VOLUNTARY ADMINISTRATION ACT - INDUSTRY ADVISORY GROUP PARTICIPATION

VOLUNTARY ADMINISTRATION ACT
The Insolvency Law Reform Bill introduced, through the Companies Amendment Act 2006, a new insolvency regime and the process of ‘voluntary administration’ as a new business rehabilitation scheme for companies similar to that operating in Australia.

The Companies Amendment Act 2006 came into effect on 1 November 2007 and made changes to the Companies Act 1993.

Why Administration?

Administration is a short-term measure that freezes the company’s financial position while the administrator and the creditors determine the company’s trading prospects going forward.

If it is not an option to save the company, the goal is to administer the affairs of the company in a way that results in a better return to creditors than they would have received if the company had instead been placed straight into liquidation.

The administration commences upon the appointment of the administrator.

Key timings for a Voluntary Administration.

The administrator must:

-Before the end of the next working day after appointment, lodge a notice of appointment with the Registrar and,

-No later than three working days after appointment, advertise the appointment in a local newspaper.

The administrator must report to the Registrar as to various matters, principally relating to offences, misconduct or breach of duty by any director, officer or shareholder of the company.

The NZ Companies Office Registrar’s records will be updated to reflect the new status of the company as ‘In Voluntary Administration’. CRISworks will be updated to reflect the new status of the company as ‘In Voluntary Administration’ within a few minutes of the status change, as we retrieve our data from the NZ Companies Office every minute during the business day.

The administrator must call the first creditor’s meeting within eight working days after the date on which they were appointed.

At least five working days before the meeting the administrator must:

-notify as many creditors as practical in writing, and:

-advertise the meeting in a local newspaper.

The purpose of the meeting is to decide whether to appoint a creditors’ committee and, if so, to appoint its members and decide whether to replace the administrator.

The administrator must call a watershed meeting within the convening period which is 20 working days after the date on which the administrator was appointed, although this can be extended by the Court.

At this meeting, creditors are given the opportunity to decide the company’s future.

At least five working days before the watershed meeting the administrator must notify as many creditors as practical in writing and advertise the meeting in a local newspaper.  In preparation for this meeting the administrator must send creditors the following documents:

-A notice of meeting; and

-The report by the administrator outlining the company’s business affairs and financial circumstances; and

-A statement setting out the administrator’s opinion as to whether it would be in the creditor’s interests to:

• End the administration and return the company to the directors’ control; or
• Wind up the company and appoint a liquidator; or

-Approve a deed of company arrangement through which the company will pay all or part of its debts and then be free of those debts.

If the creditors present decide that the information available is inadequate or incomplete, they have a right to request an extension of the Voluntary Administration. (The Voluntary Administration Act provides for a maximum period of extension).

CreditWorks is working with an industry advisory group to help define the availability of Insolvency information for credit providers in New Zealand by the Ministry of Economic Development Insolvency Office, part of the new Voluntary Administration Act.

We will update CRISworks to publish company related Insolvency Data in the CRISworks system as soon as possible after it is released by the Ministry of Economic Development.