Most
creditors paid prior to a company liquidation will be able to keep their money thanks
to new insolvency rules. Creditors paid
up to two years prior to a debtor company being wound up insolvent can keep the
money provided they received payment in good faith, did not know the debtor was
insolvent and had provided goods or services to the debtor equal in value to
the payment received.
Insolvency law has
detailed rules to even out the losses when a debtor company goes into insolvent
liquidation forcing some creditors who were paid in full before the liquidation
to repay the money received. They are
left to prove as unsecured creditors. In
practice, money recovered is used first to pay the liquidator’s fees. Frequently, little is left for unsecured
creditors as a whole.
Changes to insolvency
law in 2006 replaced earlier recovery rules which were widely viewed as being
unworkable.
Auckland insolvency
specialist Jeff Meltzer challenged these new rules arguing they should be
interpreted restrictively: any creditor paid in the two years prior to
liquidation and getting 100 cents in the dollar should have to return that
money if there are unpaid creditors.
In the High Court,
Justice Toogood applied the plain wording of the new rules. Creditors can keep their 100 cents in the
dollar provided, at the time of payment, they acted in good faith, had no
knowledge that the debtor company was insolvent and had provided monies worth
in goods or services to the debtor company.
re
Window Holdings Ltd (in liquidation) – High Court (5.12.12.)
12.037