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Companies Act 1993

Schedule 11: Liquidation of associations

You could also call this:

“How to close down an association and deal with its assets and debts”

This schedule explains how an association can be liquidated, which means it’s shut down and its assets are sold to pay off debts. The court can appoint someone called a liquidator to do this if the association has stopped working, can’t pay its debts, or if it’s fair to close it down.

An association is usually thought to be unable to pay its debts if it doesn’t pay when asked, if someone takes legal action against it for not paying, or if the court tries to collect money from it but can’t. The liquidator can make people pay money they owe to the association or contribute to its debts.

The liquidator follows special rules when closing down an association. These rules are a bit different from the ones used for companies. For example, there are different ways to serve documents on an association, like giving them to a director or leaving them at the association’s main office in New Zealand.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7144920.

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11Liquidation of associations

1Modified application of Part 16 to associations

  1. Part 16 applies to the liquidation of an association with the following modifications and exclusions:

  2. section 241(2)(a), (b), (c)(v), (va), (vii), and (viii), and (d) does not apply:
    1. clause 2 applies instead of section 241(4):
      1. clauses 3 and 4 apply instead of sections 287 and 288(1) and (2):
        1. clause 5 applies instead of section 268:
          1. references in that Part to section 241(4), 268, 287, or 288(1) or (2) (or to a provision of any of those sections) must be taken as references to the relevant replacement clause or clauses under paragraphs (b) to (d) (or to the relevant replacement provision):
            1. section 257(1)(a)(ii)(C) and (1)(a)(iii) does not apply:
              1. all other necessary modifications must be made.

                1. A document may be served on an association for the purposes of this schedule and Part 16 as follows:

                2. by delivery to a director, a principal officer, or the secretary of the association; or
                  1. by leaving it at the association's principal place of business in New Zealand; or
                    1. in the case of a document in any legal proceedings, by a method set out in paragraph (a) or (b) or by serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings.

                      Compare

                      2Grounds for appointment of liquidator

                      1. The court may appoint a liquidator of an association under section 241 if the court is satisfied that—

                      2. the association is dissolved, has ceased to carry on business, or is carrying on business solely for the purpose of terminating its affairs; or
                        1. the association is unable to pay its debts; or
                          1. it is just and equitable that the association be put into liquidation.

                            Compare

                            3Meaning of inability to pay debts

                            1. Unless the contrary is proved, and subject to clause 4 and section 288(3) to (5), an association is presumed to be unable to pay its debts if—

                            2. the association has failed to comply with a demand in respect of a debt owed by the association that is made in accordance with subclause (2); or
                              1. all of the following apply:
                                1. a proceeding has been commenced against a member of the association for the payment of a debt owed by the association or the member in that capacity; and
                                  1. notice of the proceeding has been served on the association; and
                                    1. within 10 days after the notice was served on it, the association has not paid or secured the debt, or otherwise compounded with the creditor, had the proceeding stayed, or indemnified the member for the amount of any judgment debt plus costs; or
                                    2. execution issued against the association, a member of the association in that capacity, or a person authorised to be sued on behalf of the association in respect of a judgment debt has been returned unsatisfied in whole or in part.

                                      1. A demand under subclause (1)(a) must—

                                      2. be in respect of a debt that is due that is not less than the prescribed amount; and
                                        1. be in writing; and
                                          1. be served on the association; and
                                            1. require the association to pay or secure the debt, or otherwise compound with the creditor to the reasonable satisfaction of the creditor within 15 working days after the date of service of the demand or any longer period that the court orders.

                                              Compare

                                              4Evidence of inability to pay debts

                                              1. On an application to the court for an order that an association be put into liquidation, evidence of failure to comply with a demand under clause 3 is not admissible as evidence that an association is unable to pay the debts unless the application is made within 30 working days after the last date for compliance with the demand.

                                              2. Clause 3(2) does not limit proof by other means that an association is unable to pay its debts.

                                              5Power of liquidator to enforce liability of contributors

                                              1. The liquidator may enforce a liability of a person to pay or contribute to—

                                              2. any debt or liability of an association; or
                                                1. any amount for the adjustment of the rights of members of the association among themselves.