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33 Execution process issued by another Court 34 No restriction on execution process if application for adjudication withdrawn or dismissed 35 Meaning of execution process Court's options when hearing creditor's application 36 Court may adjudicate debtor bankrupt 37 Court may refuse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 1 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 2 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 3 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 4 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 5 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 6 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 7 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 8 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 9 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 10 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 11 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. Comp