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Deposit Takers Act 2023

Crisis management and resolution - No creditor or shareholder worse off - How valuer must determine compensation

373: Valuer must determine compensation by reference to difference between liquidation value and resolution value

You could also call this:

"Valuer works out fair compensation by comparing what you got to what you would have got if the company was closed down."

Illustration for Deposit Takers Act 2023

When a valuer is working out how much compensation you should get, they look at two values. They consider what you would have got if the company had been liquidated, which is called the liquidation value. They also consider what you actually got or will get because of the resolution, which is called the resolution value.

If the valuer thinks you got a worse deal from the resolution than you would have from liquidation, they work out how much compensation you should get. They do this by looking at the difference between the two values and deciding what is fair and equitable. The valuer ignores any debts the company owes you that were created after the company went into resolution.

The valuer's job is to be fair and make sure you get the right amount of compensation. They use the liquidation value and resolution value to make this decision, as defined in the rules. This section of the law does not limit what is said in section 371.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS550676.

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Money and consumer rights > Banking and loansBusiness > Industry rules
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372: Valuer must prepare list of pre-resolution creditors and shareholders, or

"Valuer must make a list of people owed money or owning the company before big decisions."

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374: Liquidation value, or

"What something is worth if it has to be sold quickly to pay debts"

Part 7Crisis management and resolution
No creditor or shareholder worse off: How valuer must determine compensation

373Valuer must determine compensation by reference to difference between liquidation value and resolution value

  1. A valuer must assess—

    Liquidation value

  2. what each pre-resolution creditor or pre-resolution shareholder (or class of those persons) would have been likely to receive if a liquidation of the affected entity under New Zealand law had commenced immediately before it entered into resolution; and

      1. Resolution value

    1. what each pre-resolution creditor or pre-resolution shareholder (or class of those persons) has received, is receiving, or is likely to receive as a result of the resolution.

      1. If the valuer considers that, in relation to a pre-resolution creditor or pre-resolution shareholder (or class of those persons), the resolution value is less favourable than the liquidation value, the valuer must determine the compensation payable to the pre-resolution creditor or pre-resolution shareholder (or class).

      2. The valuer must determine the amount of compensation payable by reference to the difference in treatment assessed under subsection (2) and on the basis of the fair and equitable value of that difference in treatment.

      3. The valuer’s assessment under subsection (1) must not take into account any debt owing by the affected entity to a pre-resolution creditor or pre-resolution shareholder if the debt was incurred by the affected entity after it entered resolution.

      4. In this subpart,—

        liquidation value means the amount assessed under subsection (1)(a)

          resolution value means the amount assessed under subsection (1)(b).

          1. This section does not limit section 371.