etc
(1) The administrator, or a person who is applying to the Court
for a grant of administration, may apply to the Court for an
order that the estate be administered under this Part, if the
administrator or person applying ascertains that the money in
154
Insolvency Law Reform Bill Part 6 cl 361
the estate, together with the proceeds of any assets in the estate
that can conveniently be converted into money, will not be, or
is not likely to be, enough to meet the several claims on the
estate.
(2) The application may be-
(a) joined with an application for a grant of administration
in respect of the deceased's will or of the deceased's
property that does not form part of his or her estate; or
(b) made at any time after that grant of administration.
(3) An applicant under this section, in addition to the application,
must file in the Court an account that shows the assets, debts,
and liabilities of the deceased, to the extent that the applicant
knows what they are.
(4) The account-
(a) must be verified by affidavit; and
(b) may be amended from time to time; and
(c) must be filed-
(i) when the application is filed; or
(ii) within the prescribed time after the application is
filed; or
(iii) within the additional time that the Court allows.
Compare: 1967 No 54 s 154
361 Application by creditor or beneficiary for order under
this Part
(1) The following persons may also apply to the Court for an order
under this subpart:
(a) a creditor of the deceased's estate, if the creditor's debt
has reached the threshold for a creditor's application for
adjudication:
(b) a beneficiary.
(2) A creditor or beneficiary may apply for an order if-
(a) the administrator has not applied under this subpart, and
after being requested in writing to apply, fails to apply
within 15 working days after receiving the request; or
(b) after 4 months from the date of the debtor's death, no
administrator has been appointed and no application has
been filed in the Court under section 360.
155
Part 6 cl 361 Insolvency Law Reform Bill
(3) In the case of an application under subsection (2)(a) for an
order that the estate be administered under this subpart, the
Court must not make the order before 2 months have expired
after the date when the administration was granted, but this
restriction does not apply if-
(a) the administrator has consented; or
(b) the applicant proves that-
(i) the deceased committed an act of bankruptcy
within 3 months before his or her death; or
(ii) the administrator has favoured or is about to
favour any creditor; or
(c) in the Court's opinion the administrator is not properly
administering the estate.
(4) The Court may allow an application under subsection (2)(b)
to be filed before 4 months after the date of the debtor's death
have expired if the Court is satisfied that-
(a) the deceased committed an act of bankruptcy within 3
months before his or her death; or
(b) the estate that should have been available for the
deceased's creditors is reducing.
Compare: 1967 No 54 s 155
362 Notice of application by creditor or beneficiary
If an application has been filed by a creditor or beneficiary
under section 361, the applicant must give notice of the application
in the prescribed manner to-
(a) the administrator; or
(b) if there is no administrator, to the person specified by
the Court.
Compare: 1967 No 54 s 156
363 When Registrar may hear application
(1) A Registrar may hear an application for administration of the
estate of a deceased person under this Part if-
(a) the Registrar has jurisdiction to grant administration of
the estate of any deceased person; and
156
Insolvency Law Reform Bill Part 6 cl 366
(b) the application is joined with an application for a grant
of administration in respect of the estate or will of the
deceased.
(2) A Registrar may hear the application even if a Judge is available
to hear it.
Compare: 1967 No 54 s 157(2)
364 Costs of application
The Court, on hearing an application under this Part, may-
(a) make the order or refuse the application with or without
costs; and
(b) in either case, order costs to be paid by 1 party to
another, or out of the estate.
Compare: 1967 No 54 s 157(1)
365 Court may order administration by Assignee or Public
Trust
(1) This section applies if an application has been filed for an
order to administer an estate under this Part, and the Court
thinks that the estate is likely to be better administered by 1 of
the persons mentioned in subsection (2)(b) than by the person
who is or may become the administrator.
(2) The Court may, as part of its original order on the application
or by any subsequent order, order that-
(a) the administrator (if there is one) must no longer administer
the estate; and
(b) the Assignee, Public Trust, or some other person, as the
Court thinks appropriate, must administer the estate.
Compare: 1967 No 54 s 158
366 Certificate filed by Public Trust or Maori Trustee has
effect as application and order
(1) Public Trust or the Maori Trustee may file a certificate under
this section if Public Trust or the Maori Trustee (as the case
may be) is the administrator of, or would be entitled to obtain
a grant of administration for, an apparently insolvent estate.
157
Part 6 cl 366 Insolvency Law Reform Bill
(2) The filing of the certificate in the prescribed form has the
effect both of an application and an order that the estate be
administered under this Part.
(3) The certificate must be filed in the registry of-
(a) the Court out of which the grant of administration
issued; or
(b) the Court in which Public Trust or the Maori Trustee
has filed an election to administer under-
(i) Part 4 of the Public Trust Office Act 1957 or
Part 6 of the Public Trust Act 2001, in the case
of Public Trust:
(ii) section 12A or section 12B of the Maori Trustee
Act 1953, in the case of the Maori Trustee; or
(c) if no grant of administration has been issued or no election
to administer has been filed, the Court that Public
Trust or the Maori Trustee thinks appropriate.
(4) An election to administer an estate under this Part may be
combined with an election to administer the estate under Part
6 of the Public Trust Act 2001 or section 12A or section 12B
of the Maori Trustee Act 1953.
(5) Powers conferred on Public Trust or the Maori Trustee under
this Part are in addition to the powers conferred on either of
them by any other Act or law.
Compare: 1967 No 54 s 160
Effect of order that estate be administered under this Part
367 Estate vests in appointee
(1) The whole of the estate at the date when the application for the
order under this Part was filed vests in the person appointed
by the Court to administer it (the appointee).
(2) The Court, in its order that the estate be administered under
this Part or in a subsequent order, may appoint as appointee-
(a) the administrator; or
(b) the Assignee; or
(c) Public Trust; or
(d) any other person.
Compare: 1967 No 54 s 159(1)
158
Insolvency Law Reform Bill Part 6 cl 370
368 Appointee must realise, administer, and distribute estate
The appointee must, as soon as practicable after the estate
vests in the appointee, realise, administer, and distribute the
assets in accordance with the law and practice of bankruptcy,
subject to any modifications in this Part.
Compare: 1967 No 54 s 159(1)
369 Entitlement of surviving spouse to household furniture
and effects
(1) This section applies if the estate that vests in the appointee
includes any of the deceased's necessary household furniture
and effects that would have passed to the deceased's surviving
spouse (S) if the estate had not been insolvent.
(2) S may select and retain as his or her own property so much of
the furniture and effects referred to in subsection (1) that the
appointee determines.
(3) S must make the selection within the time that the appointee
allows.
(4) S's selection does not affect any rights under a valid security
or hire purchase agreement in respect of the goods selected.
(5) The fact that the goods available for selection are subject to a
security or hire purchase agreement does not give S any rights
to any other part of the deceased's property.
Compare: 1967 No 54 s 159(2)
370 Appointee may make allowance to surviving spouse
(1) The appointee may make an allowance out of the estate to the
surviving spouse or to any of the relatives of the deceased or
the surviving spouse for the support of any of them.
(2) However, the appointee must first obtain the consent of the
creditors which must be expressed in the form of a resolution.
Compare: 1967 No 54 s 159(4)
159
Part cl Insolvency Law Reform Bill
Administration of estate under this Part
371 Sections 372 to 379 apply in respect of estate administered
under this Part
Sections 372 to 379 apply when an order has been made that
the estate be administered under this Part.
Compare: 1967 No 54 s 162(1)
372 Appointee's authority, powers, and functions
The appointee has, in relation to the estate, the same authority,
powers, and functions as the Assignee has in relation to the
property of a bankrupt.
Compare: 1967 No 54 s 162(1)
373 Distribution of estate
(1) The estate must be distributed in the following order:
(a) first, payment of all proper costs, charges, debts,
and expenses of the due administration of the estate,
whether incurred before or after the order is made:
(b) secondly, payment of the deceased's reasonable funeral
expenses:
(c) thirdly, payment of the following expenses of the
deceased incurred during the 3 months immediately
before the deceased's death:
(i) medical expenses:
(ii) reasonable expenses for hospital care (as defined
in section 4(1) of the Health and Disability
Services (Safety) Act 2001) provided for the
deceased, so far as those expenses are lawfully
recoverable:
(d) fourthly, payment of other claims and interest in accordance
with section 268:
(e) all other claims, which rank equally and abate in proportion
if there is insufficient to pay them in full.
(2) For the purposes of subsection (1)(d), a reference in section
268 to the date of adjudication must be read as a reference to
the date of the deceased's death.
Compare: 1967 No 54 s 162(1)(b), (2)
160
Insolvency Law Reform Bill Part 6 cl 376
374 Payment of surplus
(1) In this section, surplus means the surplus of assets that
remains with the appointee after the appointee has paid in
full-
(a) the debts due by the deceased debtor; and
(b) the costs of the administration under this Part; and
(c) any other money that would be payable in a case of
bankruptcy.
(2) The surplus must be-
(a) paid to, or retained by, the administrator of the
deceased's property that does not form part of his or
her estate under this Part, if there is one; or
(b) if there is not, distributed as approved by the Court,
having regard to the persons who are entitled to it.
(3) The Court may make an order approving the distribution of
the surplus as part of the order that the estate be administered
under this Part, or at any time after, and the order may be
varied in respect of the surplus that remains in the appointee's
hands at the date of each variation.
Compare: 1967 No 54 s 162(1)(c), (3)
375 Creditor's notice to administrator
(1) If a creditor applies for an order that the deceased's estate be
administered under this Part, and the order is made, notice
to the deceased's administrator that the application has been
filed is treated as an act of bankruptcy.
(2) After receipt of the notice, the administrator does not obtain a
discharge for any payment of money or disposition of property
by the administrator, unless it is done pursuant to the order.
Compare: 1967 No 54 s 162(1)(d)
376 Appointee may act in relation to deceased's irregular
transactions
(1) An appointee may take a step that the Assignee could have
taken under subpart 7 of Part 3 (for example, the cancellation
of an irregular transaction) as if the deceased been bankrupt
at the time of death.
161
Part 6 cl 376 Insolvency Law Reform Bill
(2) However, there are 2 additional restrictions when an
Appointee takes a step under subpart 7 of Part 3:
(a) the appointee must not issue a notice cancelling a gift
or voluntary settlement without first obtaining the permission
of the Court, and the Court must not give permission
unless it appears that recovery of the gift or
settlement is necessary to pay the debts of the estate in
full (including interest); and
(b) the Court must not make an order under section 210
unless it is satisfied that recovery of the deceased's contribution
to the property of another is necessary to pay
the debts of the estate in full (including interest).
Compare: 1967 No 54 s 162(1)(e), (f)
377 Blank
378 Appointee may cancel execution
The appointee may cancel an execution against the deceased
debtor's estate unless it was completed more than 3 months
before the date of the order that the estate be administered
under this Part.
Compare: 1967 No 54 s 162(1)(g)
379 Administrator's acts valid before notice
Nothing in this Act invalidates any payment made, or any act
or thing done, in good faith by the administrator before the
administrator had notice of an intention to apply for an order
that the estate be administered under this Part.
Compare: 1967 No 54 s 163
162
Insolvency Law Reform Bill Part 7 cl 382
Part 7
Offences and miscellaneous provisions
Subpart 1-The Assignee
380 Appointment of Official Assignee for New Zealand and
others
(1) Suitable persons must be appointed under the State Sector Act
1988 to the following positions under this Act:
(a) the Official Assignee for New Zealand:
(b) the Deputy Official Assignee for New Zealand:
(c) Official Assignees:
(d) as required, Deputy Assignees to help in the administration
of estates.
(2) Assignees and Deputy Assignees are officers of the Court.
(3) The Deputy Official Assignee must discharge his or her duties
and exercise his or her powers under the control and direction
of the Official Assignee for New Zealand.
(4) Assignees and Deputy Assignees must discharge their duties
under the control and direction of the Official Assignee for
New Zealand and the Deputy Official Assignee for New Zealand.
(5) Nothing in this section affects section 59 or section 385(3).
Compare: 1967 No 54 s 15
381 Assignee may act on behalf of another Assignee
An Assignee or Deputy Assignee may act for, or in the place
of, another Assignee or Deputy Assignee, and in that capacity
has all the authority and powers of the Assignee or Deputy
Assignee for whom, or in whose place, he or she acts.
Compare: 1967 No 54 s 16
382 Assignee's powers
(1) AnAssignee may sue and be sued in the name of "TheOfficial
Assignee in Bankruptcy of the property of [bankrupt's name
inserted]", and in that name may do anything that must be done
or should be done as part of his or her functions as Assignee.
(2) An Assignee or Deputy Assignee may-
163
Part 7 cl 382 Insolvency Law Reform Bill
(a) administer oaths and take statutory declarations; and
(b) appear in Court and examine the bankrupt in any proceedings.
(3) An Assignee must have a seal of office, which the Assignee
must keep and use when required in the administration of the
estates in the Assignee's charge.
(4) An Assignee may execute all documents by signing the
Assignee's own name over the official name, and need not
affix a seal to any document, although he or she may do so.
Compare: 1967 No 54 s 17
383 Assignee's additional rights and remedies
The Assignee, in addition to rights and remedies under this
Act, has the rights and remedies provided by any other Act or
rule of law.
384 Disqualification of Assignee
(1) An Assignee (A) is disqualified from acting in a bankrupt
estate if A is a creditor of the estate and the creditors resolve
that A must not act as Assignee.
(2) Subsection (1) does not apply if A is a creditor of the estate
only in the capacity of-
(a) the Assignee of the property of another bankrupt; or
(b) the liquidator of a company; or
(c) an appointee under Part 6.
(3) If anAssignee is disqualified fromacting in an estate, the chief
executive of the department of State that, with the authority
of the Prime Minister, is for the time being responsible for the
administration of this Act, may appoint another Assignee as
Assignee of that estate.
Compare: 1967 No 54 s 18(1), (2)
385 Vacation of office by Assignee
(1) An Assignee must vacate his or her office if he or she is
adjudicated bankrupt.
164
Insolvency Law Reform Bill Part 7 cl 388
(2) An Assignee is eligible, subject to the provisions of the State
Sector Act 1988, to be reappointed an Assignee when discharged
from bankruptcy.
(3) This section does not affect the question of the employment of
an Assignee who is adjudicated bankrupt in any other position
in the Public Service.
Compare: 1967 No 54 s 18(3)
386 Protection of Assignee
An Assignee is not liable in any action or proceeding for any
thing the Assignee may have done by reason only that the
bankrupt is discharged or the bankruptcy is annulled.
Compare: 1967 No 54 s 138
387 Assignee's remuneration
(1) The Assignee may charge remuneration for carrying out his
or her duties and exercising his or her powers as Assignee
that is fixed under section 388 or charged according to rates
prescribed under that section.
(2) Remuneration that has been charged under subsection (1) and
paid to the Assignee must be paid into a Crown Bank Account.
Compare: 1967 No 54 s 166
388 Rates of Assignee's remuneration
(1) The Governor-General may, by Order in Council, make regulations
that fix or prescribe the amount or rates of remuneration
chargeable under section 387.
(2) The regulations may, for example,-
(a) prescribe hourly or other rates:
(b) prescribe different rates for work done in the bankruptcy
by different classes of persons:
(c) prescribe rates by reference to the net value of the assets
realised by the Assignee together with other amounts as
may be specified:
(d) prescribe rates for the exercise of particular functions
or powers:
165
Part 7 cl 388 Insolvency Law Reform Bill
(e) prescribe rates by reference to any other criteria that
may be specified.
Compare: 1967 No 54 s 166A
388A Assignee must apply for order of release
(1) After advertising the filing of the final statement of accounts
and statement of financial position for the estate of a bankrupt
(see section 223A), the Assignee must apply to the Court for
an order releasing the Assignee from the administration of that
estate.
(2) The Assignee must advertise his or her intention to apply for
an order of release, and the time when the application will be
heard.
(3) The Court must hear the application not earlier than 10 working
days before, and not later than 20 working days after, the
Assignee advertises the application under subsection (2).
(4) On hearing the application, the Court-
(a) must take into account any objection by any creditor
or other person interested in the bankruptcy to the
Assignee's release; and
(b) if the Court refuses the order, may, on the application
of any creditor or other person interested in the bankruptcy,
make any order it thinks fit to remedy any breach
of duty by the Assignee.
Compare: 1967 No 54 s
388B Effect of order
(1) An order of release made under section 388A discharges the
Assignee, from the date of the order, from all liability for any
act or omission by the Assignee-.
(a) in the administration of the bankrupt's affairs:
(b) in relation to the Assignee's conduct as Assignee of the
bankrupt up to the date of the order.
(2) The order must not be revoked except if it was obtained by
fraud.
Compare: 1967 No 54 s 133(5), (6)
166
Insolvency Law Reform Bill Part 7 cl 391
388C Subsequent order of release
(1) This section applies if the Assignee receives further property
of the bankrupt after the date of an order of release.
(2) The Assignee must, after realising or otherwise dealing with
that property, apply for an order in release in respect of the
Assignee's administration of it.
(3) Sections 388A and 388B apply to an application for a subsequent
order for release.
Compare: 1967 No 54 s 133(7)
Subpart 2-The Court
389 Jurisdiction and powers of Court
(1) A Judge may exercise all the powers and jurisdiction given to
the Court under this Act.
(2) A Judge may hear a proceeding under this Act, or any aspect
of it, in Chambers or in open Court, except that the following
must be heard and dealt with in open Court:
(a) the public examination of a bankrupt:
(b) an application for annulment of a bankruptcy or the
discharge of a bankrupt.
Compare: 1967 No 54 s 5(1)
390 Court may look at real nature of transaction
In considering a transaction, the Court may look at its real
nature, and it does not matter that the transaction appears to
be, or is described by the parties to it as being, something
different.
Compare: 1967 No 54 s 5(2)
391 Powers of Registrars and District Court Judges
(1) A Registrar or a District Court Judge has, with the exception
of the powers listed in subsection (2), all the powers and jurisdiction
of the Court under this Act during-
(a) a Court vacation; or
(b) the illness of a Judge; or
(c) any period when there is no Judge at the place where
the office of the Court is situated.
167
Part 7 cl 391 Insolvency Law Reform Bill
(2) A Registrar or a District Court Judge does not have the power
under subsection (1) to-
(a) make an order of discharge or annulment; or
(b) commit for contempt of Court; or
(c) exercise any jurisdiction conferred by subpart 3 of Part
7; or
(d) conduct a public examination under subpart 5 of Part 3.
(3) A Registrar or a District Court Judge may, if in doubt as to the
proper order to be made on an application, refer it to a Judge
at the next convenient opportunity, and a Judge may hear and
decide the application.
(4) A Judge may vary or discharge any decision by a Registrar or
District Court Judge, and the decision of the Judge under this
subsection can be reviewed, rescinded, or varied by the Court
under section 392.
(5) There is no appeal direct to the Court of Appeal from the
decision of a Registrar or a District Court Judge.
Compare: 1967 No 54 s 6
392 Rehearings and appeals
(1) The Court may review, rescind, or vary any decision of the
Court or a Judge under this Act.
(2) A person aggrieved may appeal to the Court of Appeal from
a decision of the Court or a Judge under this Act.
Compare: 1967 No 54 s 8
393 Proceedings not halted pending appeal
A notice of appeal does not halt proceedings under the decision
under appeal unless the Court or the Court of Appeal
makes an order halting the proceedings.
Compare: 1967 No 54 s 9(1)
394 Suspension of adjudication pending appeal
(1) If an appeal has been filed against an order of adjudication,
the bankrupt or any other interested person may apply to the
Court or the Court of Appeal for an order suspending the
adjudication until the appeal is decided.
168
Insolvency Law Reform Bill Part 7 cl 396
(2) The Court or Court of Appeal may suspend the adjudication
on the conditions that it thinks are appropriate, including conditions
as to anything done or decided by any person, or that
ought to have been done or decided, in the period between the
adjudication and the order suspending adjudication.
(3) The Court or the Court of Appeal may at any time make an
order as it thinks appropriate as to anything done or decided
by any person, or that ought to have been done or decided,
in the period between the adjudication and the date when the
appeal is decided if-
(a) the adjudication has been suspended and the appeal
fails; or
(b) the adjudication has not been suspended and the appeal
succeeds.
Compare: 1967 No 54 s 9(2), (3), (4)
395 Court may extend time
(1) The Court may extend any time limit, imposed by this Act or
by rules or regulations made under the Act, for doing any act
or thing.
