Plain language law

New Zealand law explained for everyone

Companies Act 1993

Compromises with creditors

228: Compromise proposal

You could also call this:

“Suggesting a plan to help a struggling company pay its debts”

If you think a company can’t pay its debts, you can suggest a plan to help sort things out. This plan is called a compromise. You can suggest this plan if you’re part of the company’s board of directors, if you’re in charge of looking after the company’s assets, if you’re helping to close down the company, or if you’re someone the company owes money to or owns part of the company.

If you’re someone the company owes money to or owns part of the company, you need to ask the court for permission first. If the court says yes, they might also tell the company to give you a list of everyone the company owes money to. This list will show how much money the company owes to each person. The court might ask the company to give you other helpful information too. This is to help you come up with a good plan.

To find out more about what it means for a company to be unable to pay its debts, you can look at section 287.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321171.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Banking and loans
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227: Interpretation, or

“Explaining key terms used in rules about company debt agreements”

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229: Notice of proposed compromise, or

“Telling people about a plan to make a deal with a company's creditors”

Part 14 Compromises with creditors

228Compromise proposal

  1. Any of the following persons may propose a compromise under this Part if that person has reason to believe that a company is or will be unable to pay its debts within the meaning of section 287—

  2. the board of directors of the company:
    1. a receiver appointed in relation to the whole or substantially the whole of the assets and undertaking of the company:
      1. a liquidator of the company:
        1. with the leave of the court, any creditor or shareholder of the company.

          1. Where the court grants leave to a creditor or shareholder under subsection (1)(d), the court may make an order directing the company to supply to the creditor or shareholder, within such time as may be specified, a list of the names and addresses of the company's creditors showing the amounts owed to each of them or such other information as may be specified to enable the creditor or shareholder to propose a compromise.