Corporate Compromises and Voting by Interested Creditors Event as iCalendar

(All seminars, Commercial Law)

29 June 2017

12 - 1pm

Venue: The University of Auckland Business School, Room 321, Level 3, Owen G Glenn Building, 12 Grafton Road, Auckland

Host: Huigenia Ostik

Contact info: +64 9 923 7656

Contact email: h.ostik@auckland.ac.nz

Summary  

When a company is in serious financial difficulty, the stakeholders may have an interest in preserving the company rather than liquidation. This may be for economic or non-economic reasons (e.g. to save jobs). The Companies Act 1993 provides several means for a company to enter a binding compromise with its creditors. These, in essence, allow for 75% of creditors to bind dissenting creditors.

The procedures have potential for abuse; in particular where an “interested creditor” (typically a director or large shareholder) votes. For this reason, courts, without express legislative mandate, have created a variety of mechanisms to protect minority creditors. In New Zealand, courts, on occasion, have prevented interested creditors from voting altogether. They have also required that creditors vote in separate classes. Finally they have required that creditors “act bona fide, and … do not promote interests adverse to those of the class whom they purport to represent.”

This seminar considers two issues: First, the relationship between the tests, and the definition of what constitutes a class. Second, the requirement to act “bona fide”. The presenter will argue that the test is fraught with difficulties. It seems to assume that there is an objective test for what a reasonable creditor should do. This ignores that creditors may have differing motives; and it is questionable whether a court should say that one motive is valid, while another is not.

About Michael Josling  

Michael Josling is a Senior Lecturer in Commercial Law at the Business School. He is a graduate of the University of Auckland, having degrees in commerce and law, and a Master of Commercial Law. Prior to joining the Business School, Michael worked for a number of years at a major New Zealand law firm in its insolvency practice. He subsequently worked at the New Zealand Law Commission as a Senior Researcher on its insolvency law reform project. This led ultimately to the 2006 reforms (including voluntary administration).

Michael teaches undergraduate and postgraduate courses in insolvency, finance law, and company law. Michael researches and writes in the areas of personal and corporate insolvency. He is the author of chapters on corporate and personal insolvency schemes in the leading text “Heath and Whale: Insolvency Law in New Zealand”. His writing is regularly discussed by New Zealand courts (for example in recent cases dealing with class voting and the release of third parties).

RSVP

Please RSVP to Huigenia Ostik by Friday 23 June 2017. A light lunch to be provided so please RSVP for catering purposes.