(2) The Court may extend the time limit-
(a) before or after the time limit has expired:
(b) on the conditions it thinks appropriate.
Compare: 1967 No 54 s 10
396 Defects in proceedings
(1) A proceeding under this Act must not be invalidated or set
aside for a defect (which includes misdescription, misnomer,
or omission) in a step that must be taken as part of, or in
connection with, the proceeding, unless a person is prejudiced
by the defect.
(2) The Court may order the defect to be corrected, and may order
the proceeding to continue, on the conditions that the Court
thinks appropriate in the interests of everyone who has an
interest in the proceeding.
Compare: 1967 No 54 s 11
169
Part cl Insolvency Law Reform Bill
Subpart 3-Offences by bankrupt
Indictable offences
397 Offences in relation to debts
(1) A bankrupt (B) commits an offence if B did not, when contracting
a debt, expect to be able to pay the debt when it fell
due for payment, as well as pay all B's other debts (including
future and contingent debts).
(2) A bankrupt (B) commits an offence if B has materially contributed
to, or increased the extent of, B's insolvency by gambling,
or by rash and hazardous speculations, or by unjustifiable
spending, or by extravagance in living.
(3) For the purposes of subsection (1), B is rebuttably presumed
to have committed the offence if B, when contracting the debt,
had no reasonable ground for expecting that B would be able
to pay the debt when it fell due for payment as well as pay all
B's other debts (including future and contingent debts).
Compare: 1967 No 54 s 126(1)(a), (c)
398 Offences in relation to property
(1) A bankrupt (B) commits an offence if B-
(a) conceals or removes any part of B's property-
(i) within 2 months immediately before any unsatisfied
judgment or order for payment of money
is obtained against B; or
(ii) at any time after an unsatisfied judgment or order
for payment of money is obtained against B; or
(b) with intent to defraud B's creditors or any of them,
makes, or causes to be made, any gift, delivery, or transfer
of, or security interest in, B's property.
(2) A bankrupt (B) commits an offence if, after an application for
B's adjudication has been filed, or within 2 years immediately
before the application is filed, B-
(a) conceals any part of B's property to the value of $500
or more; or
(b) conceals any debt due to B or due from B; or
170
Insolvency Law Reform Bill Part 7 cl 400
(c) fraudulently removes any part of B's property to the
value of $500 or more.
Compare: 1967 No 54 s 126(1)(b), (g)
399 Offence in relation to written statement to creditor, etc
A bankrupt (B) commits an offence if, within 3 years immediately
before B's adjudication,-
(a) B makes or produces any written statement to a person
who-
(i) is at the time B's creditor; or
(ii) becomes B's creditor as a result of the statement
being made or produced to that person; and
(b) the statement is not a true and fair statement of B's
affairs.
Compare: 1967 No 54 s 126(1)(e)
400 Offence in relation to documents, etc
A bankrupt (B) commits an offence if, after an application for
B's adjudication has been filed, or within 2 years immediately
before the application is filed, B-
(a) conceals, destroys, mutilates, or falsifies, or is a party
to the concealment, destruction, mutilation, or falsification
of, any book or document affecting, or relating
to, B's property or affairs; or
(b) makes, or is a party to the making of, any false entry
in any book or document affecting, or relating to, B's
property or affairs; or
(c) fraudulently parts with, alters, or makes any omission,
or is a party to fraudulently parting with, altering, or
making any omission in, any document affecting, or
relating to, B's property or affairs; or
(d) prevents the production of any book, document, paper,
or writing affecting, or relating to, B's property or
affairs to any person to whom B has an obligation under
this Act to produce it
Compare: 1967 No 54 s 126(1)(f)(i), (ii), (iii), (iv)
171
Part 7 cl 401 Insolvency Law Reform Bill
401 Offence in relation to fictitious losses or expenses
A bankrupt (B) commits an offence if, after an application for
B's adjudication has been filed, or within 12 months immediately
before the application is filed, B attempts to account for
any part of B's property by fictitious losses or expenses.
Compare: 1967 No 54 s 126(1)(h)
402 Offences in relation to credit, etc
(1) A bankrupt (B) commits an offence if, within 3 years before
an application for B's adjudication has been filed or at any
time after the application is filed,-
(a) B obtains property on credit and has not paid for the
property; and
(b) B obtains the property on credit-
(i) by a false representation or other fraud; or
(ii) by a false statement of financial position or other
false statement of B's affairs; or
(iii) under the false pretence of carrying on business
and dealing in the ordinary course of trade.
(2) A bankrupt (B) commits an offence if, within 3 years before an
application for B's adjudication has been filed or at any time
after the application is filed, B pawns, mortgages, pledges, or
disposes of, otherwise than in the ordinary course of trade,
any property that B has obtained and has not paid for.
Compare: 1967 No 54 s 126(1)(i)
403 Offences in relation to obtaining consent of creditors
A bankrupt (B) commits an offence if B makes a false representation
for, or is guilty of any other fraud for, the purpose of
obtaining the consent of any 1 or more of B's creditors to any
agreement with reference to B's affairs or B's bankruptcy.
Compare: 1967 No 54 s 126(1)(j)
404 Offence in relation to leaving New Zealand
A bankrupt (B) commits an offence if, after an application for
B's adjudication has been filed or within 12 months immediately
before the application is filed, B-
172
Insolvency Law Reform Bill Part 7 cl 407
(a) leaves New Zealand (either temporarily or permanently)
and takes with him or her any part of B's
property to the value of $1000 or more that ought, by
law, to be divided among B's creditors; or
(b) attempts to leave New Zealand, taking with him or her
any part of that property.
(c) prepares to leave New Zealand, taking with him or her
any part of that property.
Compare: 1967 No 54 s 126(1)(k)
405 Defence of absence of intent
(1) A person does not commit an offence under section 398(1)(a)
if he or she proves that at the material time he or she had no
intent to defraud any of his or her creditors.
(2) A person does not commit a crime under any of the following
provisions if the bankrupt proves that at the material time he
or she had no intent to defraud:
(a) section 398(2)(a) or (b):
(b) section 402(1):
(c) section 402(2):
(d) section 404.
(3) A person does not commit an offence under section 400(a),
(b), or (d) if the bankrupt proves that at the material time he or
she had no intent to conceal the state of his or her affairs or to
defeat the law.
406 Penalties for indictable offences by bankrupt
A person who commits an offence under any of sections 397
to 404 is liable on conviction on indictment to imprisonment
for a term not exceeding 3 years and to a fine not exceeding
$10,000 or both.
Offences in relation to record of transactions
407 Failure to keep and preserve proper record of transactions
(1) A bankrupt (B) commits an offence if, for any period during
the 3 years immediately before B's adjudication,-
173
Part 7 cl 407 Insolvency Law Reform Bill
(a) B might reasonably be expected, because of B's occupation
or transactions for the period, to keep a record
of those transactions; and
(b) B failed to keep and preserve a proper record of the
transactions.
(2) Despite anything that the Summary Proceedings Act 1957
says, an information for an offence under this section may
be laid against a bankrupt at any time within 2 years after the
date of his or her adjudication.
Compare: 1967 No 54 s 127(1)
408 Failure to keep proper records with intent to conceal
A bankrupt (B) commits an offence if, with intent to conceal
the true state of his or her affairs, B has failed to keep and
preserve a proper record of B's transactions.
Compare: 1967 No 54 s 127(2)
409 Penalties for offences relating to records
(1) A person who commits an offence under section 407 is liable
on summary conviction to imprisonment for a term not
exceeding 12 months or to a fine not exceeding $5,000 or
both.
(2) A person who commits an offence under section 408 is liable
on conviction on indictment to imprisonment for a term not
exceeding 3 years and to a fine not exceeding $10,000.
410 When bankrupt deemed not to have kept or preserved
proper record
(1) For the purposes of sections 407 and 408, a bankrupt (B) is
deemed not to have kept a proper record of his or her transactions
if, being engaged in any trade or business, B has not
kept the necessary books and accounts.
(2) In subsection (1), necessary books and accounts means the
books and accounts that are necessary to explain B's transactions
and financial position in B's trade or business, and
include-
174
Insolvency Law Reform Bill Part 7 cl 411
(a) a book or books containing entries from day to day in
sufficient detail of all cash received and cash paid; and
(b) if B's trade or business has involved dealing in goods,-
(i) a record of all goods sold and purchased; and
(ii) detailed stock sheets of annual and other stock
takings showing the quantity and the valuation
made of each item of stock on hand; and
(c) if B's trade or business has involved B's services,
details of those services.
(3) For the purposes of sections 407 and 408, B is deemed not to
have preserved a proper record of his or her transactions if B
has not preserved-
(a) the records listed in subsection (2), if applicable:
(b) a record of all goods purchased in the course of B's
business, with the original invoices:
(c) a daily record of all goods sold on credit.
Compare: 1967 No 54 s 127(3), (4)
Summary offences
411 Summary offences
(1) A bankrupt (B) commits an offence if B-
(a) fails without reasonable excuse to do any of the things
required of him or her by section 66 or section 85 or
subpart 2 of Part 3 or subpart 5 of Part 3 or to comply
with any of the provisions of section 286 or section 294;
or
(b) refuses or neglects to answer fully and truthfully all
proper questions put to B at any examination held under
this Act; or
(c) wilfuly misleads the Assignee in any statement made
to him or her in the course of the administration of B's
affairs, whether orally or in writing or in any answer to
any question put to B; or
(d) after becoming aware that any person has filed a false
proof in the bankruptcy, failed to disclose that fact
immediately to the Assignee; or
(e) has within 2 years before B's adjudication, at a time
when B was unable to pay his or her debts as they
175
Part 7 cl 411 Insolvency Law Reform Bill
became due, given, with intent to defraud B's creditors,
any undue preference to any of B's creditors; or
(f) while a bankrupt (even if the bankruptcy is later
annulled), within 3 years after B's adjudication and
without having first obtained the consent of the
Assignee,-
(i) leaves, or attempts to leave, New Zealand, temporarily
or permanently; or
(ii) makes preparations for leaving New Zealand,
temporarily or permanently; or
(g) before B obtains a final order or discharge, or before
a suspended order of discharge takes effect under this
Act,-
(i) alone, or jointly with another person, obtains
credit of $1000 or more; or
(ii) incurs liability to any person of $1000 or more
for the purpose of obtaining credit for another
person.
(2) Despite anything that section 14 of the Summary Proceedings
Act 1957 says, an information for any of the offences in subsection
(1) may be laid against a bankrupt at any time within 2
years after the time when the matter of the information arose.
Compare: 1967 No 54 s 128(1), (2)
412 Defences to summary offences of obtaining credit
(1) A bankrupt (B) does not commit an offence under section
411(1)(g)(i) if B proves that, before obtaining the credit of
$1000 or more, B informed the person giving the credit that
B was an undischarged bankrupt.
(2) A bankrupt (B) does not commit an offence under section
411(1)(g)(ii) if B proves that, before incurring the liability of
$1000 or more, the person giving the credit was informed
that the person incurring the liability was an undischarged
bankrupt.
Compare: 1967 No 54 s 128(1)(g)
176
Insolvency Law Reform Bill Part 7 cl 416
413 Penalty for summary offences by bankrupt
A person who commits an offence under section 411(1) is
liable on summary conviction to imprisonment for a term not
exceeding 12 months or a fine not exceeding $5,000 or both.
Compare: 1967 No 54 s 128(1)
Offences in relation to management of companies
414 Offence by bankrupt in relation to management of
companies
(1) A bankrupt commits an offence if he or she-
(a) acts as a director of a company; or
(b) fails without reasonable excuse to comply with section
145.
(2) Despite anything that section 14 of the Summary Proceedings
Act 1957 says, an information in respect of an offence under
subsection (1) may be laid at any time within 2 years after the
date of the offence.
Compare: 1967 No 54 s 128A
415 Penalties for offence in relation to management of
companies
A person who commits an offence under section 414 is liable,
-
(a) on conviction on indictment, to imprisonment for a term
not exceeding 2 years:
(b) on summary conviction, to imprisonment for a term not
exceeding 12 months or to a fine not exceeding $5,000
or both.
Assignee's discretion to prosecute
416 Assignee may prosecute if reasonable grounds certified
by Crown Solicitor
(1) If the Assignee has reason to suspect that a person (X) has
committed an offence under this Act, the Assignee may refer
the case to the appropriate Crown Solicitor.
177
Part 7 cl 416 Insolvency Law Reform Bill
(2) The Assignee may lay an information against X if the Crown
Solicitor certifies that there are reasonable grounds for prosecuting
X.
Compare: 1967 No 54 s 129
417 When Assignee has immunity for prosecution if certificate
given by Crown Solicitor
No action must be taken against the Assignee for malicious
prosecution in relation to a prosecution under this Act if the
Crown Solicitor certified that there were reasonable grounds
for bringing the prosecution.
Compare: 1967 No 54 s 129(2)
Subpart 4-Miscellaneous provisions
418 False or misleading statements or refusal to answer
questions
(1) A person commits an offence if he or she-
(a) makes a statement to any Assignee or person concerned
in the administration of this Act, knowing that the statement
is false in a material particular; or
(b) wilfully misleads, or attempts to mislead, any Assignee
or person concerned in the administration of this Act;
or
(c) without reasonable excuse, fails or refuses to answer
any question put to him or her by the Assignee.
(2) A person who commits an offence under this section is liable
on summary conviction to imprisonment for a term not
exceeding 12 months or to a fine not exceeding $5,000 or
both.
Compare: 1967 No 54 s 164
419 Regulations
The Governor-General may, by Order in Council, make regulations
for all or any of the following purposes:
(a) prescribing the times when creditors' meetings may be
held, how they must be conducted, and who may vote
at them:
178
Insolvency Law Reform Bill Part 7 cl 420
(b) prescribing how and when the debts and claims of creditors
must be made and proved, and when a debt or claim
may be allowed or disallowed:
(c) providing for the public examination of bankrupts:
(d) prescribing the expenses that may be paid to a bankrupt,
or any other person, who is required to attend any
examination by the Assignee:
(e) prescribing the steps an undischarged bankrupt must
take to obtain the Assignee's consent to leaving New
Zealand and the circumstances in which, and the conditions
on which, the Assignee may consent:
(f) prescribing the accounts that must be kept by the
Assignee, the audit of those accounts, and the fees
payable for the audit:
(g) prescribing the manner of advertising under this Act:
(h) providing for the appointment, retirement, removal,
discharge, and control of trustees under subpart 2 of
Part 5, and for the accounts that must be kept by them,
and for the audit of those accounts:
(i) prescribing the scale of fees of the Court and the Court
of Appeal for proceedings under this Act:
(j) providing for any other matters contemplated by this
Act, necessary for its administration, or necessary for
giving it full effect.
Compare: 1967 No 54 s 14
420 Rules
(1) Rules may be made from time to time under the Judicature
Act 1908-
(a) relating to the procedure of the Court under this Act:
(b) relating to appeals to the Court of Appeal under this
Act:
(c) to give effect to this Act.
(2) Matters that may be dealt with by the rules include the following:
(a) how proceedings are started, and transferred from one
registry of the Court to another:
(b) where proceedings may be started:
179
Part 7 cl 420 Insolvency Law Reform Bill
(c) the forms to be used in proceedings:
(d) the service of documents filed or issued in proceedings:
(e) the amendment of defects and errors in proceedings:
(f) how evidence may be given:
(g) how the identity of persons who are parties to, or
involved in, proceedings must be proved:
(h) how witnesses are summoned and documents are discovered:
(i) the right of creditors and other persons to appear in
proceedings, and the procedure to be followed in the
absence of creditors or other persons:
(j) the notices that must be given in connection with proceedings,
and who must give them and to whom:
(k) the manner of advertising:
(l) the consolidation of proceedings:
(m) the substitution of parties to proceedings:
(n) authorising the continuation of proceedings after the
death of the debtor in question:
(o) authorising proceedings to be begun against 1 or more
partners of a business partnership without including the
others, and providing for the disclosure of the other
partners:
(p) the scale of costs of solicitors and others in proceedings:
(q) the award of costs, and when security for costs must be
given:
(r) the execution of processes and the enforcement of
orders under this Act:
(s) the time limit for appealing to the Court of Appeal, and
how the appeal must be brought:
(t) matters necessary for the administration of this Act or
necessary for giving it full effect.
Compare: 1967 No 54 s 13
420A Transitional provision
(1) If a debtor is adjudicated bankrupt before the commencement
of this Act, his or her property must be applied in accordance
with the priorities stated in Part 9 of the Insolvency Act 1967
on the date of that adjudication as if this Act had not come
into force.
180
Insolvency Law Reform Bill Part 8 cl 424
(2) Subsection (1) applies despite anything to the contrary in this
Act.
420B Consequential amendments to other enactments
The enactments specified in Schedule 2 are amended in the
manner indicated in that Schedule.
Part 8
Companies Act 1993 amendments
421 Companies Act 1993 called principal Act in this Part
In this Part, the Companies Act 19931 is called "the principal
Act".
1 1993 No 105
422 Commencement of this Part
This Part comes into force on a date to be appointed by the
Governor-General by Order in Council.
423 Interpretation
Section 2(1) of the principal Act is amended by repealing the
definition of the term spouse, and substituting the following
definition:
"spouse, in relation to a person A, includes a person with
whom A is in a de facto relationship as defined in section 2D
of the Property Relationships Act 1976."
Voluntary administration
424 New Part 15A inserted
The principal Act is amended by inserting, after Part XV, the
following Part:
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Part 8 cl 424 Insolvency Law Reform Bill
"Part 15A
"Voluntary administration
"Subpart 1-Preliminary
"239A Object of this Part
The object of this Part is to provide for the business, property,
and affairs of an insolvent company to be administered in a
way that-
"(a) maximises the chances of the company, or as much as
possible of its business, continuing in existence; or
"(b) if it is not possible for the company or its business to
continue in existence, results in a better return for the
company's creditors and shareholders than would result
from an immediate liquidation of the company.
Compare: Corporations Act 2001 (Australia) s 435A
"239B Interpretation of some key terms
Some key terms used in this Part and their meaning are the
following:
"administrator means the person who is appointed the
administrator of the company in administration
"deed administrator, who may or may not be the same person
as the administrator, is the person who is appointed the
administrator of the deed of company arrangement
"deed of company arrangement means the deed that is executed
by the company and its creditors providing for payments
towards the creditors' debts
"watershed meeting means the creditors' meeting called by
the administrator to decide the future of the company and,
in particular, whether the company and the creditors should
execute a deed of company arrangement.
"239C Interpretation of other terms
In this Part, unless the context requires otherwise,-
"convening period has the meaning given to it in section
239AP(2)
"enforcement process, in relation to property, means-
"(a) execution against that property; or
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Insolvency Law Reform Bill Part 8 cl 424
"(b) any other enforcement process in relation to that property
that involves a court or a sheriff
"insolvent means, in relation to a company, that the company
is unable to pay all its debts, as and when they become due
and payable
"receiver includes a receiver and manager
"sheriff includes a person charged with the execution of a writ
or other process.
Compare: Corporations Act 2001 (Australia) s 435B
"239D When administration begins
The administration of a company begins when an administrator
is appointed under this Part.
Compare: Corporations Act 2001 (Australia), s 435C(1)
"239E When administration ends
"(1) The administration of a company ends when-
"(a) a deed of company arrangement is executed by both the
company and the deed's administrator; or
"(b) the company's creditors resolve that the administration
should end; or
"(c) the company's creditors appoint a liquidator by a resolution
passed at the watershed meeting.
"(2) However, the administration of a company may also end in
the following instances:
"(a) if the Court orders that the administration end, for
example because the Court is satisfied that the company
is solvent, the administration ends on the date
specified in the order or, if no date is specified, when
the order is made; or
"(b) if the convening period expires without the watershed
meeting having been held or without an application
having been made to extend it, the administration ends
at the end of that period; or
"(c) if an application has been made to extend the convening
period, which has expired after the application was
made, the administration ends when the application is
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Part 8 cl 424 Insolvency Law Reform Bill
refused or otherwise disposed of without the convening
period being extended; or
"(d) if the watershed meeting ends without a resolution that
the company execute a deed of arrangement, the administration
ends at the end of that meeting; or
"(e) if the company fails to execute a proposed deed of
company arrangement within the time allowed by section
239ACK, the administration ends when that time
expires; or
"(f) if the Court appoints a liquidator or an interim liquidator,
the administration ends at the time when the order
is made.
