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Companies Act 1993

Liquidations - The process of liquidation

245A: Related creditor’s vote at meeting of creditors to be disregarded unless court orders otherwise

You could also call this:

“Related creditors' votes don't count unless a court approves”

When a company is being closed down, there are meetings where people the company owes money to (called creditors) can vote on important decisions. Some of these creditors might be closely connected to the company. These are called ‘related creditors’.

If you’re a related creditor, the person in charge of closing down the company (the liquidator) won’t count your vote. This is to make sure the voting is fair for everyone.

But if you’re a related creditor and you think your vote should count, you can ask a court to allow it. You need to tell the liquidator before the vote that you’re going to do this. Then, within 10 working days after the meeting, you need to ask the court.

The court will only let your vote count if it won’t harm the interests of the other creditors. They’ll look at things like how you might benefit from the decision, your relationship with the company, and any other important factors.

A related creditor could be someone who started the company, a family member of someone who started it, a director or shareholder, or even another company that’s connected to this one. There are many types of related creditors, and the law lists them all to make sure it’s clear who counts as one.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321693.

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245: Liquidator may dispense with meetings of creditors, or

“Liquidator can skip creditor meetings if deemed unnecessary”

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245B: Creditor’s vote disregarded if liquidator considers creditor is related creditor, or

“Liquidator can ignore votes from creditors they think are connected to the company”

Part 16 Liquidations
The process of liquidation

245ARelated creditor’s vote at meeting of creditors to be disregarded unless court orders otherwise

  1. The liquidator must disregard a related creditor’s vote on a resolution at the meeting of creditors unless the court orders otherwise.

  2. A related creditor may apply to the court for an order that its vote be taken into account.

  3. A related creditor that intends to apply for an order must,—

  4. before a vote is taken on the resolution, give notice in writing to the liquidator that the creditor—
    1. is a related creditor; and
      1. intends to apply to the court for an order that its vote be taken into account; and
      2. within 10 working days of the meeting of creditors, make an application to the court.

        1. The court may make an order that a related creditor’s vote be taken into account only if satisfied that ordering that the applicant’s vote (or the applicants’ votes) be taken into account—

        2. is not contrary to the interests of the creditors, or a class of creditors, as a whole; and
          1. will not prejudice, and is not reasonably likely to prejudice, the interests of the creditors who voted against the resolution or for it, as the case may be, to an extent that is unreasonable having regard to—
            1. the benefits accruing to the applicant (or the applicants), or to some or all of the related creditors, from the resolution or from the failure to pass the resolution; and
              1. the nature of the relationship between the applicant (or the applicants) and the company, or between the related creditors and the company; and
                1. any other relevant matter.

                2. In this section and sections 245B to 245D,—

                  related creditor means a creditor who is a related entity of the company in liquidation

                    related entity means, in relation to the company in liquidation,—

                    1. a promoter; or
                      1. a relative or spouse of a promoter; or
                        1. a relative of a spouse of a promoter; or
                          1. a director or shareholder; or
                            1. a relative or spouse of a director or shareholder; or
                              1. a relative of a spouse of a director or shareholder; or
                                1. a related company; or
                                  1. a beneficiary under a trust of which the company in liquidation is or has at any time been a trustee; or
                                    1. a relative or spouse of that beneficiary; or
                                      1. a relative of a spouse of that beneficiary; or
                                        1. a company one of whose directors is also a director of the company in liquidation; or
                                          1. a trustee of a trust under which a person (A) is a beneficiary, if A is a related entity of the company in liquidation under this subsection.

                                          Compare
                                          • Corporations Act 2001 s 600A (Aust)
                                          Notes
                                          • Section 245A: inserted, on , by section 18 of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 245A heading: replaced, on , by section 36(1) of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).
                                          • Section 245A(1): replaced, on , by section 36(2) of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).
                                          • Section 245A(2): replaced, on , by section 36(2) of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).
                                          • Section 245A(2A): inserted, on , by section 36(2) of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).
                                          • Section 245A(2B): inserted, on , by section 36(2) of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).
                                          • Section 245A(3): amended, on , by section 36(3) of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).
                                          • Section 245A(3) promoter: repealed, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).