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New Zealand Bankruptcy Law

Bankruptcy lawyers among my readership may be interested in an article I spotted in the New Zealand Herald on NZ’s new bankruptcy law:

The biggest change to New Zealand insolvency law in at least 20 years came into force at the start of this month, giving creditors wider-reaching powers which should give them better returns while also saving businesses and jobs.

A company which can’t pay its debts can use a new method to try to solve its problems by resorting to “voluntary administration”. ... In simple terms, a voluntary administration puts the company into the hands of an independent administrator for a month. During that time creditors generally cannot enforce their debts. The administrator has breathing space to look at whether it is possible to put together a plan to save the business. The business is out of the hands of the directors for this period.

After a month the creditors meet to vote for or against a “deed of company arrangement”. The deed will often require creditors to forgive some of their debt and accept payment over a number of years on the balance. The creditors will look at whether the result is likely to see them repaid more of their debt than if the company went into liquidation. If a majority votes against it, the company goes into liquidation. If they vote in favour, the company survives. The administrator will often be brought in by a company’s directors, but in some cases creditors can start the process.

Follow the link for more.