Compare: Corporations Act 2001 (Australia) s 435C(2), (3)
"Subpart 2-Appointment of administrator
"239F Who may be appointed administrator
"(1) A natural person who is not disqualified under subsection (2)
may be appointed an administrator of a company.
"(2) A person must not be appointed administrator if that person
is disqualified under section 280(1) from being appointed or
acting as a liquidator of the company, unless the Court orders
otherwise.
"239G Administrator must consent in writing
A person must not be appointed the administrator of a company
unless that person has consented in writing and has not
withdrawn the consent at the time of appointment.
Compare: Corporations Law 2001 (Australia) s 448A
"239H Who may appoint administrator
"(1) An administrator may be appointed to a company by-
"(a) the company; or
"(b) if the company is in liquidation, the liquidator; or
"(c) if an interim liquidator has been appointed, the interim
liquidator; or
"(d) a chargeholder holding a charge over the whole, or substantially
the whole, of the company's property; or
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Insolvency Law Reform Bill Part 8 cl 424
"(e) the Court.
"(2) If the company is already in administration, an administrator
may be appointed only by-
"(a) the Court; or
"(b) the creditors, as a replacement administrator for an
administrator that the creditors have removed; or
"(c) the appointer of the first administrator, if that administrator
has died, resigned, or become disqualified.
Compare: Corporations Law 2001 (Australia) s 436D
"239I Appointment by company
"(1) A company may appoint an administrator if the board has
resolved that,-
"(a) in the opinion of the directors voting for the resolution,
the company is insolvent or is likely to become insolvent;
and
"(b) an administrator of the company should be appointed.
"(2) The appointment must be in writing.
"(3) The company must not appoint an administrator if the company
is already in liquidation.
Compare: Corporations Act 2001 (Australia) s 436A
"239J Appointment by liquidator or interim liquidator
"(1) The liquidator or interim liquidator of a company may appoint
an administrator if he or she thinks that the company is insolvent
or is likely to become insolvent.
"(2) The appointment must be in writing.
"(3) The liquidator or interim liquidator may appoint himself or
herself administrator if he or she first obtains-
"(a) the permission of the Court; or
"(b) in the case of a liquidator but not an interim liquidator,
the approval of the company's creditors in the form of
a resolution passed at a meeting of the creditors.
"(4) A liquidator or interim liquidator must not appoint as administrator
a person who is the liquidator's or interim liquidator's
business or professional partner, employer, or employee,
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Part 8 cl 424 Insolvency Law Reform Bill
unless the appointment has been approved by the company's
creditors in the form of a resolution passed at a creditors'
meeting.
"(5) An administrator who is appointed to a company already in
liquidation may apply to the Court for an order under section
250 terminating the liquidation.
Compare: Corporations Law 2001 (Australia) s 436B
"239K Appointment by chargeholder
"(1) A person who holds a charge over the whole, or substantially
the whole, of a company's property may appoint an administrator
if the charge has become, and is still, enforceable.
"(2) The appointment must be in writing.
"(3) A chargeholder must not appoint an administrator if the company
is already in liquidation.
Compare: Corporations Law 2001 (Australia) s 436C
"239L Appointment by Court
The Court may appoint an administrator on the application of
a creditor, the liquidator (if the company is in liquidation), or
the Registrar.
"239M Appointment must not be revoked
"(1) The appointment of an administrator must not be revoked,
"(2) This does not apply to removal by the Court or by the creditors.
Compare: Corporations Act 2001 (Australia) s 449A
"239N Appointment of 2 or more administrators
"(1) Two or more persons may be appointed administrators in any
case where this Act provides for the appointment of an administrator.
"(2) If 2 or more persons are appointed administrators of a company,
-
"(a) an administrator's function or power may be performed
or exercised by any 1 of them, or by any 2 or more of
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Insolvency Law Reform Bill Part 8 cl 424
them together, except so far as the order, instrument, or
resolution appointing them provides otherwise; and
"(b) a reference in this Act to an administrator or the administrator
refers to whichever 1 or more of the administrators
the case requires.
Compare: Corporations Act 2001 (Australia) s 451A
"239O Remuneration of administrator
"(1) The administrator is entitled to charge reasonable remuneration
for carrying out his or her duties and exercising his or her
powers as administrator.
"(2) The Court may, on the application of the administrator, an
officer of the company, creditor, or shareholder, review or fix
the administrator's remuneration at a level that is reasonable
in the circumstances.
Compare: 1993 No 105 ss 276(1), 284(1)(e)
"Subpart 3-Resignation and removal of administrator
"239P When office of administrator is vacant
The office of administrator is vacant if the administrator-
"(a) resigns; or
"(b) becomes disqualified; or
"(c) is removed by the Court.
Compare: Corporations Act 2001 (Australia) s 449C(1)
"239Q Administrator may resign
The administrator may resign by giving written notice to the
company and to his or her appointer.
Compare: Corporations Act 2001 (Australia) s 449C(1)(c)
"239R Removal of administrator
"(1) The administrator may be removed-
"(a) by the Court, on the application of a creditor, the liquidator
(if the company is in liquidation), or the Registrar;
or
"(b) by a resolution of creditors passed at the first creditors'
meeting; or
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Part 8 cl 424 Insolvency Law Reform Bill
"(c) by a resolution of creditors at a meeting convened to
consider whether to remove a replacement administrator.
"(2) The creditors may not remove the administrator by a resolution
passed at a creditors' meeting unless-
"(a) the same resolution also appoints as administrator
another person who is not disqualified; and
"(b) the person named in the resolution as the new administrator
has, before the resolution is considered, tabled at
the meeting-
"(i) a signed, written consent to act as administrator;
and
"(ii) a statement of interest.
Compare: Corporations Act 2001 ss 436E(4), 449B
"239S Appointer may appoint new administrator to fill vacancy
"(1) The appointer of an administrator may appoint a replacement
to fill the vacancy that occurs if the administrator-
"(a) resigns; or
"(b) becomes disqualified.
"(2) The appointment of a replacement administrator by a company
must be made by a resolution of the board.
Compare: Corporations Act 2001 (Australia) s 449C
"239T Creditors must consider appointment of replacement
administrator
"(1) A replacement administrator, unless appointed by the Court,
must convene a meeting of the creditors at which the creditors
may vote to remove the replacement administrator and appoint
another person in his or her place.
"(2) The meeting must be held not more than 5 working days after
the date on which the replacement administrator is appointed.
"(3) The replacement administrator must convene the meeting
by-
"(a) giving written notice of the meeting to as many of the
company's creditors as reasonably practicable; and
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Insolvency Law Reform Bill Part 8 cl 424
"(b) publishing a notice of the meeting in a national newspaper.
"(4) The replacement administrator must take the steps in subsection
(3) not less than 2 working days before the meeting.
Compare: Corporations Act 2001 (Australia) s 449C(4), (5)
"Subpart 4-Effect of appointment of administrator
"239U Outline of administrator's role
While a company is in administration, the administrator-
"(a) has control of the company's business, property, and
affairs; and
"(b) may carry on that business and manage that property
and those affairs; and
"(c) may terminate or dispose of all or part of that business,
and may dispose of any of that property; and
"(d) may perform any function, and exercise any power, that
the company or any of its officers could perform or
exercise if the company were not in administration.
Compare: Corporations Law 2001 (Australia) s 437A(1)
"239V Administrator's powers
"(1) The administrator has the powers-
"(a) to carry out the functions and duties of an administrator
under this Act; and
"(b) conferred on an administrator under this Act.
"(2) An administrator's powers include the powers to-
"(a) begin, continue, discontinue, and defend legal proceedings;
and
"(b) carry on, to the extent necessary for the administration,
the business of the company; and
"(c) appoint an agent to do anything that the administrator
is unable to do.
Compare: Companies Act 1993 s 260(1)
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Part 8 cl 424 Insolvency Law Reform Bill
"239W Administrator is company's agent
The administrator of a company, when performing a function
or exercising a power in that capacity, is the company's agent.
Compare: Corporations Law 2001 (Australia) s 437B
"239X Effect on company officers
"(1) The appointment of an administrator does not remove the
officers of the company from office.
"(2) However, an officer of a company that is in administration
must not exercise or perform, or purport to exercise or
perform, a function or power as an officer of the company
except-
"(a) with the prior, written approval of the administrator; or
"(b) as expressly permitted by this Part.
"(3) In this section, officer, in relation to a company in administration,
-
"(a) includes-
"(i) a receiver who is not also a manager; and
"(ii) a receiver and manager appointed by the Court;
and
"(iii) a liquidator or interim liquidator appointed by
the Court before the administration began; but
"(b) does not include a person merely because he or she is
an employee of the company.
Compare: Corporations Law 2001 (Australia) s 437C
"239Y Effect on employees
"(1) The appointment of an administrator does not automatically
terminate an employment agreement to which the company is
a party.
"(2) The administrator is not personally liable for any obligation
of the company under an employment agreement to which the
company is a party, unless the administrator expressly adopts
the agreement in writing.
"(3) From the date of the appointment of the administrator, the
duty of good faith set out in section 4 of the Employment
Relations Act 2000 continues to apply between each employee
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Insolvency Law Reform Bill Part 8 cl 424
of the company and his or her employer (who may be the
administrator if the administrator has adopted the employment
agreement under subsection (2)).
"239Z Effect on dealing with company property
"(1) A transaction or dealing by a company in administration, or by
a person on behalf of the company, that affects the company's
property is void unless the transaction or dealing was entered
into-
"(a) by the administrator, on the company's behalf; or
"(b) with the administrator's prior, written consent; or
"(c) under an order of the Court.
"(2) The Court may validate a transaction or dealing that is void
under subsection (1).
"(3) Subsection (1) does not apply to a payment made by a registered
bank-
"(a) out of an account kept by the company with the bank;
and
"(b) in good faith and in the ordinary course of the bank's
banking business; and
"(c) on or before the day on which the bank was notified in
writing by the administrator that the administration had
begun or notice of the administration was published
in accordance with section 239ADR(1)(b), whichever
occurred first.
"(4) A company officer commits an offence if he or she-
"(a) purported, on the company's behalf, to enter into a
transaction or dealing that is void under subsection (1);
or
"(b) was in any other way knowingly concerned in, or party
to, the void transaction or dealing, whether-
"(i) by act or omission; or
"(ii) directly or indirectly.
Compare: Corporations Act 2001 (Australia) s 437D
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Part 8 cl 424 Insolvency Law Reform Bill
"239AA Company officer's liability for compensation for void
transaction or dealing
The Court may order a company officer who is convicted of
an offence under section 239Z(4) to compensate any person,
including the company, who has suffered loss as a result of
the act or omission constituting the offence.
Compare: Corporations Act 2001 (Australia) s 437E(1)
"239AB Effect on transfer of shares
"(1) A share in a company in administration must not be transferred
and the rights or liabilities of a shareholder of the company
must not be altered.
"(2) However, the administrator may consent to the transfer of a
share in company in administration if the administrator is satisfied
that the transfer is in the best interests of the company's
shareholders.
"(3) Also, despite subsection (1), the Court may make an order
for-
"(a) the transfer of a share of a company in administration,
but only after the administrator has been asked to consent
to the transfer and has refused or failed to respond
for an unreasonable time; or
"(b) altering the rights and liabilities of a shareholder in a
company in administration.
Compare: Corporations Act 2001 (Australia) s 437F
"Subpart 5-Administrator's investigation of company's
affairs
"239AC Administrator must investigate company's affairs and
consider possible courses of action
As soon as practicable after the administration of a company
begins, the administrator must-
"(a) investigate the company's business, property, affairs,
and financial circumstances; and
"(b) form an opinion about each of the following matters:
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Insolvency Law Reform Bill Part 8 cl 424
"(i) whether it would be in the creditors' interests
for the company to execute a deed of company
arrangement:
"(ii) whether it would be in the creditors' interests for
the administration to end:
"(iii) whether it would be in the creditors' interests for
a liquidator to be appointed.
Compare: Corporations Act 2001 (Australia) s 438A
"239AD Directors' statement of company's position
"(1) Within 5 working days after the administration of a company
begins, the directors must give to the administrator a statement
about the company's business, property, affairs, and financial
circumstances.
"(2) The administrator may extend the time for compliance with
subsection (1).
"(3) The administrator must table the directors' statement-
"(a) at the first creditors' meeting; or
"(b) if the administrator has extended the time for compliance
by the directors, at the watershed meeting.
Compare: Corporations Act 2001 (Australia) s 438B(2)
"239AE Administrator's right to documents, etc
Sections 261 and 263 to 267 apply with all necessary modifications
as if every reference to "liquidator" and "liquidation"
was a reference to "administrator" and "administration".
"239AF Administrator may lodge report with Registrar
The administrator may lodge a report with the Registrar specifying
any matter that, in his or her opinion, should be brought
to the Registrar's notice.
Compare: Corporations Act 2001 (Australia) s 438D(2)
"239AG Administrator must report misconduct
"(1) The administratormust as soon as practicable report thematter
to the Registrar if the administrator believes that-
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Part 8 cl 424 Insolvency Law Reform Bill
"(a) a past or present officer or shareholder of the company
may have committed an offence in relation to the company;
or
"(b) a person who has taken part in the formation, promotion,
administration, management, or liquidation of the
company-
"(i) may have misapplied or retained or become liable
or accountable for the company's money or
property (whether in New Zealand or elsewhere);
or
"(ii) may have been guilty of negligence, default, or
breach of duty or trust in relation to the company.
"(2) In any case where the administrator makes a report under subsection
(1), the administrator must give the Registrar assistance
that the Registrar may reasonably require by way of-
"(a) provision of information; and
"(b) access to documents; and
"(c) facilities for inspecting and copying documents.
"(3) In any case where the Court is satisfied that the administrator
should make a report under subsection (1) and has not done
so, the Court may, on the application of an interested person,
direct the administrator to make a report.
Compare: Corporations Act 2001 (Australia) s 438D
"Subpart 6-Creditors' meetings generally
"239AH Administrator must call creditors' meetings
The administrator must call-
"(a) the first creditors' meeting, for the appointment (if any)
of a committee of creditors; and
"(b) the watershed meeting (see section 239AO; and
"(c) other creditors' meetings as required (for example,
because an administrator has been replaced).
"239AI Conduct of creditors' meetings
"(1) The following clauses of the Fifth Schedule apply to creditors'
meetings called under this Part as if references to "the
liquidator" were references to "the administrator":
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Insolvency Law Reform Bill Part 8 cl 424
"(a) subject to section 239AV, clause 4; and
"(b) clause 5(1) and clauses 6 to 11.
"(2) The administrator or the administrator's nominee must chair
a creditors' meeting, and has a casting vote.
"Subpart 7-First creditors' meeting to appoint creditors
committee
"239AJ Administrator must call first creditors' meeting
"(1) The administrator must call the first creditors' meeting to-
"(a) decide whether to appoint a creditors' committee and,
if so, to appoint its members; and
"(b) decide whether to replace the administrator.
"(2) The meeting must be held within 8 working days after the date
on which the administration began.
Compare: Corporations Act 2001 (Australia) s 436E(1), (2)
"239AK Notice of first creditors' meeting
"(1) The administrator must call the first creditors' meeting by-
"(a) giving written notice of the meeting to as many of the
company's creditors as reasonably practicable; and
"(b) publishing a notice of the meeting in a national newspaper.
"(2) The administrator must take the steps in subsection (1) not
less than 5 working days before the meeting.
Compare: Corporations Law 2001 (Australia) s 436E(3)
"239AL Administrator must table interests statement
"(1) The administrator must table at the first creditors' meeting an
interests statement that complies with subsection (2).
"(2) The interests statement must disclose whether the administrator,
or a firm of which the administrator is a partner, has a
relationship (whether professional, business, or personal) with
the company in administration, or any of its officers, shareholders,
or creditors.
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Part 8 cl 424 Insolvency Law Reform Bill
"(3) The administrator must, before tabling the interests statement,
make the inquiries that are reasonably necessary for ensuring
that the interests statement is complete.
"239AM Function of creditors' committee
"(1) The functions of the creditors' committee of a company in
administration are-
"(a) to consult with the administrator about matters relating
to the administration; and
"(b) to receive and consider reports by the administrator.
"(2) The committee must not give directions to the administrator,
but the administrator must report to the committee about matters
relating to the administration as and when the committee
reasonably requires.
Compare: Corporations Act 2001 (Australia) s 436F
"239AN Membership of creditors' committee
A person may be a member of the creditors' committee only
if he or she is-
"(a) a creditor of the company; or
"(b) the agent of a creditor under a general power of attorney;
or
"(c) authorised in writing by a creditor to be a member.
Compare: Corporations Act 2001 (Australia) s 436G
"Subpart 8-Watershed meeting
"239AO What is watershed meeting
The watershed meeting is the meeting of creditors called by
the administrator to decide the future of the company and, in
particular, whether the company and creditors should execute
a deed of company arrangement.
"239AP Administrator must convene watershed meeting
"(1) The administrator must convene the watershed meeting within
the convening period.
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Insolvency Law Reform Bill Part 8 cl 424
"(2) The convening period is the period of 20 working days after
the date on which the administrator is appointed, and includes
any period for which it is extended under subsection (3).
"(3) The Court may, on the administrator's application, extend the
convening period, butmust not do so if the application is made
after the convening period has expired, unless the Court is
satisfied that a substantial injustice will result if the convening
period is not extended.
"239AQ Notice of watershed meeting
"(1) The administrator must convene the watershed meeting by-
"(a) giving written notice of the meeting to as many of the
company's creditors as reasonably practicable; and
"(b) publishing a notice of the meeting in a national
newspaper.
"(2) The administrator must take the steps in subsection (1) not
less than 5 working days before the meeting.
"(3) The following documents must accompany the notice of the
watershed meeting that is sent to the company's creditors:
"(a) a report by the administrator-
"(i) about the company's business, property, affairs,
and financial circumstances; and
"(ii) any other matter material to the creditors' decisions
to be considered at the meeting; and
"(b) a statement setting out the administrator's opinion, with
reasons for that opinion, about each of the following
matters:
"(i) whether it would be in the creditors' interests
for the company to execute a deed of company
arrangement:
"(ii) whether it would be in the creditors' interests for
the administration to end:
"(iii) whether it would be in the creditors' interests for
the company to be placed in liquidation; and
"(c) if a deed of company arrangement is proposed, a statement
setting out the details of the proposed deed.
Compare: Corporations Act 2001 (Australia) s 439A(3), (4)
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Part 8 cl 424 Insolvency Law Reform Bill
"239AR When watershed meeting must be held
The watershed meeting must be held within 5 working days
after the end of the convening period or extended convening
period, as the case may be.
Compare: Corporations Law 2001 (Australia) s 439A(2)
"239AS Directors must attend watershed meeting
"(1) The directors of the company must attend the watershed meeting,
including any occasion to which the meeting is adjourned,
but cannot be required to answer questions at the meeting.
"(2) A director need not attend the watershed meeting if-
"(a) the director has a valid reason for not attending; or
"(b) the administrator or the creditors by resolution have
excused the director from attending.
"(3) A director attending the watershed meeting must leave for
all or part of the remainder of the meeting if required by a
resolution of the creditors to do so.
"239AT Disclosure of voting arrangements
The administrator and the directors of the company under
administration must, before the meeting votes on any resolution,
inform the meeting of any voting arrangement of which
the administrator or a director, as the case may be, is aware
that requires 1 or more creditors to vote in a particular way on
any resolution that will or may be voted on by the meeting.
"239AU Court may order that pooled property owners are
separate class
"(1) On the application of the administrator, the Court may order
that, for the limited purposes of this section only, pooled property
owners are a separate class.
"(2) In this section,-
"pooled property owners means all the owners or lessors of
property that is pooled in a single enterprise forming part of
the business of a company in administration
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Insolvency Law Reform Bill Part 8 cl 424
"requisite majority means a majority in number representing
75% in value of the pooled property owners voting in person
or by proxy vote or by postal vote
"resolution means a resolution that the company in administration
execute the deed of company arrangement specified in
the resolution.
"(3) Each pooled property owner is bound by the deed of company
arrangement as if that person had voted in favour the resolution
at the watershed meeting if-
"(a) the Court has ordered that the pooled property owners
are a separate class; and
"(b) at the watershed meeting the creditors (including the
pooled property owners) approved the resolution; and
"(c) the requisite majority of the pooled property owners
were included in the creditors who voted in favour of
the resolution.
"(4) It is not necessary that a separate meeting of the pooled property
owners be held for the purpose of voting on the resolution.
