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Companies Act 1993

Liquidations - The process of liquidation

243A: Directors’ declaration that debts will be paid within 12 months

You could also call this:

“Directors declare company can pay debts within 12 months during liquidation”

If most of the directors of a company think it can pay its debts within 12 months, they can make a special statement. This happens when someone is appointed to close down the company. The directors must write this statement and give it to the Registrar before the person is appointed to close the company.

In this statement, the directors must say they have looked into the company’s situation. They need to believe the company can pay all its debts within 12 months. They must have good reasons for thinking this. The statement must be made no more than 20 working days before the person is appointed to close the company.

The statement must include details about the company’s property, how much money they think they can get from it, what the company owes, and how much they think it will cost to close the company.

If a director makes this statement without good reasons, they are breaking the law. They could be punished as explained in section 373(2).

The person closing the company must tell the Registrar if they think the company won’t be able to pay its debts in the time stated. If this happens, the special rules about this statement no longer apply to the company. If the person closing the company doesn’t tell the Registrar about this, they are breaking the law and could be punished.

Even if the special rules stop applying, directors can still be in trouble if they made the statement without good reasons.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS411967.

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Part 16 Liquidations
The process of liquidation

243ADirectors’ declaration that debts will be paid within 12 months

  1. This section applies to a company if—

  2. a liquidator is appointed under section 241(2)(a) or (b); and
    1. before the appointment of the liquidator, a copy of a declaration described in this section is made by a majority of the company’s directors and delivered to the Registrar for registration.

      1. The declaration must—

      2. be to the effect that the directors have made an inquiry into the affairs of the company and have formed the opinion, on reasonable grounds, that the company will be able to pay its debts in full within a period of not more than 12 months after the appointment of the liquidator; and
        1. be in writing; and
          1. be made within 20 working days before the appointment of the liquidator; and
            1. include a statement of the affairs of the company that contains the prescribed information and shows, as at the latest practicable date before the making of the declaration,—
              1. the property of the company, and the total amount expected to be realised from that property; and
                1. the liabilities of the company; and
                  1. the estimated expenses of the liquidation.

                  2. A director who makes a declaration under this section without having reasonable grounds for their opinion that the company will be able to pay or otherwise provide for its debts within the period stated in the declaration commits an offence and is liable on conviction to the penalty set out in section 373(2).

                  3. If, at any time, the liquidator considers, or has reasonable grounds to consider, that the company will not be able to pay or otherwise provide for its debts in full within the period stated in the declaration,—

                  4. this section ceases to apply to the company; and
                    1. the liquidator must, as soon as practicable, notify the Registrar that this section no longer applies to the company.

                      1. A liquidator who fails to comply with subsection (4)(b) commits an offence and is liable on conviction to the penalty set out in section 373(2).

                      2. The fact that this section ceases to apply to a company does not limit or affect subsection (3).

                      Notes
                      • Section 243A: inserted, on , by section 33 of the Insolvency Practitioners Regulation (Amendments) Act 2019 (2019 No 28).