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Deposit Takers Act 2023

Crisis management and resolution - Conduct of resolution - Bank may dispose of business undertaking or property, rights, or liabilities

327: Kind of security interest referred to in various sections

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"What kind of security the law is talking about when a bank is in trouble"

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When a bank is in trouble, it can sell its business or properties. You need to know what kind of security interest is being talked about in certain sections of the law. This security interest is over some or all of the bank's accounts receivable and inventory.

The security interest must not be a purchase money security interest that has been perfected at a certain time, as stated in section 74 of the Personal Property Securities Act 1999. It also must not be a security interest that has been perfected under the Personal Property Securities Act 1999 when the bank entered resolution. This type of security interest is explained in the Personal Property Securities Act 1999.

Some words have special meanings in this section, like account receivable, inventory, new value, purchase money security interest, and security interest. These words have the same meanings as in the Personal Property Securities Act 1999. There are also rules about what happens when a security interest is over accounts receivable, inventory, or both, and it secures payment or performance of an obligation under a qualifying derivative.

In this case, the counterparties to the derivative must be two qualifying counterparties or a qualifying counterparty and an overseas person. Before the security interest can be enforced, the collateral must be delivered, transferred, held, registered, or otherwise designated so as to be in the possession or under the control of the enforcing counterparty. This can also be done by another person on behalf of the enforcing counterparty, under the terms of an arrangement evidenced in writing.

Some terms and expressions used in this section have the same meanings as in section 62A of the Corporations (Investigation and Management) Act 1989. Section 62B of the Corporations (Investigation and Management) Act 1989 also applies to this section, with some modifications.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS534962.

Topics:
Money and consumer rights > Banking and loansBusiness > Industry rules
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Part 7Crisis management and resolution
Conduct of resolution: Bank may dispose of business undertaking or property, rights, or liabilities

327Kind of security interest referred to in various sections

  1. The kind of security interest referred to in sections 324 and 326 is a security interest that—

  2. is over all or any part of the licensed deposit taker’s or body corporate’s accounts receivable and inventory or all or any part of either of them; and
    1. is not a purchase money security interest that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999; and
      1. is not a security interest that has been perfected under the Personal Property Securities Act 1999 at the time the licensed deposit taker entered resolution and that arises from the transfer of an account receivable for which new value is provided by the transferee for the acquisition of the account receivable (whether or not the transfer of the account receivable secures payment or performance of an obligation); and
        1. is not a security interest referred to in subsection (3).

          1. In this section, account receivable, inventory, new value, purchase money security interest, and security interest have the same meanings as in the Personal Property Securities Act 1999.

          2. For the purposes of subsection (1)(d), the security interest is a security interest over accounts receivable, inventory, or both to the extent that the security interest secures payment or performance of an obligation under or in relation to a qualifying derivative and—

          3. the counterparties to the derivative are—
            1. 2 qualifying counterparties; or
              1. a qualifying counterparty and an overseas person; and
              2. before the exercise of rights to enforce the security interest, the collateral is delivered, transferred, held, registered, or otherwise designated so as to be in the possession or under the control of—
                1. the enforcing counterparty; or
                  1. another person (who is not the grantor) on behalf of the enforcing counterparty, under the terms of an arrangement evidenced in writing.

                  2. Terms and expressions defined in section 62A of the Corporations (Investigation and Management) Act 1989 and used in subsection (3) have in that subsection the same meanings as in that section.

                  3. Section 62B of the Corporations (Investigation and Management) Act 1989 applies with all necessary modifications for the purposes of subsection (3)(b) (and those modifications include treating references to section 42(10)(b) of that Act as references to subsection (3)(b) of this section).

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