"(5) Subsection (3) applies no matter what sections 239ACO and
239ACP say.
"239AV Adjournment of watershed meeting
"(1) The watershed meeting may be adjourned, but only to a day
that is not more than 30 working days after the first day on
which the meeting was held.
"(2) However, the Court may, on the administrator's application,
order that the meeting be adjourned for more than 30 working
days.
Compare: Corporations Act 2001 (Australia) s 439B(2)
"239AW What creditors may decide at watershed meeting
At the watershed meeting, the creditors may-
"(a) resolve that the company execute a deed of company
arrangement specified in the resolution (and it does not
matter that the deed to be executed differs from any
proposed deed of which details were given in the notice
of the meeting); or
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Part 8 cl 424 Insolvency Law Reform Bill
"(b) resolve that the administration should end; or
"(c) unless the company is already in liquidation, by resolution
appoint a liquidator.
Compare: Corporations Act 2001 (Australia) s 439C
"239AX What happens if proposed deed not fully approved at
watershed meeting
If, at the watershed meeting, the creditors resolve that the
company execute a deed of company arrangement, but the
proposed deed is not fully approved at the meeting, then the
administrator must take the steps set out in section 239ACL
(briefly, the administrator must draft a deed and circulate it to
creditors).
"Subpart 9-Protection of company's property during
administration
"239AY charge unenforceable
During the administration of a company, a person must not
enforce a charge over the property of the company, except-
"(a) with the administrator's written consent; or
"(b) with the permission of the Court.
Compare: Corporations Act 2001 (Australia) s 440B
"239AZ Owner or lessor must not recover property used by
company
During the administration of a company, the owner or lessor of
property that was used or occupied by, or is in the possession
of, the company must not take possession of the property or
otherwise recover it, except-
"(a) with the administrator's written consent; or
"(b) with the permission of the Court.
Compare: Corporations Act 2001 (Australia) s 440C
"239ABA Proceedings halted
During the administration of a company, a proceeding in a
court against the company or in relation to any of its property
must not be begun or continued, except-
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Insolvency Law Reform Bill Part 8 cl 424
"(a) with the administrator's written consent; or
"(b) with the permission of the Court and in accordance with
the terms that the Court imposes.
Compare: Corporations Act 2001 (Australia) s 440D
"239ABB Administrator not liable in damages for refusing
consent
An administrator is not liable in damages for a refusal to give
an approval or consent for the purposes of this subpart.
Compare: Corporations Act 2001 (Australia) s 440E
"239ABC Enforcement process halted
During the administration of a company, an enforcement process
in relation to the company's property must not be begun
or continued except with the permission of the Court and in
accordance with the terms that the Court imposes.
Compare: Corporations Act 2001 (Australia) s 440F
"239ABD Duties of court officer in relation to company's
property
"(1) This section applies to a court officer, that is, a sheriff or
registrar or other appropriate officer of the court, who receives
written notice that a company is in administration.
"(2) During the administration, the court officer must not-
"(a) take action to sell property of the company under an
execution process; or
"(b) pay to a person (other than the administrator)-
"(i) proceeds of the sale of the company's property
(at any time) under an execution process; or
"(ii) money of the company seized (at any time) under
an execution process; or
"(iii) money paid (at any time) to avoid seizure or sale
of property of the company under an execution
process; or
"(c) take action in relation to the attachment of a debt due
to the company; or
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"(d) pay to any person (other than the administrator) money
received because of the attachment of a debt due to the
company.
"(3) The court officer must deliver to the administrator any property
of the company that is in his or her possession under an
execution process (whenever begun).
"(4) The court officer must pay to the administrator all proceeds or
money of a kind referred to in subsection (2)(b) or (d) that-
"(a) are in the court officer's possession; or
"(b) have been paid into the court and have not since been
paid out.
"(5) The costs of the execution or attachment are a first charge over
property delivered under subsection (3) or proceed or money
paid under subsection (4).
"(6) In order to give effect to a charge under subsection (5), on
proceeds or money, the court officer may retain, on behalf of
the person entitled to the charge, so much of the proceeds as
the court officer thinks necessary.
"(7) The court may, if it is satisfied that it is appropriate to do so,
permit the court officer to take action, or make a payment, that
subsection (2) would otherwise prevent.
"(8) A person who buys property in good faith under a sale under
an execution process obtains a good title to the property as
against the company and the administrator, despite anything
else in this section.
Compare: Corporations Act 2001 (Australia) s 440G
"239ABE Lis pendens taken to exist
"(1) This section has effect only for the purposes of a law about
the effect of a lis pendens on purchasers or mortgagees.
"(2) During the administration of a company, an application for
the appointment of a liquidator to the company is taken to be
pending.
"(3) An application that is taken because of subsection (2) to be
pending constitutes a lis pendens.
Compare: Corporations Act 2001 (Australia) s 440H
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"239ABF Administration not to trigger guarantee liability of
director or relative
"(1) During the administration of a company, except with the
Court's permission and in accordance with the terms that the
Court may impose, a guarantee of a liability of the company
must not be enforced against-
"(a) a director of the company who is a natural person; or
"(b) that person's spouse or relative.
"(2) In this section, liability means a debt, liability, or other obligation.
Compare: Corporations Act 2001 (Australia) s 440J(1)
"Subpart 10-Rights of chargeholder, owner, or lessor
"239ABG Meaning of terms used in this subpart
In this subpart, unless the context otherwise requires,-
"decision period means, in relation to a chargeholder
in relation to a charge over property of a company in
administration, the period that-
"(a) begins-
"(i) if notice of the appointment of the administrator
must be given to the chargeholder under section
239ADR(1)(c), on the day when that notice is
given; or
"(ii) in any other case, on the day when the administration
begins; and
"(b) ends at the end of the 10th working day after the day
when it begins
"enforce, in relation to a charge over property of a company
in administration, includes-
"(a) appoint a receiver of property of the company under a
power contained in an instrument relating to the charge;
or
"(b) obtain an order for the appointment of a receiver of that
property for the purpose of enforcing the charge; or
"(c) enter into possession, or assume control, of that property
for that purpose; or
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"(d) appoint a person to enter into possession or assume
control (whether as agent for the chargeholder or for
the company) for that purpose; or
"(e) exercise, as chargeholder or as a receiver or person so
appointed, a right, power, or remedy existing because
of the charge, whether arising under an instrument relating
to the charge, under a written or unwritten law, or
otherwise.
"239ABH If chargeholder acts before or during decision period
"(1) This section applies if-
"(a) the whole, or substantially the whole, of the property of
a company in administration is subject to a charge; and
"(b) before or during the decision period, the chargeholder
enforced the charge in relation to all property of the
company subject to the charge, whether or not the
charge was enforced in the same way in relation to all
that property.
"(2) This section also applies if-
"(a) a company is in administration; and
"(b) the same person is the chargeholder in relation to each
of 2 or more securities in the property of the company;
and
"(c) the property of the company (in this subsection called
the charged property) subject to the respective securities
together constitutes the whole, or substantially the
whole, of the company's property-
"(i) whether or not the securities were enforced in the
same way in relation to all the charged property;
and
"(ii) whether or not any of the securities was enforced
in the same way in relation to all the property of
the company subject to that charge; and
"(iii) in so far as the securities were enforced in relation
to property of the company in away referred
to in paragraph (a), (b), or (d) of the definition of
enforce in section 239ABG, whether or not the
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same person was appointed in respect of all of
the last-mentioned property.
"(3) Nothing in section 239X or section 239AY, or in an order under
section 239ABK, prevents any of the following from enforcing
the charge:
"(a) the chargeholder:
"(b) a receiver or person appointed as mentioned in paragraph
(a), (b), or (d) of the definition of enforce in section
239ABG as that definition applies in relation to the
charge, or any of the charges (even if appointed after
the decision period).
"(4) Section 239Z does not apply in relation to a transaction or
dealing that affects property of the company and is entered into
by the chargeholder or a receiver or person of a kind referred
to in subsection (3)(b) in the performance or exercise of a
function or power as that chargeholder, receiver, or person, as
the case may be.
Compare: Corporations Act 2001 (Australia) s 441A
"239ABI If enforcement of charges begins before administration
"(1) This section applies if, before the beginning of the administration
of a company, a chargeholder, receiver, or other person,
for the purpose of enforcing a charge over the property,-
"(a) entered into possession, or assumed control, of the
property of the company; or
"(b) entered into an agreement to sell the property; or
"(c) made arrangements for the property to be offered for
sale by public auction; or
"(d) publicly invited tenders for the purchase of the property;
or
"(e) exercised any other power in relation to the property.
"(2) Nothing in section 239X or section 239AY prevents the chargeholder,
receiver, or other person from enforcing the charge in
relation to the property.
"(3) Section 239Z does not apply in relation to a transaction or
dealing that affects the property and is entered into, as the
case may be,-
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"(a) in the exercise of a power of the chargeholder as chargeholder;
or
"(b) in the performance or exercise of a function or power
of the receiver or other person.
Compare: Corporations Act 2001 (Australia) s 441B
"239ABJ charge over perishable property
"(1) This section applies if perishable property of a company in
administration is subject to a charge.
"(2) Nothing in section 239X or section 239AY prevents the chargeholder,
a receiver, or a person appointed (at any time) as mentioned
in paragraph (a), (b), or (d) of the definition of enforce
in section 239ABG from enforcing the charge, so far as it is a
charge over perishable property.
"(3) Section 239Z does not apply in relation to a transaction or
dealing that affects perishable property of the company and is
entered into, as the case may be,-
"(a) in the exercise of a power of the chargeholder as chargeholder;
or
"(b) in the performance or exercise of a function or power
of the receiver or other person.
Compare: Corporations Act 2001 (Australia) s 441C
"239ABK Court may limit powers of chargeholder, etc, in
relation to property subject to charge
"(1) This section-
"(a) applies if-
"(i) for the purpose of enforcing a charge over property
of a company, the chargeholder, a receiver,
or other person does an act of a kind referred to
in section 239ABI(1); and
"(ii) the company is in administration when the
chargeholder, receiver, or other person does
the act, or the company later begins to be in
administration:
"(b) does not apply in a case where section 239ABI applies.
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"(2) On an application by the administrator, the Court may order
the chargeholder, receiver, or other person not to perform
specified functions or exercise specified powers, except as
permitted by the order.
"(3) The Court may make an order only if satisfied that what the
administrator proposes to do during the administration will
adequately protect the chargeholder's interests.
"(4) An order-
"(a) may be made only, and has effect only, during the
administration; and
"(b) has effect despite section 239ABI and section 239ABJ.
Compare: Corporations Act 2001 (Australia) s 441D
"239ABL Giving notice under security agreement
Section 239X or section 239AY does not prevent a person from
giving a notice under the provisions of a security agreement.
Compare: Corporations Act 2001 (Australia) s 441E
"239ABM If recovery of property begins before administration
"(1) This section applies if, before the beginning of the administration
of a company, a receiver or other person, for the purpose
of enforcing a right of the owner or lessor of the property to
take possession of the property or otherwise recover it,-
"(a) entered into possession of, or assumed control of, property
used or occupied by, or in the possession of, the
company; or
"(b) exercised any other power in relation to the property.
"(2) Section 239X or section 239AZ does not prevent the receiver
or other person from performing a function, or exercising a
power, in relation to the property.
"(3) Section 239Z does not apply in relation to a transaction or
dealing that affects the property and is entered into in the
performance or exercise of a function or power of the receiver
or other person.
Compare: Corporations Act 2001 (Australia) s 441F
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"239ABN Recovering perishable property
"(1) Neither section 239X nor section 239AZ prevents a person
from taking possession of, or otherwise recovering, perishable
property.
"(2) Section 239Z does not apply in relation to a transaction or
dealing that affects perishable property and is entered into for
the purpose of enforcing a right of the owner or lessor of
the property to take possession of the property or otherwise
recover it.
Compare: Corporations Act 2001 (Australia) s 441G
"239ABO Court may limit powers of receiver, etc, in relation to
property used by company
"(1) This section-
"(a) applies if, for the purpose of enforcing a right of the
owner or lessor of property used or occupied by, or in
the possession of, a company to take possession of the
property or otherwise recover it, a person-
"(i) enters into possession, or assumes control, of the
property; or
"(ii) exercises any other power in relation to the
property; and
"(b) the company is in administration when the person does
so, or the company later begins to be in administration.
"(2) On an application by the administrator, the Court may order
the person not to perform specified functions, or exercise specified
powers, in relation to the property, except as permitted
by the order.
"(3) The Court may make an order only if satisfied that what the
administrator proposes to do during the administration will
adequately protect the interests of the owner or lessor.
"(4) An order-
"(a) may be made only, and has effect only, during the
administration; and
"(b) has effect despite section 239ABM and section 239ABN.
Compare: Corporations Act 2001 (Australia) s 441H
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"239ABP Giving notice under agreement about property
Nothing in section 239X or section 239AZ prevents a person
from giving a notice to a company under an agreement relating
to property that is used or occupied by, or is in the possession
of, the company.
Compare: Corporations Act 2001 (Australia) s 441J
"Subpart 11-Interface with liquidation
"239ABQ When liquidator may be appointed to company in
administration
A liquidator may be appointed to a company in administration
-
"(a) by the Court, on an application for the appointment of
a liquidator under section 241(2)(c); or
"(b) by resolution of the creditors at the watershed meeting
or at a meeting convened under section 239ADB to consider
the termination of the deed of company arrangement.
"239ABR Court may adjourn application for liquidation
The Court may adjourn an application under section 241(1)(c)
for the appointment of a liquidator of a company in administration
if the Court is satisfied that it is in the interests of the
company's creditors for the company to continue in administration
rather than be placed in liquidation.
Compare: Corporations Act 2001 (Australia) s 440A(2)
"239ABS Court must not appoint interim liquidator if
administration in creditors' interests
The Court must not appoint an interim liquidator of a company
in administration if the Court is satisfied that it is in the
interests of the company's creditors for the company to continue
in administration rather than have an interim liquidator
appointed.
Compare: Corporations Act 2001 (Australia) s 440A(3)
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Part 8 cl 424 Insolvency Law Reform Bill
"239ABT Effect of appointment of liquidator by Court
The appointment by the Court of a liquidator to a company in
administration ends the administration.
"239ABU Administrator is default liquidator
In the case of the appointment by the creditors of a liquidator
to a company in administration, the administrator is the liquidator
if-
"(a) the creditors' resolution does not nominate a person for
appointment; or
"(b) the person nominated is disqualified from acting as the
liquidator or has not consented in writing; or
"(c) the person nominated is for any other reason unable or
unwilling to act as liquidator.
"239ABV Person in control of company must lodge revised
report with Registrar
"(1) This section applies when a liquidator is appointed to a company
that is in administration or under a deed of company
arrangement.
"(2) The person in control of the company immediately before
the appointment of the liquidator must as soon as practicable
lodge the following documents with the Registrar:
"(a) a copy of the administrator's report that accompanied
the notice to creditors of the watershed meeting; and
"(b) a further report updating the administrator's report with
any matters of which the officer is aware that-
"(i) are not referred to in the administrator's report,
or have changed since that report; and
"(ii) affect the financial position of the company.
"239ABW Act of administrator in good faith must not be set
aside in liquidation
A payment made, transaction entered into, or any other act
or thing done, in good faith, by or with the consent of the
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Insolvency Law Reform Bill Part 8 cl 424
administrator of a company in administration, must not be set
aside in a liquidation of the company.
Compare: Corporations Act 2001 (Australia) s 451C(b)
"239ABX Voidable transactions
"(1) The voidable transactions provisions do not apply to a transaction
by a company in administration if the transaction is-
"(a) carried out by or with the authority of the administrator
or deed administrator; or
"(b) specifically authorised by the deed of company arrangement
and carried out by the deed administrator.
"(2) In this section, the voidable transaction provisions mean
sections 292 to 296.
"Subpart 12-Deed administrator
"239ABX Who is deed administrator
The administrator of the company is the deed administrator,
unless the creditors at the watershed meeting by resolution
appoint someone else to be the deed administrator.
Compare: Corporations Act 2001 (Australia) s 444A(2)
"239ABZ Who may be appointed deed administrator
"(1) A natural person who is not disqualified under subsection (2)
may be appointed deed administrator.
"(2) A person must not be appointed deed administrator if that
person is disqualified under section 280(1) from acting as a
liquidator of the company, unless the Court orders otherwise.
"239ACA Deed administrator must consent in writing
A person must not be appointed deed administrator unless that
person has consented in writing and has not withdrawn the
consent at the time when the deed of company arrangement is
executed.
Compare: Corporations Law 2001 (Australia) s 448A
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"239ACB Appointment of deed administrator must not be
revoked
Except in the case of removal by the Court, the appointment
of the deed administrator must not be revoked.
Compare: Corporations Act 2001 (Australia) s 449A
"239ACC Appointment of 2 or more deed administrators
"(1) Two or more persons may be appointed deed administrators
in any case where this Act provides for the appointment of a
deed administrator.
"(2) If 2 or more persons are appointed deed administrators
jointly,-
"(a) a deed administrator's function or power may be performed
or exercised by any 1 of them, or by any 2
or more of them together, except so far as the order,
instrument, or resolution appointing them provides otherwise;
and
"(b) a reference in this Act to a deed administrator or the
deed administrator refers to whichever 1 or more of the
deed administrators the case requires.
Compare: Corporations Act 2001 (Australia) s 451B
"239ACD When office of deed administrator vacant
The office of the deed administrator is vacant if the deed
administrator-
"(a) resigns; or
"(b) becomes disqualified; or
"(c) is removed by the Court.
"239ACE Deed administrator may resign
The deed administrator may resign by giving written notice to
the company.
"239ACF Removal of deed administrator
"(1) The Court may-
"(a) remove the deed administrator, and appoint a person in
his or her place; or
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Insolvency Law Reform Bill Part 8 cl 424
"(b) appoint a new deed administrator, if the deed of company
arrangement has not yet terminated but for some
reason no deed administrator is acting.
"(2) The Court may make an order under subsection (1) on the
application of a creditor of the company, a shareholder, the
liquidator (if the company is in liquidation), or the Registrar.
"239ACG Remuneration of deed administrator
"(1) The deed administrator is entitled to charge reasonable remuneration
for carrying out his or her duties and exercising his
or her powers as deed administrator.
"(2) The Court may, on the application of the deed administrator,
an officer of the company, creditor, or shareholder, review
or fix the deed administrator's remuneration at a level that is
reasonable in the circumstances.
Compare: 1993 No 105 ss 276(1), 284(1)(e)
"239ACH Deed administrator may sell shares in company
"(1) The deed administrator may sell existing shares in the company
-
"(a) with the consent of the shareholder in question; or
"(b) if the shareholder does not consent, with the permission
of the Court given on an application of the administrator.
"(2) The shareholder concerned, a creditor, or the Registrar may
oppose an application by the administrator for the Court's
permission.
"Subpart 13-Execution and effect of deed of company
arrangement
"239ACI When this subpart applies
This subpart applies when the creditors, at the watershed meeting,
have resolved that the company execute a deed of company
arrangement.
Compare: Corporations Act 2001 (Australia) s 444A(1)
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Part 8 cl 424 Insolvency Law Reform Bill
"239ACJ Preparation and contents of deed
"(1) The deed administrator must prepare a document that sets out
the terms of the deed.
"(2) The document must also specify the following:
"(a) who is the deed administrator:
"(b) the property of the company (whether or not it is already
owned by the company when it executes the deed) that
will be available to pay creditors:
"(c) the nature and duration of any moratorium period for
which the deed provides:
"(d) to what extent the company will be released from its
debts:
"(e) the conditions (if any) for the deed to come into operation:
"(f) the conditions (if any) for the deed to continue in operation:
"(g) the circumstances in which the deed terminates:
"(h) the order in which the proceeds of realisation of the
property referred to in paragraph (b) will be distributed
among creditors who are bound by the deed:
"(i) the day (which is called the cut-off day and must not be
later than the day when the administration began) on or
before which creditors' claims must have arisen if they
are to be admissible under the deed.
"(3) The document is treated as including provisions prescribed
under this Act, except those prescribed provisions that the
document expressly excludes.
Compare: Corporations Act 2001 (Australia) s 444A(3)-(5)
"239ACK Execution of deed
"(1) The deed is a deed of company arrangement when it is executed
by both the company in administration and the deed
administrator.
