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Companies Act 1993

Liquidations - Company unable to pay its debts

291: Additional powers of court on application to set aside statutory demand

You could also call this:

“Court's extra options when you challenge a demand for payment”

If you go to court to challenge a demand for payment, the court has some extra powers. If the court finds that you owe money to someone and there’s no big argument about it, they can do two things:

They can tell you to pay the money within a certain time. If you don’t pay, the person you owe can ask the court to close down your company.

Or, the court can decide right away to close down your company because you can’t pay your debts.

If the court tells you to pay within a certain time and you don’t, it will be assumed that you can’t pay your debts when someone asks to close down your company.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM321973.

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“Court can cancel a formal payment request if a company has valid reasons”

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Part 16 Liquidations
Company unable to pay its debts

291Additional powers of court on application to set aside statutory demand

  1. If, on the hearing of an application under section 290, the court is satisfied that there is a debt due by the company to the creditor that is not the subject of a substantial dispute, or is not subject to a counterclaim, set-off, or cross-demand, the court may—

  2. order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or
    1. dismiss the application and forthwith make an order under section 241(4) putting the company into liquidation,—
        1. on the ground that the company is unable to pay its debts.

      1. For the purposes of the hearing of an application to put the company into liquidation pursuant to an order made under subsection (1)(a), the company is presumed to be unable to pay its debts if it failed to pay the debt within the specified period.