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Companies Act 1993

Liquidations - Creditors' claims

305: Rights and duties of secured creditors

You could also call this:

“What secured creditors can do and must do when a company is being liquidated”

If you are a secured creditor, you have several options when a company is being liquidated. You can sell the property that your charge is on, decide how much the property is worth and claim for any remaining amount as an unsecured creditor, or give up your charge to help all creditors and claim for your whole debt as an unsecured creditor.

If you sell the property, you can claim as an unsecured creditor for any money still owed to you. You must also give any extra money to the liquidator after your debt is paid.

If you value the property and claim as an unsecured creditor, you need to fill out a form with all the details about your valuation, claim, and charge. The liquidator might ask to see any documents you mention.

The liquidator can accept or reject your valuation and claim. If it’s rejected, you can try again with a new valuation within 10 working days. The liquidator can also change their mind if they think they were wrong to reject your claim.

If the liquidator accepts your valuation, they can pay you that amount to get the property back, unless you’ve already sold it.

The liquidator can ask you to choose what you want to do within 20 working days. If you don’t respond, it’s assumed you’ve given up your charge.

If you’ve given up your charge, you might be able to change your mind later, but you need permission from the court or the liquidator.

It’s against the law to make a false or misleading claim on purpose. If you do, you could be punished as outlined in section 373(4).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM322329.

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304: Claims by unsecured creditors, or

“How unsecured creditors can claim money from a company in liquidation”

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306: Ascertainment of amount of claim, or

“How to calculate the amount owed to creditors when a company is liquidated”

Part 16 Liquidations
Creditors' claims

305Rights and duties of secured creditors

  1. A secured creditor may—

  2. realise property subject to a charge, if entitled to do so; or
    1. value the property subject to the charge and claim in the liquidation as an unsecured creditor for the balance due, if any; or
      1. surrender the charge to the liquidator for the general benefit of creditors and claim in the liquidation as an unsecured creditor for the whole debt.

        1. A secured creditor may exercise the power referred to in paragraph (a) of subsection (1) whether or not the secured creditor has exercised the power referred to in paragraph (b) of that subsection.

        2. A secured creditor who realises property subject to a charge—

        3. may, unless the liquidator has accepted a valuation and claim by the secured creditor under subsection (6), claim as an unsecured creditor for any balance due after deducting the net amount realised:
          1. must account to the liquidator for any surplus remaining from the net amount realised after satisfaction of the debt, including interest payable in respect of that debt up to the time of its satisfaction, and after making any proper payments to the holder of any other charge over the property subject to the charge.

            1. If a secured creditor values the security and claims as an unsecured creditor for the balance due, if any, the valuation and any claim must be made in the prescribed form and—

            2. contain full particulars of the valuation and any claim; and
              1. contain full particulars of the charge including the date on which it was given; and
                1. identify any documents that substantiate the claim and the charge.

                  1. The liquidator may require production of any document referred to in subsection (4)(c).

                  2. Where a claim is made by a secured creditor under subsection (4), the liquidator must—

                  3. accept the valuation and claim; or
                    1. reject the valuation and claim in whole or in part, but—
                      1. where a valuation and claim is rejected in whole or in part, the creditor may make a revised valuation and claim within 10 working days of receiving notice of the rejection; and
                        1. the liquidator may, if he or she subsequently considers that a valuation and claim was wrongly rejected in whole or in part, revoke or amend that decision.

                        2. Where the liquidator—

                        3. accepts a valuation and claim under subsection (6)(a); or
                          1. accepts a revised valuation and claim under subsection (6)(b)(i); or
                            1. accepts a valuation and claim on revoking or amending a decision to reject a claim under subsection (6)(b)(ii),—
                                1. the liquidator may, unless the secured creditor has realised the property, at any time, redeem the security on payment of the assessed value.

                              1. The liquidator may at any time, by notice in writing, require a secured creditor, within 20 working days after receipt of the notice, to—

                              2. elect which of the powers referred to in subsection (1) the creditor wishes to exercise; and
                                1. if the creditor elects to exercise the power referred to in paragraph (b) or paragraph (c) of that subsection, exercise the power within that period.

                                  1. A secured creditor on whom notice has been served under subsection (8) who fails to comply with the notice, is to be taken as having surrendered the charge to the liquidator under subsection (1)(c) for the general benefit of creditors, and may claim in the liquidation as an unsecured creditor for the whole debt.

                                  2. A secured creditor who has surrendered a charge under subsection (1)(c) or who is taken as having surrendered a charge under subsection (9) may, with the leave of the court or the liquidator and subject to such terms and conditions as the court or the liquidator thinks fit, at any time before the liquidator has realised the property charged,—

                                  3. withdraw the surrender and rely on the charge; or
                                    1. submit a new claim under this section.

                                      1. Every person who—

                                      2. makes, or authorises the making of, a claim under subsection (4) that is false or misleading in a material particular knowing it to be false or misleading; or
                                        1. omits, or authorises the omission, from a claim under that subsection of any matter knowing that the omission makes the claim false or misleading in a material particular—
                                            1. commits an offence, and is liable on conviction to the penalties set out in section 373(4).

                                          Notes
                                          • Section 305(4): replaced, on , by section 35 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).