"(2) The deadline for the execution of the deed by the company
and the deed administrator is-
"(a) 15 working days after the watershed meeting has
approved it; or
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Insolvency Law Reform Bill Part 8 cl 424
"(b) the further time that the Court allows, if the deed administrator
has applied to the Court for an extension before
the end of the initial period of 15 working days after
approval.
"(3) The company may not execute the deed unless the board of
the company has, by resolution, authorised the deed to be
executed by the company or on its behalf.
"(4) Subsection (3) has effect despite section 239X, but does not
limit the functions and powers of the administrator of the
company.
Compare: Corporations Act 2001 (Australia) s 444B
"239ACL Procedure if deed not fully approved at watershed
meeting
"(1) If, at the watershed meeting, the creditors resolve that the
company execute a deed of company arrangement, but the
proposed deed is not fully approved at the meeting, then-
"(a) the administrator must draft the complete deed and circulate
it to the creditors within 10working days after the
meeting (called in this section the preparation period);
and
"(b) the creditors may inspect the deed for a period of 3
working days (called in this section the inspection
period) after the end of the preparation period; and
"(c) the company and the administrator must execute the
deed within 2 working days (called in this section
the execution period) after the end of the inspection
period.
"(2) The Court may extend the preparation period by up to 10
working days, on an application by the administrator, but
only if the application is made within the original preparation
period.
"(3) The Court may extend the execution period by up to 2 working
days, on an application by the administrator, but only if the
application is made within the original execution period.
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"239ACM Creditor must not act inconsistently with deed, etc,
before execution
"(1) In this section, interim period means the period between a
resolution passed at the watershed meeting that the company
execute a deed of company arrangement and the sooner of-
"(a) execution of the deed by the company and the deed
administrator; or
"(b) expiry of the period during which the deed may be
executed.
"(2) In the interim period, in so far as a person would be bound by
the deed if it had already been executed, that person-
"(a) must not do anything inconsistent with the deed, except
with the permission of the Court; and
"(b) must not take a step that is prohibited under section
239ACQ.
Compare: Corporations Act 2001 (Australia) s 444C
"239ACN Company's failure to execute deed
If the creditors at the watershed meeting have passed a resolution
that the company execute a deed of company arrangement,
and the company fails to do so within the deadline for
execution, the administrator must apply for the appointment
of a liquidator to the company.
"239ACO Who is bound by deed
A deed of company arrangement binds-
"(a) the company's creditors, to the extent provided by section
239ACP; and
"(b) the company; and
"(c) the company's officers and shareholders; and
"(d) the deed administrator.
Compare: Corporations Act 2001 (Australia) s 444G
"239ACP Extent to which deed binds creditors
"(1) A deed of company arrangement binds all creditors in respect
of claims that arise on or before the cut-off day (see section
239ACJ(2)(i) ) specified in the deed.
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"(2) This section does not prevent a secured creditor from realising
or otherwise dealing with the charge, except so far as-
"(a) the deed provides otherwise in relation to a secured
creditor who at the watershed meeting voted in favour
of the resolution as a result of which the company executed
the deed; or
"(b) the Court orders otherwise under section 239ACR(1)(a).
"(3) This section does not affect a right that an owner or lessor of
property has in relation to that property, except so far as-
"(a) the deed provides otherwise in relation to an owner or
lessor of property who at the watershed meeting voted
in favour of the resolution as a result of which the company
executed the deed; or
"(b) the Court orders otherwise under section 239ACR(1)(b).
Compare: Corporations Act 2001 (Australia) s 444D
"239ACQ Person bound by deedmust not take steps to liquidate,
etc
"(1) A person who is bound by a deed of company arrangement
must not, while the deed is in force,-
"(a) apply, or continue with an application, to the Court for
the appointment of a liquidator of the company:
"(b) except with the Court's permission, begin or continue
a proceeding against the company or in relation to any
of its property:
"(c) except with the Court's permission, begin or continue
an enforcement process against the company's property.
"(2) In this section, property includes property used or occupied
by the company, or in its possession.
Compare: Corporations Act 2001 (Australia) s 444E
"239ACR Court may restrain creditors and others from
enforcing charge or recovering property
"(1) The Court may, at any time after creditors have resolved at
the watershed meeting that a deed of company arrangement
be executed, order that, except as permitted by the order,-
"(a) a secured creditor must not realise or otherwise deal
with the charge; or
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Part 8 cl 424 Insolvency Law Reform Bill
"(b) the owner or lessor of property that is used or occupied
by the company or is in the company's possession must
not take possession of the property or otherwise recover
it.
"(2) The Court may make the order only if-
"(a) it is satisfied that achieving the purposes of the deed
would be materially adversely affected if the order was
not made; and
"(b) having regard to the terms of the deed and the order, and
any other relevant matter, it is satisfied that the interests
of the person affected by the order, that is the creditor,
property owner, or lessor, will be adequately protected.
"(3) An application for an order under this section may be made
only,-
"(a) if the deed has not yet been executed, by the administrator;
or
"(b) if the deed has been executed, by the deed administrator.
"(4) The Court's order may be made subject to conditions.
Compare: Corporations Act 2001 (Australia) s 444F
"239ACS Effect of deed on company's debts
"(1) A deed of company arrangement releases the company from
a debt only in so far as-
"(a) the deed provides for the release; and
"(b) the creditor concerned is bound by the deed.
"(2) The release of the company from a debt under subsection (1)
does not discharge or otherwise affect the liability of-
"(a) a guarantor of the debt; or
"(b) a person who has indemnified the creditor concerned
against default by the company in relation to the debt.
Compare: Corporations Act 2001 (Australia) s 444H
"239ACT Court may rule on validity of deed
"(1) The Court may rule on the validity of a deed of company
arrangement if there is doubt, on a specific ground, whether a
deed of company arrangement-
"(a) was entered into in accordance with this Part; or
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Insolvency Law Reform Bill Part 8 cl 424
"(b) complies with this Part.
"(2) An application under this section may be made by-
"(a) the deed administrator; or
"(b) a shareholder or creditor of the company; or
"(c) the Registrar.
"(3) On an application under this section,-
"(a) the Court may declare the deed void or not void:
"(b) if the deed is void for contravention of a provision of
this Part, the Court may validate the deed, or any part
of it, provided the Court is satisfied that-
"(i) the provision was substantially complied with;
and
"(ii) no injustice will result for anyone bound by the
deed if the contravention is disregarded.
"(4) The Court may, if it declares that a provision of the deed is
void, vary the deed, but only if the deed administrator consents.
Compare: Corporations Act 2001 (Australia) s 445G
"Subpart 14-Administrator's duty to file accounts
"239ACU Administrator includes deed administrator
In this subpart, unless the context otherwise requires, administrator
includes a deed administrator.
"239ACV Administrator must file accounts
"(1) Every administrator must file an account with the Registrar
for each of the following periods:
"(a) the period of 6 months (or shorter, as the administrator
decides) after the day on which the administrator was
appointed; and
"(b) each subsequent period of 6 months during which the
administrator holds office; and
"(c) the period between the last period of the kind referred to
in paragraph (b) and the day on which the administrator
vacates office.
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Part 8 cl 424 Insolvency Law Reform Bill
"(2) The administrator must file the account within 20 working
days after the end of the period in question.
"(3) The account must be in the prescribed form and must show-
"(a) for each period, the administrator's receipts and payments;
and
"(b) for each period except the first, the aggregates of the
administrator's receipts and payments since the day on
which the administrator was appointed.
Compare: Corporations Act 2001 (Australia) s 432(1), (1A)(a), (b)
"Subpart 15-Variation and termination of deed
"239ACW Creditors may vary deed
The creditors may vary a deed of company arrangement by
a resolution passed at a meeting convened under section
239ADB, but the variation must not be materially different
from the proposed variation set out in the notice of the
meeting.
Compare: Corporations Act 2001 (Australia) s 445A
"239ACX Court may cancel creditors' variation
"(1) A creditor of a company in administration may apply to the
Court for an order cancelling the variation of the deed of
company arrangement by the creditors.
"(2) On the application, the Court may-
"(a) cancel or confirm the variation, wholly or in part, on
specified conditions (if any); and
"(b) make any other orders that the Court thinks appropriate.
Compare: Corporations Act 2001 (Australia) s 445B
"239ACY Termination of deed
A deed of company arrangement may be terminated-
"(a) by the Court under section 239ACZ; or
"(b) by a resolution of the creditors under section 239ADA;
or
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Insolvency Law Reform Bill Part 8 cl 424
"(c) automatically, if the deed specifies circumstances in
which the deed will terminate, and those circumstances
occur.
Compare: Corporations Act 2001 (Australia) s 445C
"239ACZ Termination by Court
"(1) The Court may terminate a deed of company arrangement on
the application of-
"(a) the company; or
"(b) a creditor; or
"(c) the deed administrator; or
"(d) any other interested person.
"(2) The Court may terminate a deed of company arrangement if
it is satisfied that-
"(a) an information breach has occurred; or
"(b) there has been a material contravention of the deed by
a person bound by it; or
"(c) effect cannot be given to the deed without injustice or
undue delay; or
"(d) the deed or a provision of it is, an act or omission done
or made under deed was, or an act or omission proposed
to be done or made under the deed would be,-
"(i) oppressive or unfairly prejudicial to, or unfairly
discriminatory against, 1 ormore of the creditors;
or
"(ii) contrary to the interests of the company as a
whole; or
"(e) the deed should be terminated for some other reason.
"(2) The Court must not terminate the deed without first taking
into account the rights of third parties.
"(3) In this section, an information breach has occurred if-
"(a) false or misleading information about the company's
business, property, affairs, or financial circumstances-
"(i) was given to the administrator or the creditors;
or
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Part 8 cl 424 Insolvency Law Reform Bill
"(ii) was contained in a report or statement under section
239AQ(3) that accompanied a notice of meeting
at which a resolution that the company execute
a deed of company arrangement was passed;
or
"(b) there was an omission from the report or statement
referred to in paragraph (a)(ii); and
"(c) the information or the omission, as the case may be,
can reasonably have been expected to be material to
the creditors in deciding whether to vote in favour of
the resolution that the company execute the deed of
company arrangement.
Compare: Corporations Act 2001 (Australia) s 445D
"239ADA Termination by creditors
"(1) The creditors, by a resolution passed at a meeting convened
under section 239ADB, may terminate the deed if there has
occurred a material breach of the deed that has not been rectified.
"(2) The creditors may also appoint a liquidator if the notice of
the meeting sets out a proposed resolution that a liquidator be
appointed to the company.
Compare: Corporations Act 2001 (Australia) s 445E
"239ADB creditors' meeting to consider proposed variation or
termination of deed
"(1) The deed administrator-
"(a) may at any time convene a meeting of the company's
creditors to consider a variation to, or the termination
of, the deed; and
"(b) must convene ameeting if requested inwriting by creditors
whose claims against the company are not less than
10% in value of the total value of all creditors' claims.
"(2) The deed administrator must convene the meeting by-
"(a) giving written notice to as many of the company's creditors
as reasonably practicable; and
"(b) publishing a notice of the meeting in a national newspaper.
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Insolvency Law Reform Bill Part 8 cl 424
"(3) The administrator must take the steps in subsection (2) not
less than 5 working days before the meeting.
"(4) The notice given to the creditors must set out any resolution
for varying or terminating the deed that is to be considered by
the meeting.
"(5) The deed administrator must preside at the meeting.
"(6) The meeting may be adjourned from time to time.
Compare: Corporations Act 2001 (Australia) s 445F
"Subpart 16-Administrator's liability and indemnity for
debts of administration
"239ADC Administrator not liable for company's debts except
as provided in this subpart
The administrator is not liable for the debts of the company
except as provided in this subpart.
Compare: Corporations Act 2001 (Australia) s 443C
"239ADD Administrator liable for general debts
"(1) The administrator is liable for debts that he or she incurs,
in the performance or exercise, or purported performance or
exercise, of any of his or her functions and powers as administrator,
for-
"(a) services rendered; or
"(b) goods bought; or
"(c) property hired, leased, or occupied.
"(2) Subsection (1) has effect despite any agreement to the contrary,
but without prejudice to the administrator's rights against the
company or anyone else.
Compare: Corporations Act 2001 (Australia) s 443A
"239ADE Administrator's liability for rent
"(1) The administrator is personally liable, to the extent specified
in subsection (2), for rent and other payments becoming due
by the company under an agreement-
"(a) made before the administration began; and
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Part 8 cl 424 Insolvency Law Reform Bill
"(b) relating to the use, possession, or occupation of property
by the company.
"(2) The administrator is liable for rent and other payments that
accrue in the period-
"(a) beginning more than 7 days after the administration
begins; and
"(b) throughout which-
"(i) the company continues to use or occupy, or be in
possession of, the property; and
"(ii) the administration continues; and
"(c) ending on the earliest of the following:
"(i) the end of the administration; or
"(ii) the giving of a notice under section 239ADF; or
"(iii) the appointment of a receiver of the property; or
"(iv) the appointment of an agent by a chargeholder
of the property, under the provisions of a charge
over the property, to enter into possession or to
assume control of the property; or
"(v) when a chargeholder takes possession or assumes
control of the property under the provisions of a
charge over the property.
"(3) The administrator is not taken, because of subsection (2),-
"(a) to have adopted the agreement; or
"(b) to be liable under the agreement except as set out in
subsection (2).
"(4) This section does not affect the liability of the company for
rent and other payments due under the agreement.
Compare: Corporations Act 2001 (Australia) s 443B(1), (2), (7), (9)
"239ADF Administrator not liable for rental if non-use notice in
force
"(1) The administrator is not liable under section 239ADE for any
period for which a non-use notice is in force.
"(2) In this section, non-use notice means, in relation to the property
to which it refers, a notice that-
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Insolvency Law Reform Bill Part 8 cl 424
"(a) is given by the administrator to the owner or the lessor
of the property within 7 days after the administration
begins; and
"(b) specifies the property to which it relates; and
"(c) states that the company does not propose to use the
property or otherwise exercise any rights in relation to
it.
"(3) A non-use notice ceases to have effect if -
"(a) the administrator revokes it by written notice to the
owner or lessor; or
"(b) the company exercises, or purports to exercise, a right
in relation to the property.
"(4) In subsection (3)(b), the company does not exercise, or purport
to exercise, a right in relation to the property merely because
the company continues to occupy, or to be in possession of,
the property, unless the company-
"(a) also uses the property; or
"(b) asserts a right, as against the owner or the lessor, to
continue to occupy or be in possession.
"(5) A non-use notice does not affect the company's liability for
rent and other payments.
Compare: Corporations Act 2001 (Australia) s 443B(3)-(6)
"239ADG Court may exempt administrator from liability for
rent
The Court may exempt an administrator from liability for rent
and other payments under section 239ADF, but the Court's
order does not affect the company's liability.
Compare: Corporations Act 2001 (Australia) s 443B(8)
"239ADH Administrator's indemnity
The administrator is indemnified out of the company's property
for-
"(a) a personal liability incurred in the due performance of
his or her duties, but not a personal liability incurred in
bad faith or negligently; and
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Part 8 cl 424 Insolvency Law Reform Bill
"(b) the remuneration to which the administrator is entitled
under section 239O.
Compare: Corporations Act 2001 (Australia) s 443D
"239ADI Administrator's right of indemnity has priority over
other debts
Subject to section 268, the administrator's right of indemnity
under this subpart has priority over-
"(a) all the company's unsecured debts; and
"(b) debts of the company secured by a charge of the kind
described in clause 2(1)(b) of Schedule 7.
Compare: Corporations Act 2001 (Australia) s 443E
"239ADJ Lien to secure indemnity
"(1) The administrator has a lien on the company's property to
secure a right of indemnity under this subpart.
"(2) A lien under subsection (1) has priority over a charge to the
same extent as the right of indemnity has priority over debts
secured by the relevant security agreement.
Compare: Corporations Act 2001 (Australia) s 443F
"Subpart 17-Powers of Court
"239ADK Court's general power
"(1) The Court may make any order that it thinks appropriate about
how this Part is to operate in relation to a particular company.
"(2) For example, the Court may terminate the administration
under subsection (1) if the Court is satisfied that the administration
should end-
"(a) because the company is solvent; or
"(b) because the provisions of this Part are being abused; or
"(c) for some other reason.
"(3) The Court's order may be made subject to conditions.
"(4) The Court may make an order under this section on the application
of-
"(a) the company; or
"(b) a creditor of the company; or
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Insolvency Law Reform Bill Part 8 cl 424
"(c) the administrator; or
"(d) the deed administrator; or
"(e) the Registrar; or
"(f) any other interested person.
Compare: Corporations Act 2001 (Australia) s 447A
"239ADL Orders to protect creditors during administration
"(1) On the application of the Registrar, the Court may make any
order that it thinks necessary to protect the interests of the
company's creditors while the company is in administration.
"(2) On the application of a creditor of a company, the Court may
make any order that it thinks necessary to protect the interests
of that creditor while the company is in administration.
"(3) An order may be made subject to conditions.
Compare: Corporations Act 2001 (Australia) s 447B
"239ADM Court may rule on validity of administrator's
appointment
"(1) If there is doubt, on a specific ground, as to the validity of the
appointment of a person as administrator or deed administrator,
any of the following persons may apply to the Court for a
ruling on the validity of the appointment:
"(a) the person appointed; or
"(b) the company in question; or
"(c) any of the company's creditors.
"(2) In ruling that the appointment is invalid, the Court is not limited
to the grounds specified in the application.
Compare: Corporations Act 2001 (Australia) s 447C
"239ADN Administrator may seek directions
"(1) The administrator or the deed administrator may apply to the
Court for directions in relation to the performance or exercise
of any of the administrator's functions and powers.
"(2) The deed administrator may apply to the Court for directions
in relation to the operation of, or giving effect to, the deed.
Compare: Corporations Act 2001 (Australia) s 447D
227
Part 8 cl 424 Insolvency Law Reform Bill
"239ADO Court may supervise administrator or deed
administrator
"(1) The Court may make any order it thinks just if it is satisfied
that-
"(a) the administrator's or the deed administrator's management
of the company's business, property, or affairs is
prejudicial to the interests of some or all of the company's
creditors or shareholders; or
"(b) the administrator's or deed administrator's conduct or
proposed conduct has been or is or will be prejudicial
to those interests.
"(2) An application for an order under this section may be made
by-
"(a) a creditor or shareholder of the company in question; or
"(b) the Registrar.
Compare: Corporations Act 2001 (Australia) s 447E(1)
"239ADP Courtmay order administrator or deed administrator
to remedy default
"(1) The Court may order an administrator or deed administrator
to remedy his or her default.
"(2) Examples of default include the following:
"(a) the administrator or deed administrator has failed, as
required by this Act or otherwise by law, to make or
file any return, account, or other document or to give
a notice, and has not remedied the default within 10
working days after service on him or her of a notice by
a shareholder or creditor of the company in administration
requiring that the default be remedied:
"(b) the administrator or deed administrator has failed, after
being required at any time by the liquidator of the company
to do so,-
"(i) to render proper accounts of, and to vouch, his
or her receipts and payments as administrator or
deed administrator:
"(ii) to pay to the liquidator the amount properly payable
to the liquidator.
228
Insolvency Law Reform Bill Part 8 cl 424
"(3) An application for an order under this section may be made
by-
"(a) a shareholder or creditor of the company, in the case of
a default referred to in subsection (2)(a):
"(b) the liquidator, in the case of a default referred to in
subsection (2)(b):
"(c) in any case, by the Registrar.
"239ADQ Court's power when office of administrator or deed
administrator vacant, etc
"(1) The Court may make any order it thinks just if it is satisfied
that-
"(a) in the case of a company in administration, the office of
the administrator is vacant or no administrator is acting;
or
"(b) in the case of a deed of company arrangement that is still
in force, the office of the deed administrator is vacant
or no deed administrator is acting.
"(2) An application for an order under this section may be made
by-
"(a) a creditor or shareholder of the company; or
"(b) the Registrar.
Compare: Corporations Act 2001 (Australia) s 447E(2)
"Subpart 18-Notices about steps taken under this Part
"239ADR Administrator must give notice of appointment
"(1) An administrator appointed by the company under section
239I, by the liquidator or interim liquidator under section 239J,
or by a chargeholder under section 239K, must-
"(a) before the end of the next working day after appointment,
lodge a notice of the appointment with the Registrar;
and
"(b) not later than 3 working days after appointment, publish
a notice of the appointment in a national newspaper; and
"(c) as soon as practicable, and in any event not later than
the end of the next working day after appointment, give
written notice of the appointment to-
229
Part 8 cl 424 Insolvency Law Reform Bill
"(i) each person who holds a charge over the whole,
or substantially the whole, of the company's
property; or
"(ii) each person who holds 2 or more securities in
the property of the company if the property of
the company subject to those securities together
is the whole, or substantially the whole, of the
company's property.
