Plain language law

New Zealand law explained for everyone

Companies Act 1993

Liquidations - Provisions relating to prior execution process

251: Restriction on rights of creditors to complete execution, distraint, or attachment

You could also call this:

“Limits on creditors taking company property when company is closing”

You need to know about a rule that stops people who are owed money by a company from taking the company’s stuff to pay back the debt. This rule kicks in when the company is about to be shut down.

If you’re owed money by a company, you can’t keep any of the company’s property that you’ve taken through a legal process unless you finished taking it before the company started to shut down. This means you need to have finished before:

  1. The company decides to appoint someone to shut it down, or
  2. The company’s bosses decide to appoint someone to shut it down, or
  3. Someone asks a court to appoint a person to shut down the company

But there are some exceptions. If you bought something from the company in good faith (meaning you didn’t know about any problems), you get to keep it, even if the company is being shut down.

The court can also change this rule if they think it’s fair to do so.

For this rule, ‘finishing’ the process of taking property means different things:

  • For personal property, it means taking it and selling it
  • For money owed to the company, it means receiving the money
  • For land, it means selling it or, for some types of ownership, appointing someone to manage it

This rule doesn’t change anything in section 292 of this law.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321901.

Topics:
Business > Industry rules
Business > Fair trading
Crime and justice > Courts and legal help
Previous

250: Court may terminate liquidation, or

“Court can end the liquidation process if it's fair and justified”

Next

252: Duties of officer in execution process, or

“Rules for handling company property during legal action and liquidation”

Part 16 Liquidations
Provisions relating to prior execution process

251Restriction on rights of creditors to complete execution, distraint, or attachment

  1. Subject to subsection (3), a creditor is not entitled to retain the benefit of any execution process, distress, or attachment over or against the property of a company unless the execution process, distress, or attachment is completed before—

  2. the passing of a special resolution under section 241(2)(a) or a resolution under section 241(2)(d) appointing a liquidator of the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or
    1. the passing of a resolution by the board of a company under section 241(2)(b) appointing a liquidator of the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or
      1. the making of an application to the court under section 241(2)(c) to appoint a liquidator of the company.

        1. Notwithstanding subsection (1),—

        2. a person who, in good faith, purchases property of a company from an officer charged with an execution process acquires a good title as against the liquidator of the company:
          1. a person who, in good faith, purchases property of a company on which distress has been levied acquires a good title as against the liquidator of the company.

            1. The court may set aside the application of subsection (1) to such an extent and on such terms and conditions as the court thinks fit.

            2. For the purposes of this section,—

            3. an execution or distraint against personal property is completed by seizure and sale:
              1. an attachment of a debt is completed by receipt of the debt:
                1. an execution against land is completed by sale, and, in the case of an equitable interest, by the appointment of a receiver.

                  1. Nothing in this section limits or affects section 292.

                  Compare
                  • 1955 No 63 s 314
                  • 1980 No 43 s 29
                  Notes
                  • Section 251(1)(a): amended, on , by section 11 of the Companies Amendment Act 2006 (2006 No 56).