Plain language law

New Zealand law explained for everyone

Companies Act 1993

Liquidations - Voidable transactions

293: Voidable charges

You could also call this:

“When certain charges on company property can be cancelled”

You can cancel a charge over a company’s property or business if certain conditions are met. A charge is when someone has a right to claim something if a debt isn’t paid.

If a charge was given within a specific time period before the company went into liquidation, and the company couldn’t pay its debts right after giving the charge, you can cancel it. This time period is called the ‘restricted period’ and is usually 6 months before liquidation started.

There’s also a ‘related party period’ of 2 years for charges given to people or businesses connected to the company.

However, you can’t cancel a charge if it was for money actually paid to the company, or for goods or services the company received. You also can’t cancel a charge if it replaced an earlier charge from before the restricted or related party periods.

If a charge was given within the restricted period, it’s assumed the company couldn’t pay its debts afterwards, unless proven otherwise.

There are some exceptions for charges securing unpaid property purchases, as long as they’re made within 30 days of the sale.

When deciding if a charge can be cancelled, any payments received after the charge was given are considered to have gone towards the money, goods, or services the charge was for.

The exact timing of the restricted and related party periods can change depending on how the company went into liquidation.

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 It might be out of date or be missing some parts.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=DLM321989.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Banking and loans
Previous

292: Insolvent transaction voidable, or

“Transactions can be cancelled if a company is struggling financially”

Next

294: Procedure for setting aside transactions and charges, or

“How to challenge certain company transactions or charges as a liquidator”

Part 16 Liquidations
Voidable transactions

293Voidable charges

  1. A charge over any property or undertaking of a company is voidable by the liquidator if—

  2. the charge was given within the restricted period; and
    1. immediately after the charge was given, the company was unable to pay its due debts.

      1. A charge over any property or undertaking of a company is voidable by the liquidator if—

      2. the charge was given to a related party within the related party period; and
        1. immediately after the charge was given, the company was unable to pay its due debts.

          1. Neither subsection (1) nor (1AA) applies to a charge that—

          2. secures money actually advanced or paid, or the actual price or value of property sold or supplied to the company, or any other valuable consideration given in good faith by the grantee of the charge at the time of, or at any time after, the giving of the charge; or
            1. is in substitution for a charge that,—
              1. in the case of subsection (1), was given before the restricted period:
                1. in the case of subsection (1AA), was given before the related party period.

                2. Unless the contrary is proved, a company giving a charge within the restricted period is presumed to have been unable to pay its due debts immediately after giving the charge.

                3. Subsection (1A)(b) does not apply to the extent that—

                4. the amount secured by the substituted charge exceeds the amount secured by the existing charge; or
                  1. the value of the property subject to the substituted charge at the date of the substitution exceeds the value of the property subject to the existing charge at that date.

                    1. Nothing in subsection (1) or (1AA) applies to a charge given by a company that secures the unpaid purchase price of property, whether or not the charge is given over that property, if the instrument creating the charge is executed not later than 30 days after the sale of the property or, in the case of the sale of an estate or interest in land, not later than 30 days after the final settlement of the sale.

                    2. For the purposes of subsection (1A)(a) and subsection (4), where any charge was given by the company within the period specified in subsection (1) or (1AA) (as relevant), all payments received by the grantee of the charge after it was given shall be deemed to have been appropriated so far as may be necessary—

                    3. towards repayment of money actually advanced or paid by the grantee to the company on or after the giving of the charge; or
                      1. towards payment of the actual price or value of property sold by the grantee to the company on or after the giving of the charge; or
                        1. towards payment of any other liability of the company to the grantee in respect of any other valuable consideration given in good faith on or after the giving of the charge.

                          1. For the purposes of subsections (1) to (2), restricted period means—

                          2. the period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and
                            1. in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and
                              1. if—the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.
                                1. an application was made to the court to put a company into liquidation; and
                                  1. after the making of the application to the court a liquidator was appointed under section 241(2)(a) or (b),—

                                  2. For the purposes of subsections (1AA) and (1A), related party period means—

                                  3. the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and
                                    1. in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of the application and ending on the date on which, and at the time at which, the order of the court was made; and
                                      1. if—the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.
                                        1. an application was made to the court to put a company into liquidation; and
                                          1. after the making of the application to the court a liquidator was appointed under section 241(2)(a) or (b),—

                                          2. Repealed
                                          Notes
                                          • Section 293(1): replaced, on , by section 28(1) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(1)(a): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(1AA): inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(1A): inserted, on , by section 28(1) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(1A): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(1A)(a): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(1A)(b): replaced, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(3): amended, on , by section 28(2) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(4): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(5): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(5): amended, on , by section 28(3) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(5A): inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(6): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(6)(a): replaced, on , by section 9(1) of the Companies Amendment Act 1999 (1999 No 19).
                                          • Section 293(6)(a): amended, on , by section 28(4) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(6)(b): amended, on , by section 28(4) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(6)(b): amended, on , by section 9(2)(a) of the Companies Amendment Act 1999 (1999 No 19).
                                          • Section 293(6)(b): amended, on , by section 13(1) of the Companies Amendment Act 1998 (1998 No 31).
                                          • Section 293(6)(c): inserted, on , by section 13(1) of the Companies Amendment Act 1998 (1998 No 31).
                                          • Section 293(6)(c)(ii): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                          • Section 293(6)(c): amended, on , by section 28(4) of the Companies Amendment Act 2006 (2006 No 56).
                                          • Section 293(6)(c): amended, on , by section 9(2)(b) of the Companies Amendment Act 1999 (1999 No 19).
                                          • Section 293(7): repealed, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).