"(2) The administrator need not give notice under subsection (1)
to the person who appointed him or her.
Compare: Corporations Act 2001 (Australia) s 450A(1), (3), (4)
"239ADS Chargeholder who appoints administrator must give
notice to company
A chargeholder who appoints an administrator under section
239K must give written notice of the appointment to the company
as soon as practicable and in any event before the end of
the next working day.
Compare: Corporations Act 2001 (Australia) s 450A(2)
"239ADT Deed administrator must give notice of execution of
deed of company arrangement
As soon as practicable after a deed of company arrangement
is executed, the deed administrator must-
"(a) send to each creditor a written notice of the execution
of the deed; and
"(b) publish the notice in a national newspaper; and
"(c) file a copy of the deed with the Registrar.
Compare: Corporations Act 2001 (Australia) s 450B
"239ADU Deed administrator must give notice of failure to
execute deed of company arrangement
If a company does notmeet the deadline under section 239ACK
for the execution of a deed of company arrangement, the deed
administrator must as soon as practicable-
"(a) publish a notice of the failure in a national newspaper;
and
230
Insolvency Law Reform Bill Part 8 cl 424
"(b) file a copy of the notice with the Registrar.
Compare: Corporations Act 2001 (Australia) s 450C
"239ADV Deed administrator must give notice of termination
by creditors of deed of company arrangement
If the creditors terminate the deed of company arrangement,
the deed administrator must as soon as practicable-
"(a) send a notice of the termination to each of the creditors;
and
"(b) publish the notice in a national newspaper; and
"(c) file a copy of the notice with the Registrar.
Compare: Corporations Act 2001 (Australia) s 450D
"239ADW Company must disclose fact of administration
"(1) A company must set out, in every document issued or signed
by, or on behalf of, the company that evidences or creates a
legal obligation of the company, after the company's name
where it first appears,-
"(a) for as long as the company is in administration, the
words "administrator appointed"; and
"(b) for as a long as a deed of company arrangement is
in force, the expression "subject to deed of company
arrangement".
"(2) The Court may, on an application by the company, exempt the
company from the requirement in subsection (1)(b).
"(3) A company that fails to comply with subsection (1) commits
an offence and is liable on conviction to the penalty set out in
section 373(1).
Compare: Corporations Act 2001 (Australia) s 450E
"239ADX Notice of change of name
"(1) A company in administration that changed its name less than
6 months before the appointment of the administrator must, in
any document of the company where its name appears, include
also its former name.
"(2) If a company to which subsection (1) applies is in the course of
the administration placed in liquidation, the liquidator must, in
231
Part 8 cl 424 Insolvency Law Reform Bill
any document of the company where its name appears, include
also its former name.
"239ADY Effect of contravention of this subpart
A contravention of this subpart does not affect the validity of
anything done or omitted under this Part, except so far as the
Court orders otherwise.
Compare: Corporations Act 2001 (Australia) s 450F
"Subpart 19-Miscellaneous
"239ADZ Effect of things done during administration of
company
A payment made, transaction entered into, or any other act
or thing done, in good faith, by or with the consent of the
administrator of a company in administration,-
"(a) is valid and effectual for the purpose of this Act; and
"(b) if the company is placed in liquidation, must not be set
aside in the liquidation.
Compare: Corporations Act 2001 (Australia) s 451C(a)
"239AEA Interruption of time for doing act
If there is a time before which, or a period during which,
an act for any purpose may or must be done, and this Act
prevents the act from being done in time, then the time or
period in question is extended by the period during which this
Act prevents the act from being done in time.
Compare: Corporations Act 2001 (Australia) s 451D"."
Amendments to Companies Act 1993 consequential on new
voluntary administration provisions
425 Commencement of liquidation
Section 241 of the principal Act is amended by repealing subsection
(2), and substituting the following subsection:
"(2) A liquidator may be appointed by-
"(a) special resolution of those shareholders entitled to vote
and voting on the question; or
232
Insolvency Law Reform Bill Part 8 cl 428
"(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
"(vi) the Registrar; or
"(d) a resolution of the creditors passed at the watershed
meeting held under section 239AQ."
426 Commencement of liquidation to be recorded
Section 241A(1) of the principal Act is amended by adding
the following paragraph:
"(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."
427 Liquidator to summon creditors' meeting
Section 243 of the principal Act is amended by adding the
following subsection:
"(11) Except for subsection (5), this section does not apply if the
liquidator is appointed under section 241(2)(d)."
428 Court may terminate liquidation
Section 250 of the principal Act is amended by repealing subsection
(2), and substituting the following subsections:
"(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
233
Part 8 cl 428 Insolvency Law Reform Bill
"(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."
429 Restrictions on rights of creditors to complete execution,
distraint, or attachment
Section 251(1)(a) of the principal Act is amended by omitting
the words "section 241(2)(a) of this Act", and substituting
the words "section 241(2)(a) or a resolution under section
241(2)(d)".
430 Other duties of liquidator
Section 255(3)(a) of the principal Act is amended by omitting
the words "under paragraph (a) or paragraph (b) of subsection
(2) of section 241 of this Act", and substituting the words
"under section 241(2)(a), (b), or (d)".
431 Restriction on enforcement of lien over documents
Section 263(2) of the principal Act is amended by omitting
the words "to the extent of $500 or such greater amount as
may be prescribed at the commencement of the liquidation",
and substituting the words "to the extent of 10% of the total
value of the debt, up to a maximum amount of $2,000".
432 Power of Court to require persons to repay money or
return property
(1) Section 301(1) of the principal Act is amended by inserting,
after the word "manager,", in both places where it appears, the
word "administrator,".
234
Insolvency Law Reform Bill Part 8 cl 434
(2) Section 301 of the principal Act is amended by adding the
following subsection:
"(4) In making an order under subsection (2) against a past or
present director, the Court must, where relevant, take into
account any action that person took for the appointment of an
administrator to the company under Part 15A."
Qualifications of liquidators
433 Qualifications of liquidators
(1) Section 280(1) of the principal Act is amended by inserting,
after paragraph (c), the following paragraphs:
"(ca) a person who has, or whose firm has, within the 2 years
immediately before the commencement of the liquidation,
provided accounting services to the company:
"(cb) a person who has, within the 2 years immediately before
the commencement of the liquidation, had a continuing
business relationship with the company, its majority
shareholder, or any of its secured creditors:."
(2) Section 280 of the principal Act 1993 is amended by inserting,
after subsection (1), the following subsection:
"(1A) Subsection (1)(ca) or (cb) does not apply if all the creditors
consent to the appointment of the person in question."
(3) Section 280 of the principal Act is amended by adding the
following subsection:
"(4) A person other than the Official Assignee must not be
appointed a liquidator unless he or she has first certified in
writing that he or she is not disqualified under subsection
(1)."
Assignment of liquidator's statutory right to sue
434 New section 260A inserted
The principal Act is amended by inserting, after section 260,
the following section:
"260A Liquidator may assign right to sue under this Act
"(1) The liquidator may, if the Court has first approved it, assign
any right to sue that is conferred by this Act.
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Part 8 cl 434 Insolvency Law Reform Bill
"(2) The application for approval may be-
"(a) made by the liquidator or the proposed assignee; and
"(b) opposed by a person who is a defendant to the liquidator's
action, if already begun, or a proposed defendant."
Voidable transactions
435 Transactions having preferential effect
(1) Section 292 of the principal Act is amended by repealing the
heading to section 292 and subsections (1) to (4), and substituting
the following heading and subsections:
"292 Insolvent transaction voidable
"(1) A transaction by a company is voidable by the liquidator if
it-
"(a) is an insolvent transaction; and
"(b) was entered into within the specified period.
"(2) An insolvent transaction is a transaction by a company
that-
"(a) is entered into at a time when the company is unable to
pay its due debts; and
"(b) enables another person to receive more towards satisfaction
of a debt owed by the company than the person
would receive, or would be likely to receive, in the
company's liquidation.
"(3) In this section, transaction means any of the following steps
by the company:
"(a) conveying or transferring the company's property:
"(b) creating a charge over the company's property:
"(c) incurring an obligation:
"(d) undergoing an execution process:
"(e) paying money (including paying money in accordance
with a judgment or an order of a court):
"(f) anything done or omitted to be done for the purpose of
entering into the transaction.
"(4) A transaction that is entered into within the restricted period
is presumed, unless the contrary is proved, to be entered into
at a time when the company is unable to pay its due debts.
236
Insolvency Law Reform Bill Part 8 cl 436
"(5) A series of transactions within the specified period must be
treated as a single transaction if-
"(a) each transaction in the series is, for commercial purposes,
an integral part of a continuing business relationship
(for example, a running account) between the
company and the other party to the transaction; and
"(b) in the course of the relationship, the level of the company's
net indebtedness to the other party is increased
or reduced from time to time as a result of each transaction."
(1) Section 292(5) of the principal Act is amended by omitting the
words "(2)(a)(ii) of this section", and substituting the words
"(1) and (4A)".
(2) Section 292(6) of the principal Act is amended by omitting
the expression "(3), and substituting the expression "(4)".
436 Voidable charges
(1) Section 293 of the principal Act is amended by repealing subsection
(1), and substituting the following subsections:
"(1) A charge over any property or undertaking of a company is
voidable by the liquidator if-
"(a) the charge was given within the specified period; and
"(b) immediately after the charge was given, the company
was unable to pay its due debts.
"(1A) Subsection (1) does not apply if-
"(a) the charge secures money actually advanced or paid, or
the actual price or value of property sold or supplied to
the company, or any other valuable consideration given
in good faith by the grantee of the charge at the time of,
or at any time after, the giving of the charge; or
"(b) the charge is in substitution for a charge given before
the specified period."
(2) Section 293(3) of the principal Act is amended by omitting the
expression "(1)(c)", and substituting the expression "(1A)(b)".
(3) Section 293(5) of the principal Act is amended by omitting the
expression "(1)(a)", and substituting the expression "(1A)(b)".
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Part 8 cl 436 Insolvency Law Reform Bill
(4) Section 293(6) of the principal Act is amended by omitting
the words "a year" in each place where they appear, and substituting
in each case the words "2 years".
437 New section 294 substituted
The principal Act is amended by repealing section 294, and
substituting the following section:
"294 Procedure for setting aside transactions and charges
"(1) A liquidator who wishes to set aside a transaction or charge
that is voidable under section 292 or 293 must-
"(a) file a notice with the Court that meets the requirements
set out in subsection (2); and
"(b) serve the notice as soon as practicable on-
"(i) the other party to the transaction or the charge
holder, as the case may be; and
"(ii) any other party from whom the liquidator intends
to recover.
"(2) The notice must-
"(a) be in writing; and
"(b) state the liquidator's postal, email, and street addresses;
and
"(c) specify the transaction or charge that the liquidator
wishes to set aside; and
"(d) describe the property, or state the amount, that the liquidator
wishes to recover, as the case may be; and
"(e) state that the person named in the notice may object to
the transaction or charge being set aside if that person
sends a written notice of objection to the liquidator
within 20 working days after the notice has been served
on that person; and
"(f) state that the transaction or charge will be set aside as
against the person named in the notice if that person
does not object; and
"(g) state that if the person named in the notice does object,
the liquidator may apply to the Court for the transaction
or charge to be set aside.
"(3) The transaction or charge is automatically set aside against
a person on whom the liquidator has served the notice, if that
238
Insolvency Law Reform Bill Part 8 cl 438
person has not objected, within 20 working days after service
of the notice, by sending a written notice of objection to the
liquidator.
"(4) The Court may, on the liquidator's application, set aside the
transaction or charge in any case where a person named in
the notice has objected, within 20 working days after service
of the notice, by sending a written notice of objection to the
liquidator."
438 New section 295 substituted
The principal Act is amended by repealing section 295, and
substituting the following section:
"295 Other orders
If a transaction or charge is set aside under section 294, the
Court may make 1 or more of the following orders:
"(a) an order that a person pay to the company an amount
equal to some or all of the money that the company has
paid under the transaction:
"(b) an order that a person transfer to the company property
that the company has transferred under the transaction:
"(c) an order that a person pay to the company an amount
that, in the Court's opinion, fairly represents some or
all of the benefits that the person has received because
of the transaction:
"(d) an order that a person transfer to the company property
that, in the Court's opinion, fairly represents the
application of either or both of the following:
"(i) money that the company has paid under the transaction:
"(ii) proceeds of property that the company has transferred
under the transaction:
"(e) an order releasing, in whole or in part, a charge given
by the company:
"(f) an order requiring security to be given for the discharge
of an order made under this section:
"(g) an order specifying the extent towhich a person affected
by the setting aside of a transaction or by an order made
239
Part 8 cl 438 Insolvency Law Reform Bill
under this section is entitled to claim as a creditor in the
liquidation.
Compare: Corporations Act 2001 (Australia) s 588FF(1)(a)-(d)"
439 Additional provisions relating to setting aside transactions
and charges
Section 296 of the principal Act is amended by repealing subsection
(3), and substituting the following subsection:
"(3) A court must not order the recovery of property of a company
(or its equivalent value) by a liquidator, whether under this
Act, any other enactment, or in law or in equity, if the person
from whom recovery is sought (A) proves that A when A
received the property-
"(a) A acted in good faith; and
"(b) a reasonable person in A's position would not have suspected
that the company was, or would become, insolvent;
and
"(c) A gave value for the property or altered A's position
in the reasonably held belief that the transfer of the
property to A was valid and would not be set aside."
440 Transactions at undervalue
(1) Section 297 of the principal Act is amended by repealing subsections
(1) and (2), and substituting the following subsections:
"(1) Under subsection (2) the liquidator may recover from a person
(X) the amount C in the formula A - B = C, where-
"(a) A is the value that X received under a transaction to
which the company was or is a party; and
"(b) B is the value (if any) that the company received from
X under the transaction.
"(2) The liquidator may recover the difference in value (that is, C
in the formula in subsection (1)) from X if-
"(a) the company entered into the transaction within the
specified period; and
"(b) either-
"(i) the company was unable to pay its due debts
when it entered into the transaction; or
240
Insolvency Law Reform Bill Part 8 cl 442
"(ii) the company became unable to pay its due debts
as a result of entering into the transaction."
(2) Section 297(3) of the principal Act is amended by repealing
paragraph (a), and substituting the following paragraph:
"(a) transaction has the same meaning as in section 292(3)."
(3) Section 297(3) of the principal Act is amended by omitting
the words "a year" from each place where they appear in
paragraph (b), and substituting the words "2 years" in each
case.
New offence for directors
441 Carrying on business fraudulently
Section 380 of the principal Act is amended by adding, after
subsection (2), the following subsection:
"(3) Every director of a company commits an offence and is liable
on conviction to the penalties set out in section 373(4), who,
with intent to defraud a creditor or creditors of the company,
does any thing that causes material loss to any creditor."
Phoenix companies
442 New sections 386A and 386B inserted
The principal Act 1993 is amended by inserting, after section
386, the following sections:
"386A Director of failed company must not be director, etc, of
phoenix company with same or substantially similar name
"(1) Except with the permission of the Court, a director of a failed
company must not, for a period of 5 years after the date of
commencement of the liquidation of the failed company,-
"(a) be a director of a phoenix company; or
"(b) directly or indirectly be concerned in or take part in
the promotion, formation, or management of a phoenix
company; or
"(c) directly or indirectly be concerned in or take part in the
carrying on of a business that has the same or substantially
the same name as the failed company.
"(2) In subsection (1),-
241
Part 8 cl 442 Insolvency Law Reform Bill
"director of a failed company means a person who was a
director of a failed company at any time in the period of 12
months before the commencement of its liquidation
"failed company means a company that was placed in liquidation
at a time when it was unable to pay its due debts
"phoenix company means, in relation to a failed company, a
company that, within 12 months after the commencement of
the liquidation of the failed company, is incorporated with or
changes its name to the name of the failed company or a name
that is substantially the same.
"(3) A personwho contravenes subsection (1) commits an offence
and is liable on conviction on indictment to the penalty set out
in section 373(4).
Compare: Insolvency Act 1986 (UK) s 216
"386B Liability for debts of phoenix company
"(1) A person who contravenes section 386A(1)(a) or (b) is personally
liable for all of the relevant debts of the phoenix company.
"(2) A person (A) who is involved in the management of a phoenix
company is personally liable for all of the relevant debts
of the company if-
"(a) in the management of the company A acts or is willing
to act on instructions given by another person (B); and
"(b) at that time A knows that B is contravening section
386A(1)(a) or (b) in relation to the company.
"(3) In this section,-
"phoenix company has the same meaning as in section 386A
"relevant debt-
"(a) in subsection (1), means the debts and liabilities
incurred by the phoenix company while the person
liable was involved in the management of the company:
"(b) in subsection (2), means the debts and liabilities
incurred by the phoenix company while A was acting
or was willing to act on the instructions of B.
"(4) Liability under this section is joint and several.
"(5) For the purposes of this section, a person who, as a person
involved in the management of a company, has at any time
242
Insolvency Law Reform Bill Part 8 cl 446
acted on instructions given by a person whom he or she knew
at the time to be in contravention of section 386A is presumed,
unless the contrary is shown, to have been willing at any later
time to act on any instructions given by that person."
Compare: Insolvency Act 1986 (UK) s 217"
443 Consequential amendments to section 126 of Companies
Act 1993
(1) Section 126(1)(b) of the principal Act is amended by omitting
the words "and 385," and substituting the words "385, 386A,
and 386B".
(2) Section 126(1)(c) of the Companies Act 1993 is amended
by omitting the words "and 385," and substituting the words
"385, 386A, and 386B".
443A Consequential amendment to section 373(4) of
Companies Act 1993
Section 373(4) of the Companies Act 1993 is amended by
adding the following paragraph:
"(j) section 386A(3) (which relates to acting as a director
of a phoenix company)."
Seventh Schedule
444 Seventh Schedule
The principal Act is amended by repealing the Seventh Schedule,
and substituting the Schedule set out in Schedule 3.
Consequential amendments to other enactments
445 Consequential amendments to other enactments
The enactments specified in Schedule 4 are amended in the
manner indicated in that schedule.
446 Blank
Blank.
243
Part 8 cl 447 Insolvency Law Reform Bill
447 Blank
Blank.
Part 9
Cross-border insolvency
448 Commencement
This Part comes into force on a date to be appointed by the
Governor-General by Order in Council.
449 Purpose
The purpose of this Part is to-
(a) implement theModel Law on Cross-Border Insolvency
adopted by the United Nations Commission on International
Trade Law on 30 May 1997, and approved by the
General Assembly of the United Nations on 15 December
1997, (amended and supplemented in order to apply
to New Zealand) in New Zealand; and
(b) provide a framework for facilitating insolvency proceedings
when-
(i) a person is subject to insolvency administration
(whether personal or corporate) in 1 country, but
has assets or debts in another country; or
(ii) more than 1 insolvency administration has commenced
in more than 1 country in relation to a
person.
450 Interpretation
In this Part,-
insolvency proceedingmeans a collective judicial or administrative
proceeding, including an interim proceeding, pursuant
to a law relating to insolvency (whether personal or corporate)
in which the assets and affairs of a debtor are subject to
control or supervision by a judicial or other authority competent
to control or supervise that proceeding, for the purpose of
reorganisation or liquidation
Minister means the Minister of the Crown who, under the
authority of any warrant or with the authority of the Prime
244
Insolvency Law Reform Bill Part 9 cl 455
Minister, is for the time being responsible for the administration
of this Part.
451 Further provision relating to interpretation
In interpreting this Part, reference may be made to-
(a) theModel Law on Cross-Border Insolvency adopted by
the United Nations Commission on International Trade
Law on 30 May 1997, and approved by the General
Assembly of the United Nations on 15 December 1997;
and
(b) any document that relates to the Model Law on
Cross-Border Insolvency that originates from the
United Nations Commission on International Trade
Law, or its working group for the preparation of the
Model Law on Cross-Border Insolvency.
452 Part binds the Crown
This Part binds the Crown.
453 Application of Model Law on Cross-Border Insolvency
in New Zealand
Schedule 5 applies in the circumstances set out in article 1 of
that Schedule.
454 Blank
Blank.
