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New Zealand law explained for everyone

Companies Act 1993

Compromises with creditors

230: Effect of compromise

You could also call this:

“How a compromise between a company and its creditors becomes binding”

When a company wants to make a deal with the people it owes money to, it’s called a compromise. Here’s how it works:

If you and other people the company owes money to agree to the compromise at a special meeting, it becomes official. This meeting follows rules set out in Schedule 5. The compromise is approved if enough people agree to it, as explained in clause 5 of that schedule.

Once a compromise is approved, it applies to the company and to all the people it owes money to who were told about the proposal. This includes any changes made to the compromise during the meeting.

Sometimes, different groups of people the company owes money to might need to vote separately on the compromise. If this happens, it’s assumed that each group’s approval depends on all the other groups approving it too, unless the compromise clearly says otherwise.

After the voting, the person who suggested the compromise must tell everyone about the result in writing. This includes all the people the company owes money to, the company itself, anyone managing the company’s money, and the person in charge of keeping official company records.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321173.

Topics:
Business > Industry rules
Business > Fair trading
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229: Notice of proposed compromise, or

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

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231: Variation of compromise, or

“How to change an approved compromise with creditors”

Part 14 Compromises with creditors

230Effect of compromise

  1. A compromise, including any amendment proposed at the meeting, is approved by creditors, or a class of creditors, if, at a meeting of creditors or that class of creditors conducted in accordance with Schedule 5, the compromise, including any amendment, is adopted in accordance with clause 5 of that schedule.

  2. A compromise, including any amendment, approved by creditors or a class of creditors of a company in accordance with this Part is binding on the company and on—

  3. all creditors; or
    1. if there is more than 1 class of creditors, on all creditors of that class—
        1. to whom notice of the proposal was given under section 229.

      1. If a resolution proposing a compromise, including any amendment, is put to the vote of more than 1 class of creditors, it is to be presumed, unless the contrary is expressly stated in the resolution, that the approval of the compromise, including any amendment, by each class is conditional on the approval of the compromise, including any amendment, by every other class voting on the resolution.

      2. The proponent must give written notice of the result of the voting to each known creditor, the company, any receiver or liquidator, and the Registrar.