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Companies Act 1993

Voluntary administration - Rights of secured creditor, owner, or lessor

239ABL: If secured creditor acts before or during decision period

You could also call this:

“What happens when a secured creditor enforces their rights during company administration”

If you have a company in administration, and almost all of its property is covered by a charge (a type of security), this law explains what can happen if the secured creditor (the person who holds the charge) decides to enforce their rights.

The law applies in two main situations:

  1. When one secured creditor has a charge over nearly all the company’s property and enforces it.

  2. When one secured creditor has multiple charges that together cover nearly all the company’s property and enforces them all at once.

In these situations, the secured creditor can enforce their charge even if there are rules or court orders that usually stop this from happening during administration. This means they can take actions to recover their money or take control of the property.

The secured creditor can do this themselves, or they can appoint someone else (like a receiver) to do it for them. This is allowed even if the appointment happens after the decision period (a specific time frame in the administration process).

Also, if the secured creditor or the person they appoint does something that affects the company’s property while enforcing the charge, they don’t need to follow the usual rules about getting the administrator’s written consent.

Remember, this is just a simple explanation of the law. If you need to understand how it applies to a real situation, you should talk to a lawyer.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321565.

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239ABK: Meaning of terms used in this subpart, or

“Explaining key terms for secured creditors during company administration”

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239ABM: If enforcement of charges begins before administration, or

“What happens if someone starts enforcing a charge before a company goes into administration”

Part 15A Voluntary administration
Rights of secured creditor, owner, or lessor

239ABLIf secured creditor acts before or during decision period

  1. This section applies if—

  2. the whole, or substantially the whole, of the property of a company in administration is subject to a charge; and
    1. before or during the decision period, the secured creditor enforces the charge in relation to all property of the company subject to the charge, whether or not the charge is enforced in the same way in relation to all that property.

      1. This section also applies if—

      2. a company is in administration; and
        1. the same person is the secured creditor in relation to each of 2 or more charges over the property of the company; and
          1. the property of the company (in this subsection called the charged property) subject to the respective charges together constitutes the whole, or substantially the whole, of the company's property; and
            1. before or during the decision period, the secured creditor enforces together the charges in relation to all the charged property—
              1. whether or not the charges are enforced in the same way in relation to all the charged property; and
                1. whether or not any of the charges is enforced in the same way in relation to all the property of the company subject to that charge; and
                  1. in so far as the charges are enforced in relation to property of the company in a way referred to in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK, whether or not the same person is appointed in respect of all of the last-mentioned property.

                  2. Nothing in section 239ABC or in an order under section 239ABO prevents any of the following persons from enforcing the charge:

                  3. the secured creditor:
                    1. a receiver or person appointed as mentioned in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period).

                      1. Section 239Z does not apply in relation to a transaction or dealing that affects property of the company and is entered into by the secured creditor or a receiver or person of a kind referred to in subsection (3)(b) in the performance or exercise of a function or power as that secured creditor, receiver, or person, as the case may be.

                      Compare
                      • Corporations Act 2001 s 441A (Aust)
                      Notes
                      • Section 239ABL: inserted, on , by section 6 of the Companies Amendment Act 2006 (2006 No 56).