455 High Court to act in aid of overseas courts
(1) This section applies to a person referred to in article 1(2) of
Schedule 5.
(2) If a court of a Commonwealth country (other than New Zealand)
has jurisdiction in an insolvency proceeding and makes
an order requesting the aid of the High Court in relation to
the insolvency proceeding of a person to whom this section
applies, the High Court must act in aid of and be auxiliary to
that court in relation to that insolvency proceeding.
245
Part 9 cl 455 Insolvency Law Reform Bill
(3) In acting in aid of and being auxiliary to a court in accordance
with subsection (2), the High Court may exercise the powers
that it could exercise in respect of the matter if it had arisen
within its own jurisdiction.
(4) The High Court may, if it thinks fit, exercise the powers specified
in subsections (2) and (3) at the request of a court in any
country that is not a Commonwealth country.
456 Power to make rules
Rules may be made under section 51C of the Judicature Act
1908-
(a) relating to the procedure of the High Court under this
Part; and
(b) relating to the manner in which an application under
Schedule 5 must be made to the High Court; and
(c) to give effect to this Part.
457 Regulations may prescribe specified insolvency
proceedings
(1) On the recommendation of the Minister, the Governor-General
may, by Order in Council, make regulations designating a
class of insolvency proceeding, in a designated country other
than New Zealand (referred to in this section as the foreign
country), to be a specified insolvency proceeding.
(2) The Minister must not recommend the making of regulations
under subsection (1) unless he or she is satisfied that-
(a) New Zealand and the foreign country are both parties to
an agreement for the mutual recognition of insolvency
proceedings; and
(b) the level of recognition given to the interests of New
Zealand debtors and creditors in an insolvency proceeding
in the foreign country and the terms of the agreement
referred to in paragraph (a) provide appropriate
protection for the interests of New Zealand debtors and
creditors.
246
Insolvency Law Reform Bill Part 9 cl 460
(3) A regulation made under subsection (1)may specifically modify
or vary Schedule 5 in relation to a specified insolvency
proceeding.
(4) Subsection (3) prevails over section 453.
458 Regulations
The Governor-General may, by Order in Council, make regulations
prescribing forms to be used for the purposes of this
Part, and the matters to be specified in the forms.
459 Transitional provisions
(1) If an insolvency proceeding has started before the commencement
of this Part, the law governing that insolvency proceeding
is the law that would have applied if this Part had not been
passed.
(2) For the purposes of subsection (1), an insolvency proceeding
is taken to have started on the date upon which the judicial
manager, Official Assignee, statutory manager, receiver, liquidator,
or administrator was appointed.
460 Consequential amendments to other enactments
The enactments specified in Schedule 6 are amended in the
manner indicated in that schedule.
247
Schedule 1 Insolvency Law Reform Bill
Schedule 1 s 214(2)
Assignee's general powers
The Assignee has the power to-
(a) hold property:
(b) begin, continue, discontinue, and defend legal proceedings
relating to the property of the bankrupt:
(c) with the leave of the Court, continue in the Assignee's name
legal proceedings begun by the bankrupt before adjudication:
(d) refer a dispute to arbitration:
(e) compromise debts, claims, and liabilities, present or future,
actual or contingent, or ascertained or not, subsisting or
believed to subsist between the bankrupt and any person, on
whatever terms are agreed:
(f) make a compromise or an arrangement with creditors, or persons
claiming to be creditors, in respect of debts provable in
the bankruptcy:
(g) accept as consideration for the sale of any of the bankrupt's
property money to be paid in the future, on terms (including
terms as to security) that the Assignee thinks appropriate:
(h) make a compromise or an arrangement in respect of a claim
that arises out of, or is incidental to, the bankrupt's property,
whether it is a claim by the Assignee, or a claim by a person
against the Assignee:
(i) carry on the bankrupt's business, if it is necessary or advantageous
in order to dispose of it, and for that purpose may
employ and pay any person, including the bankrupt:
(j) use money in the bankrupt's estate for the repair, maintenance,
upkeep, or renovation of the bankrupt's property, whether or
not the work is necessary to salvage the property:
(k) borrow money:
(l) mortgage any of the bankrupt's property:
(m) employ any person to do anything that must be done in the
course of the administration of the bankruptcy, including the
receipt and payment of money:
(n) prove and draw a dividend in respect of any debt due to the
bankrupt:
(o) if any of the bankrupt's property cannot be readily or advantageously
sold because of its peculiar nature or other special
248
Insolvency Law Reform Bill Schedule 2
circumstances, divide it in its existing form among the creditors
according to its estimated value:
(p) give receipts and sign discharges and releases for any money
that the Assignee receives, so that the person who pays the
money is effectively discharged from any responsibility for
how the money is used:
(q) execute a power of attorney, deed, or any other document for
the purpose of carrying into effect the provisions of this Act:
(r) exercise in relation the bankrupt's property any power
conferred on a trustee under the Trustee Act 1956 or by the
Court under that Act; and for the purposes of those powers
the Assignee is a trustee of the bankrupt's property:
(s) exercise any authority or power or do any act in relation to the
bankrupt's property that the bankrupt could have exercised or
done if he or she was not bankrupt:
(t) in respect of any particular estate or estates,-
(i) appoint an agent to act for the Assignee:
(ii) delegate to that agent any or all of the powers conferred
by this Schedule:
(iii) revoke the agent's appointment:
(iv) set the agent's remuneration, which must be paid out of
the estate.
Compare: 1967 No 54 s 71
Schedule 2 s 420B
Consequential amendments to other enactments
Customs and Excise Act 1996 (1996 No 27)
Omit from section 101(2) the words "section 104 of the Insolvency
Act 1967" and substitute the words "section 268(5) of the Insolvency
Law Reform Act 2004".
Fisheries Act 1996 (1996 No 88)
Repeal section 270.
249
Schedule 2 Insolvency Law Reform Bill
Industry Training Act 1992 (1992 No 55)
Omit from section 16 the expression ", 23," and the words ", and
section 23,".
Judicature Act 1908 (1908 No 89)
Insert in section 26I(1) after paragraph (c), the following:
"(ca) a proceeding for recovery under-
"(i) section 297 or section 298 of the Companies Act 1993;
or
"(ii) sections 000 of the Insolvency Law Reform Act 2004".
Repeal section 26I(2)(h) and substitute the following:
"(h) sections 00 of the Insolvency Law Reform Act 2004".
Layby Sales Act 1971 (1971 No 80)
Repeal section 11(2) and substitute the following:
"(2) Debts to which priority is given by subsection (1) must be paid
in accordance with section 312 and the Seventh Schedule of
the Companies Act 1993, or section 30 of the Receiverships
Act 1993, or section 268(3) of the Insolvency Law Reform Act
2004, as the case may be."
Radiocommunications Act 1989 (1989 No 148)
Omit from section 183(3) the words "Subject to subsection (4) of
this section, the" and substitute the word "The".
Repeal section 183(4) to (6).
Volunteers Employment Protection Act 1973 (1973 No 25)
Repeal section 15.
250
Insolvency Law Reform Bill Schedule 3
Schedule 3 s 444
New Schedule 7 substituted in Companies Act 1993
Schedule 7 s 312
Preferential claims
1 Priority of payments to preferential creditors
(1) The liquidator must first pay, in the order of priority in which
they are listed,-
(a) the fees and expenses properly incurred by the liquidator
in carrying out the duties and exercising the powers
of the liquidator and the remuneration of the liquidator;
and
(b) the fees and expenses properly incurred by the administrator
in carrying out the duties and exercising the
powers of the administrator and the remuneration of
the administrator; and
(c) the reasonable costs of a person who applied to the
Court for an order that the company be put into
liquidation, including the reasonable costs incurred
between solicitor and client in procuring the order; and
(d) the actual out-of-pocket expenses necessarily incurred
by a liquidation committee; and
(e) to any creditor who protects or preserves assets of the
company for the benefit of the company's creditors by
the payment of money or the giving of an indemnity,-
(i) the amount received by the liquidator by the realisation
of those assets, up to the value of that
creditor's unsecured debt; and
(ii) the amount of the costs incurred by that creditor
in protecting or preserving those assets.
(2) After paying the claims referred to in subclause (1), the liquidator
must next pay, to the extent that they remain unpaid, the
following claims:
(a) subject to clause 3(1), all wages or salary of any
employee, whether or not earned wholly or in part by
way of commission, and whether payable for time or
for piece work, in respect of services provided to the
251
Schedule 3 Insolvency Law Reform Bill
Schedule -continued
company during the 4 months before the commencement
of the liquidation:
(b) subject to clause 3(1), any holiday pay payable to an
employee on the termination of his or her employment
before, or because of, the commencement of the liquidation:
(c) subject to clause 3(1), any compensation for redundancy
owed to an employee that accrues before, or because of,
the commencement of the liquidation:
(d) subject to clause 3(1), amounts deducted by the company
from the wages or salary of an employee in
order to satisfy obligations of the employee (including
amounts payable to the Commissioner of Inland
Revenue in accordance with section 163(1) of the
Child Support Act 1991 and section 167(2) of the Tax
Administration Act 1994 as applied by section 25 of
the Student Loan Scheme Act 1992):
(e) subject to clause 3(1), any reimbursement or payment
provided for, or ordered by, the Employment Relations
Authority, the Employment Court, or the Court
of Appeal under section 123(b) or section 128 of the
Employment Relations Act 2000, to the extent that the
reimbursement or payment does not relate to any matter
set out in section 123(c) of the Employment Relations
Act 2000, in respect of wages or other money or
remuneration lost during the 4 months before the commencement
of the liquidation:
(f) amounts that are preferential claims under section
263(2):
(g) all sums which by any other enactment are required to
be paid in accordance with the priority established by
this subclause.
(3) After paying the claims referred to in subclause (2), the liquidator
must next pay all sums, for which a buyer is a creditor in
the liquidation of the company under section 11 of the Layby
Sales Act 1971-
252
Insolvency Law Reform Bill Schedule 3
Schedule -continued
(a) paid by the buyer to a seller on account of the purchase
price of goods; or
(b) to which the buyer is or becomes entitled to receive
from a seller under section 9 of the Layby Sales Act
1971.
(4) After paying the claims referred to in subclause (3), the liquidator
must next pay the amount of any costs referred to in
section 234(c) of this Act.
(5) After paying the claims referred to in subclause (4), the liquidator
must next pay, to the extent that it remains unpaid to
the Commissioner of Inland Revenue or to the Collector of
Customs, as the case may require, the amount of-
(a) tax payable by the company in the manner required by
Part 3 of the Goods and Services Tax Act 1985; and
(b) tax deductions made by the company under the PAYE
rules of the Income Tax Act 1994; and
(c) non-resident withholding tax deducted by the company
under the NRWT rules of the Income Tax Act 1994;
and
(d) resident withholding tax deducted by the company
under the RWT rules of the Income Tax Act 1994; and
(e) duty payable within the meaning of section 2(1) of the
Customs and Excise Act 1996.
2 Conditions to priority of payments to preferential creditors
(1) The claims listed in each of subclauses (2), (3), (4), and (5) of
clause 1-
(a) rank equally among themselves and, subject to any
maximum payment level specified in any Act or regulations,
must be paid in full, unless the assets of the
company are insufficient to meet them, in which case
they abate in equal proportions; and
(b) so far as the assets of the company available for payment
of those claims are insufficient to meet them,-
(i) have priority over the claims of any person under
a security interest to the extent that the security
interest-
253
Schedule 3 Insolvency Law Reform Bill
Schedule -continued
(A) is over all or any part of the company's
accounts receivable and inventory or all
or any part of either of them; and
(B) is not a purchase money security interest;
and
(C) does not arise from the transfer of an
account receivable for which new value is
provided by the transferee for the acquisition
of that account receivable (whether or
not the transfer of the account receivable
secures payment or performance of an
obligation); and
(ii) must be paid accordingly out of any accounts
receivable or inventory subject to that security
interest (or their proceeds).
(2) For the purposes of subclause (1)(b), the terms account
receivable, inventory, new value, proceeds, purchase
money security interest, and security interest have the
same meanings as in the Personal Property Securities Act
1999.
(3) To the extent that the claims to which subclause (1) applies are
paid out of assets referred to in paragraph (b) of that subclause,
the amount so paid is an unsecured debt due by the company
to the secured party.
(4) Clause 9, as in force immediately before the commencement
of the Personal Property Securities Act 1999, continues to
apply in respect of a company whose property was subject to
a floating charge that, before the commencement of that Act,
became a fixed or specific charge.
3 Provisions concerning preferential payments to employees
(1) The total sum to which priority is to be given under any, or
all, of paragraphs (a) to (e) of clause 1(2) must not, in the case
of any one employee, exceed $15,000 or any greater amount
that is prescribed under subclause (2) at the commencement
of the liquidation.
(2) The sum stated in subclause (1) must be adjusted as follows:
254
Insolvency Law Reform Bill Schedule 3
Schedule -continued
(a) subject to paragraph (d), an adjustment must be made,
by the Governor-General by Order in Council, after the
3-year period starting on 1 July 2003 and ending on
30 June 2006 and after every 3-year period following
that (an adjustment period):
(b) subject to paragraph (d), the Order in Council must
be made within 3 months of the end of an adjustment
period:
(c) each adjustment must reflect any overall percentage
increase, over the relevant adjustment period, in average
weekly earnings (total, private sector), calculated
by reference to the last Quarterly Employment Survey
published by Statistics New Zealand (or, if that survey
ceases to be published, a survey certified by the Government
Statistician as an equivalent to that survey) within
the relevant adjustment period:
(d) if, in an adjustment period, there is no change, or an
overall decrease, in the percentage movement in average
weekly earnings (total, private sector), as so calculated,
no adjustment may be made for that adjustment
period:
(e) if, in accordance with paragraph (d), no adjustment is
made, the next adjustment made for any succeeding
adjustment period must reflect any overall percentage
increase in average weekly earnings (total, private sector)
between the date of the last adjustment and the end
of the relevant adjustment period for which the adjustment
is to be made:
(f) all adjustments are cumulative and must be rounded to
the nearest $20:
(g) any correction to the Quarterly Employment Survey
upon which an adjustment is based must be disregarded
until the adjustment that takes effect in the following
adjustment period which must reflect the corrected
information in the calculation of that adjustment and
must otherwise be made in accordance with this subclause.
255
Schedule 3 Insolvency Law Reform Bill
Schedule -continued
(3) The sum stated in subclause (1), or any greater amount that is
prescribed under subclause (2), on the date of commencement
of a liquidation, continues to apply to that liquidation regardless
of any change to that sum that is prescribed after the date
of commencement of the liquidation.
(4) For the purposes of this clause and clause 1,-
(a) remuneration in respect of a period of holiday or of
absence from work through sickness or other good
cause is to be treated as wages in respect of services
rendered to the company during that period:
(b) employee means any person of any age employed by
an employer to do any work for hire or reward under a
contract of service (including a homeworker as defined
in section 5 of the Employment Relations Act 2000);
but does not include a person who is, or was at any time
during the 12 months before the commencement of the
liquidation, a director of the company in liquidation, or
a nominee or relative of, or a trustee for, a director of
the company:
(c) holiday pay, in relation to a person, means all sums
payable to that person by the company under Subpart
1 of Part 2 of the Holidays Act 2003, and includes all
sums which by or under any other enactment or any
award, agreement, or contract of service are payable to
that person by the company as holiday pay.
4 Subrogation of persons if payment has been made
If a payment has been made to a person (A) on account of
any preferential claim specified in this Schedule out of money
advanced by some other person (B) for that purpose, then B
has, in a liquidation, the same right of priority in respect of
the money so advanced as A would have if the payment had
not been made.
5 Priority given to person who distrains on goods
If a landlord or other person has distrained on goods or effects
of the company during the 20 working days before the commencement
of the liquidation, the preferential claims set out
256
Insolvency Law Reform Bill Schedule 3
Schedule -continued
in this Schedule are a first charge on the goods or effects so
distrained on, or the proceeds from their sale; but if any money
is paid to a claimant under that charge, the landlord or other
person has the same rights of priority as that claimant.
6 Saving provision for liquidation that has commenced
If a liquidation of a company has commenced before Part 8
of the Insolvency Law Reform Act 2004 came into force, that
company's property must be applied in accordance with the
priorities stated in this Schedule on the date the liquidation
commenced as if Part 8 of the Insolvency Law Reform Act
2004 had not come into force.
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Schedule 4 s 445
Consequential amendments relating to Part 8
Industrial and Provident Societies Amendment Act 1952 (1952
No 45)
Repeal section 13(2) and substitute the following:
"(2) In the application of clause 1(2)(b) of the Seventh Schedule of
the Companies Act 1993, the reference to holiday pay payable
to an employee on the termination of the employment before,
or because of, the commencement of the liquidation must be
construed as a reference to holiday pay payable to an employee
on the termination of the employment before, or because of,
the appointment of the receiver or the taking possession of the
property."
Property Law Act 1952 (1952 No 51)
Omit from section 104PPA(2)(b) the words "clauses 1 and 9(b)" and
substitute the words "clauses 1(1) and 2(1)(b)".
Receiverships Act 1993 (1993 No 122)
Omit from the definition in section 2(1) of preferential claims the
expression "clause 1" and substitute the expression "clause 1(1)".
Omit from section 30(2)(b) the words "clauses 1 and 9(b)" and substitute
the words "clauses 1(1) and 2(1)(b)".
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Schedule 5 s 453
Rules applying to cross-border insolvency proceedings
[The provisions of this Schedule correspond, for the most part, to the provisions
of the Model Law on Cross-Border Insolvency adopted by the United
Nations Commission on International Trade Law on 30 May 1997, and
approved by the General Assembly of the United Nations on 15 December
1997 (General Assembly Resolution 52/158). Certain changes have been
made to amend or supplement the provisions of the Model Law in its application
to New Zealand.]
Contents
[This table is not part of the Model Law and is included for convenience.]
Chapter 1
Art 1
Art 2
Art 3
Art 4
Art 5
Art 6
Art 7
Art 8
Chapter II
Art 9
Art 10
Art 11
Art 12
Art 13
Art 14
Chapter III
Art 15
Art 16
Art 17
Art 18
General provisions
Scope of application
Definitions
International obligations of New Zealand
High Court to have jurisdiction
Authorisation of insolvency administrator to
act in a foreign State
Public policy exception
Additional assistance under other laws
Interpretation
Access of foreign representatives and
creditors to courts in New Zealand
Right of direct access
Limited jurisdiction
Application by a foreign representative
to commence a New Zealand insolvency
proceeding
Participation of a foreign representative in
New Zealand insolvency proceeding
Access of foreign creditors to a New Zealand
insolvency proceeding
Notification to foreign creditors of a New
Zealand insolvency proceeding
Recognition of a foreign proceeding and
relief
Application for recognition of a foreign
proceeding
Presumptions concerning recognition
Decision to recognise a foreign proceeding
Subsequent information
Art 19
Art 20
Art 21
Art 22
Art 23
Art 24
Chapter IV
Art 25
Art 26
Art 27
Chapter V
Art 28
Art 29
Art 30
Art 31
Art 32
Relief that may be granted upon application for
recognition of a foreign proceeding
Effects of recognition of foreign main proceeding
Relief that may be granted upon recognition of a
foreign proceeding
Protection of creditors and other interested persons
Actions to avoid acts detrimental to creditors
Intervention by a foreign representative in New
Zealand insolvency proceeding
Co-operation with foreign courts and foreign
representatives
Co-operation and direct communication between
the High Court and foreign courts or foreign
representatives
Co-operation and direct communication between
the insolvency administrator and foreign courts or
foreign representatives
Forms of co-operation
Concurrent proceedings
Commencement of a New Zealand insolvency
proceeding after recognition of a foreign main
proceeding
Co-ordination of a New Zealand insolvency
proceeding and a foreign proceeding
Co-ordination of more than one foreign proceeding
Presumption of insolvency based on recognition of
a foreign main proceeding
Rule of payment in concurrent proceedings
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Preamble
The purpose of this Schedule is to provide effective mechanisms
for dealing with cases of cross-border insolvency so as
to promote the objectives of:
(a) co-operation between the courts and other competent
authorities of New Zealand and foreign States involved
in cases of cross-border insolvency;
(b) greater legal certainty for trade and investment;
(c) fair and efficient administration of cross-border insolvencies
that protects the interests of all creditors and
other interested persons, including the debtor;
(d) protection and maximisation of the value of the debtor's
assets; and
(e) facilitation of the rescue of financially troubled businesses,
thereby protecting investment and preserving
employment.
Chapter I. General provisions
Article 1. Scope of application
(1) Except as provided in paragraph (2) of this article, this Schedule
applies where:
(a) assistance is sought in New Zealand by a foreign court
or a foreign representative in connection with a foreign
proceeding; or
(b) assistance is sought in a foreign State in connection
with a New Zealand insolvency proceeding; or
(c) a foreign proceeding and a New Zealand insolvency
proceeding in respect of the same debtor are taking
place concurrently; or
(d) creditors or other interested persons in a foreign State
have an interest in requesting the commencement of, or
participation in, a New Zealand insolvency proceeding.
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(2) This Schedule does not apply to a registered bank within the
meaning of section 2 of the Reserve Bank of New Zealand Act
1989 that is subject to statutory management under that Act.
Article 2. Definitions
For the purposes of this Schedule:
(a) foreign proceeding means a collective judicial or
administrative proceeding in a foreign State, including
an interim proceeding, pursuant to a law relating to
insolvency in which proceeding the assets and affairs
of the debtor are subject to control or supervision by
a foreign court, for the purpose of reorganisation or
liquidation;
(b) foreign main proceeding means a foreign proceeding
taking place in the State where the debtor has the centre
of its main interests;
(c) foreign non-main proceeding means a foreign proceeding,
other than a foreign main proceeding, taking
place in a State where the debtor has an establishment
within the meaning of subparagraph (f) of this article;
(d) foreign representative means a person or body, including
one appointed on an interim basis, authorised in a
foreign proceeding to administer the reorganisation or
the liquidation of the debtor's assets or affairs or to act
as a representative of the foreign proceeding;
(e) foreign court means a judicial or other authority competent
to control or supervise a foreign proceeding;
(f) establishment means any place of operations where the
debtor carries out a non-transitory economic activity
with human means and goods or services;
(g) High Court or Court means the High Court of New
Zealand;
(h) insolvency administrator means-
(i) a judicial manager appointed under section 40A
of the Life Insurance Act 1908; or
(ii) the Official Assignee within the meaning of section
3 of the Insolvency Law Reform Act 2004; or
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(iii) a statutory manager appointed under section 38
of the Corporations (Investigation and Management)
Act 1989; or
(iv) a receiver within the meaning of section 2 of the
Receiverships Act 1993; or
(v) a liquidator appointed under Part XVI of the
Companies Act 1993 or under any other Act; or
(vi) an administrator within the meaning of section
239B of the Companies Act 1993;
(i) New Zealand insolvency proceeding means a collective
judicial or administrative proceeding pursuant to
the law in New Zealand relating to the bankruptcy, liquidation,
receivership, judicial management, statutory
management, or voluntary administration of a debtor, or
the reorganisation of the debtor's affairs, under which
the assets and affairs of the debtor are administered, or
the assets of the debtor are or will be realised for the
benefit of secured or unsecured creditors.
Article 3. International obligations of New Zealand
No action may be taken under this Schedule that conflicts with
an obligation of New Zealand arising out of any treaty or other
form of agreement to which New Zealand is a party with one
or more other States.
Article 4. High Court to have jurisdiction
The functions referred to in this Schedule relating to recognition
of foreign proceedings and co-operation with foreign
courts shall be performed by the High Court.
Article 5. Authorisation of insolvency administrator to act in a
foreign State
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An insolvency administrator is authorised to act in a foreign
State on behalf of a New Zealand insolvency proceeding, as
permitted by the applicable foreign law.
Article 6. Public policy exception
(1) Nothing in this Schedule prevents the High Court from refusing
to take an action governed by this Schedule if the action
would be manifestly contrary to the public policy of New Zealand.
(2) Before the Court refuses to take an action under paragraph (1)
of this article, the Court shall consider whether it is necessary
for the Solicitor-General to appear and be heard on the question
of the public policy of New Zealand.
Article 7. Additional assistance under other laws
Nothing in this Schedule limits the power of a court or an
insolvency administrator to provide additional assistance to a
foreign representative under other laws of New Zealand.
Article 8. Interpretation
In the interpretation of this Schedule, regard is to be had to its
international origin and to the need to promote uniformity in
its application and the observance of good faith.
Chapter II. Access of foreign representatives and
creditors to courts in New Zealand
Article 9. Right of direct access
A foreign representative is entitled to apply directly to the
High Court.
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Article 10. Limited jurisdiction
The sole fact that an application pursuant to this Schedule is
made to the High Court by a foreign representative does not
subject the foreign representative or the foreign assets and
affairs of the debtor to the jurisdiction of the Court for any
purpose other than the application.
Article 11. Application by a foreign representative to commence a
New Zealand insolvency proceeding
A foreign representative is entitled to apply to commence a
New Zealand insolvency proceeding if the conditions for commencing
such a proceeding are otherwise met.
Article 12. Participation of a foreign representative in a New
Zealand insolvency proceeding
Upon recognition by the High Court of a foreign proceeding,
the foreign representative is entitled to participate in a New
Zealand insolvency proceeding regarding the debtor.
Article 13. Access of foreign creditors to a New Zealand
insolvency proceeding
(1) Subject to paragraph (2) of this article, foreign creditors have
the same rights regarding the commencement of, and participation
in, a New Zealand insolvency proceeding as creditors
in New Zealand.
(2) Paragraph (1) of this article does not affect the ranking of
claims in a New Zealand insolvency proceeding or the exclusion
of foreign tax and social security claims from such a
proceeding.
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Article 14. Notification to foreign creditors of a New Zealand
insolvency proceeding
(1) Whenever, under a New Zealand insolvency proceeding, notification
is to be given to creditors in New Zealand, such notification
shall also be given to the known creditors that do not
have addresses in New Zealand. The High Court may order
that appropriate steps be taken with a view to notifying any
creditor whose address is not yet known.
(2) Such notification shall be made to the foreign creditors
individually, unless the Court considers that, under the circumstances,
some other form of notification would be more
appropriate. No letters rogatory or other, similar formality is
required.
(3) When a notification of commencement of a proceeding is to
be given to foreign creditors, the notification shall:
(a) indicate a reasonable time period for filing claims and
specify the place for their filing;
(b) indicate whether secured creditors need to file their
secured claims; and
(c) contain any other information required to be included
in such a notification to creditors pursuant to the law of
New Zealand and the orders of the Court.
Chapter III. Recognition of a foreign proceeding
and relief
Article 15. Application for recognition of a foreign proceeding
(1) A foreign representative may apply to the High Court for
recognition of the foreign proceeding in which the foreign
representative has been appointed.
(2) An application for recognition shall be accompanied by:
(a) a certified copy of the decision commencing the foreign
proceeding and appointing the foreign representative;
or
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(b) a certificate from the foreign court affirming the existence
of the foreign proceeding and of the appointment
of the foreign representative; or
(c) in the absence of evidence referred to in subparagraphs
(a) and (b), any other evidence acceptable to the Court
of the existence of the foreign proceeding and of the
appointment of the foreign representative.
(3) An application for recognition shall also be accompanied by a
statement identifying all foreign proceedings in respect of the
debtor that are known to the foreign representative.
(4) The Court may require a translation of documents supplied
in support of the application for recognition into an official
language of New Zealand.
Article 16. Presumptions concerning recognition
(1) If the decision or certificate referred to in paragraph (2) of
article 15 indicates that the foreign proceeding is a proceeding
within the meaning of subparagraph (a) of article 2 and that the
foreign representative is a person or body within the meaning
of subparagraph (d) of article 2, the High Court is entitled to
so presume.
(2) The Court is entitled to presume that documents submitted
in support of the application for recognition are authentic,
whether or not they have been legalised.
(3) In the absence of proof to the contrary, the debtor's registered
office, or habitual residence in the case of an individual, is
presumed to be the centre of the debtor's main interests.
Article 17. Decision to recognise a foreign proceeding
(1) Subject to article 6, a foreign proceeding shall be recognised
if:
(a) the foreign proceeding is a proceeding within the meaning
of subparagraph (a) of article 2;
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(b) the foreign representative applying for recognition is a
person or body within the meaning of subparagraph (d)
of article 2;
(c) the application meets the requirements of paragraph (2)
of article 15; and
(d) the application has been submitted to the High Court.
(2) The foreign proceeding shall be recognised:
(a) as a foreign main proceeding if it is taking place in
the State where the debtor has the centre of its main
interests; or
(b) as a foreign non-main proceeding if the debtor has an
establishment within the meaning of subparagraph (f)
of article 2 in the foreign State.
(3) An application for recognition of a foreign proceeding shall
be decided upon at the earliest possible time.
(4) As soon as practicable, after the Court recognises the foreign
proceeding under paragraph (1) of this article, the foreign
representative shall notify the debtor, in the prescribed form,
that the application has been recognised.
(5) The provisions of articles 15, 16, 17, and 18 do not prevent
modification or termination of recognition if it is shown that
the grounds for granting it were fully or partially lacking or
have ceased to exist.
Article 18. Subsequent information
From the time of filing the application for recognition of the
foreign proceeding, the foreign representative shall inform the
High Court promptly of:
(a) any substantial change in the status of the recognised
foreign proceeding or the status of the foreign representative's
appointment; and
(b) any other foreign proceeding regarding the same debtor
that becomes known to the foreign representative.
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Article 19. Relief that may be granted upon application for
recognition of a foreign proceeding
(1) From the time of filing an application for recognition until
the application is decided upon, the High Court may, at the
request of the foreign representative, where relief is urgently
needed to protect the assets of the debtor or the interests of the
creditors, grant relief of a provisional nature, including:
(a) staying execution against the debtor's assets;
(b) entrusting the administration or realisation of all or part
of the debtor's assets located in New Zealand to the
foreign representative or another person designated by
the Court, in order to protect and preserve the value
of assets that, by their nature or because of other circumstances,
are perishable, susceptible to devaluation
or otherwise in jeopardy; and
(c) any relief mentioned in paragraph (1)(c) and (d) of
article 21.
(2) As soon as practicable, after the Court grants relief under
paragraph (1) of this article, the foreign representative shall
notify the debtor, in the prescribed form, of the relief that has
been granted.
(3) Unless extended under paragraph (1)(f) of article 21, the relief
granted under this article terminates when the application for
recognition is decided upon.
(4) The Court may refuse to grant relief under this article if such
relief would interfere with the administration of a foreign main
proceeding.
Article 20. Effects of recognition of a foreign main proceeding
(1) Upon recognition by the High Court of a foreign proceeding
that is a foreign main proceeding,
(a) commencement or continuation of individual actions or
individual proceedings concerning the debtor's assets,
rights, obligations, or liabilities is stayed;
(b) execution against the debtor's assets is stayed; and
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(c) the right to transfer, encumber, or otherwise dispose of
any assets of the debtor is suspended.
(2) Paragraph (1) of this article does not prevent the Court, on the
application of any creditor or interested person, from making
an order, subject to such conditions as the Court thinks fit, that
the stay or suspension does not apply in respect of any particular
action or proceeding, execution, or disposal of assets.
(3) Paragraph (1)(a) of this article does not affect the right to commence
individual actions or proceedings to the extent necessary
to preserve a claim against the debtor.
(4) Paragraph (1) of this article does not affect the right to request
the commencement of a New Zealand insolvency proceeding
or the right to file claims in such a proceeding.
Article 21. Relief that may be granted upon recognition of a
foreign proceeding
(1) Upon recognition by the High Court of a foreign proceeding,
whether main or non-main, where necessary to protect the
assets of the debtor or the interests of the creditors, the Court
may, at the request of the foreign representative, grant any
appropriate relief, including:
(a) staying the commencement or continuation of individual
actions or individual proceedings concerning the
debtor's assets, rights, obligations, or liabilities, to the
extent they have not been stayed under paragraph (1)(a)
of article 20;
(b) staying execution against the debtor's assets to the
extent it has not been stayed under paragraph (1)(b) of
article 20;
(c) suspending the right to transfer, encumber, or otherwise
dispose of any assets of the debtor to the extent this
right has not been suspended under paragraph (1)(c) of
article 20;
(d) providing for the examination of witnesses, the taking
of evidence, or the delivery of information concerning
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the debtor's assets, affairs, rights, obligations, or liabilities;
(e) entrusting the administration or realisation of all or part
of the debtor's assets located in New Zealand to the
foreign representative or another person designated by
the Court; and
(f) extending relief granted under paragraph (1) of article
19.
(2) Upon recognition by the High Court of a foreign proceeding,
whether main or non-main, the Court may, at the request of
the foreign representative, entrust the distribution of all or part
of the debtor's assets located in New Zealand to the foreign
representative or another person designated by the Court, provided
that the Court is satisfied that the interests of creditors
in New Zealand are adequately protected.
(3) In granting relief under this article to a representative of a
foreign non-main proceeding, the Court must be satisfied that
the relief relates to assets that, under the law of New Zealand,
should be administered in the foreign non-main proceeding or
concerns information required in that proceeding.
Article 22. Protection of creditors and other interested persons
(1) In granting or denying relief under article 19 or article 21,
or in modifying or terminating relief under paragraph (3) of
this article, the High Court must be satisfied that the interests
of the creditors and other interested persons, including the
debtor, are adequately protected.
(2) The Courtmay subject relief granted under article 19 or article
21 to conditions it considers appropriate.
(3) The Court may, at the request of the foreign representative or
a person affected by relief granted under article 19 or article
21, or at its own motion, modify or terminate such relief.
(4) The Court must, on application of the statutory manager, terminate
the relief granted under article 19 or article 21 if-
(a) an application for recognition has been made in respect
of a debtor that is a registered bank within the meaning
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Insolvency Law Reform Bill Schedule 5
of section 2 of the Reserve Bank of New Zealand Act
1989;
(b) the Court has granted that application or the Court has
granted relief under article 19; and
(c) the debtor is placed in statutory management after that
application or relief has been granted.
Article 23. Actions to avoid acts detrimental to creditors
(1) Upon recognition by the High Court of a foreign proceeding,
the foreign representative has standing to initiate any action
that an insolvency administrator may take in respect of a New
Zealand insolvency proceeding that relates to a transaction
(including any gifts or improvement of property or otherwise),
security, or charge that is voidable or may be set aside or
altered.
(2) When the foreign proceeding is a foreign non-main proceeding,
the Court must be satisfied that the action relates to assets
that, under the law of New Zealand, should be administered
in the foreign non-main proceeding.
(3) To avoid any doubt, nothing in paragraph (1) of this article
affects the doctrine of relation back as it is applied in New
Zealand.
Article 24. Intervention by a foreign representative in New Zealand
insolvency proceeding
Upon recognition by the High Court of a foreign proceeding,
the foreign representative may, provided the requirements of
the law of New Zealand are met, intervene in any proceeding
in which the debtor is a party.
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Chapter IV. Co-operation with foreign courts and
foreign representatives
Article 25. Co-operation and direct communication between the
High Court and foreign courts or foreign representatives
(1) In matters referred to in paragraph (1) of article 1, the High
Court shall co-operate to the maximum extent possible with
foreign courts or foreign representatives, either directly or
through an insolvency administrator.
(2) The Court is entitled to communicate directly with, or to
request information or assistance directly from, foreign courts
or foreign representatives.
Article 26. Co-operation and direct communication
between the insolvency administrator and foreign courts or
foreign representatives
(1) In matters referred to in paragraph (1) of article 1, an insolvency
administrator shall, in the exercise of its functions and
subject to the supervision of the High Court, co-operate to the
maximum extent possible with foreign courts or foreign representatives.
(2) The insolvency administrator is entitled, in the exercise of its
functions and subject to the supervision of the Court, to communicate
directly with foreign courts or foreign representatives.
Article 27. Forms of co-operation
Co-operation referred to in articles 25 and 26 may be implemented
by any appropriate means, including:
(a) appointment of a person or body to act at the direction
of the High Court;
(b) communication of information by any means considered
appropriate by the Court;
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(c) co-ordination of the administration and supervision of
the debtor's assets and affairs;
(d) approval or implementation by courts of agreements
concerning the co-ordination of proceedings; and
(e) co-ordination of concurrent proceedings regarding the
same debtor.
Chapter V. Concurrent proceedings
Article 28. Commencement of a New Zealand insolvency proceeding
after recognition of a foreign main proceeding
After recognition by the High Court of a foreign main proceeding,
a New Zealand insolvency proceeding may be commenced
only if the debtor has assets in New Zealand; the
effects of that proceeding shall be restricted to the assets of
the debtor that are located in New Zealand and, to the extent
necessary to implement co-operation and co-ordination under
articles 25, 26, and 27, to other assets of the debtor that, under
the law of New Zealand, should be administered in that proceeding.
Article 29. Co-ordination of a New Zealand insolvency proceeding
and a foreign proceeding
Where a foreign proceeding and a New Zealand insolvency
proceeding are taking place concurrently regarding the same
debtor, the High Court shall seek co-operation and co-ordination
under articles 25, 26, and 27, and the following shall
apply:
(a) when the New Zealand insolvency proceeding is taking
place at the time the application for recognition of the
foreign proceeding is filed,
(i) any relief granted under article 19 or article 21
must be consistent with the New Zealand insolvency
proceeding; and
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(ii) if the foreign proceeding is recognised in New
Zealand as a foreign main proceeding, article 20
does not apply;
(b) when the New Zealand insolvency proceeding commences
after recognition, or after the filing of the application
for recognition, of the foreign proceeding,
(i) any relief in effect under article 19 or article 21
shall be reviewed by the Court and shall be modified
or terminated if inconsistent with the New
Zealand insolvency proceeding; and
(ii) if the foreign proceeding is a foreign main proceeding,
the stay and suspension referred to in
paragraph (1) of article 20 shall be modified or
terminated pursuant to paragraph (2) of article 20
if inconsistent with the New Zealand insolvency
proceeding; and
(c) in granting, extending, or modifying relief granted to
a representative of a foreign non-main proceeding, the
Court must be satisfied that the relief relates to assets
that, under the law of New Zealand, should be administered
in the foreign non-main proceeding or concerns
information required in that proceeding.
Article 30. Co-ordination of more than one foreign proceeding
In matters referred to in paragraph (1) of article 1, in respect of
more than one foreign proceeding regarding the same debtor,
the High Court shall seek co-operation and co-ordination
under articles 25, 26, and 27, and the following shall apply:
(a) any relief granted under article 19 or article 21 to a
representative of a foreign non-main proceeding after
recognition of a foreign main proceeding must be consistent
with the foreign main proceeding;
(b) if a foreign main proceeding is recognised after recognition,
or after the filing of an application for recognition,
of a foreign non-main proceeding, any relief in effect
under article 19 or article 21 shall be reviewed by the
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Court and shall be modified or terminated if inconsistent
with the foreign main proceeding; and
(c) if, after recognition of a foreign non-main proceeding,
another foreign non-main proceeding is recognised, the
Court shall grant, modify, or terminate relief for the
purpose of facilitating co-ordination of the proceedings.
Article 31. Presumption of insolvency based on recognition of a
foreign main proceeding
In the absence of evidence to the contrary, recognition of a
foreign main proceeding is, for the purpose of commencing a
New Zealand insolvency proceeding, proof that the debtor is
insolvent.
Article 32. Rule of payment in concurrent proceedings
Without prejudice to secured claims or rights in rem, a creditor
who has received part payment in respect of its claim in a
proceeding pursuant to a law relating to insolvency in a foreign
State may not receive a payment for the same claim in a New
Zealand insolvency proceeding regarding the same debtor, so
long as the payment to the other creditors of the same class is
proportionately less than the payment the creditor has already
received.
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Schedule 6 s 460
Consequential amendments relating to Part 9
Companies Act 1993 (1993 No 105)
Omit from the heading of section 342 the words "assets in New
Zealand" and substitute the words "overseas company".
Omit from section 342(1) the words "the assets in New Zealand of".
Omit from the heading of the Ninth Schedule the words "OF
ASSETS".
Omit from clause 1 of the Ninth Schedule the words "the assets in
New Zealand of".
Repeal clauses 1(a) and (e) of the Ninth Schedule.
Omit from clause 2 of the Ninth Schedule the words "the assets of".
Judicature Act 1908 (1908 No 89)
Add to section 26I(2):
"(k) the Model Law on Cross-Border Insolvency as set out
in Schedule 3 of the Insolvency Law Reform Act 2004."
Insert after clause 458D(1)(a)(vii) of the Second Schedule:
"(viia) theModel Law on Cross-Border Insolvency as set out
in Schedule 3 of the Insolvency Law Reform Act 2004:"
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