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New insolvency law should save businesses and jobs

For Immediate Release
October 31, 2007

New insolvency law should save businesses and jobs

The biggest change to New Zealand insolvency law in at least 20 years comes into force tomorrow (November 1), giving creditors wider-reaching powers which should give them better returns while also saving businesses and jobs.
Peter Hattaway, a leading New Zealand credit expert, says that New Zealanders who have been accustomed to seeing news of companies going into receivership or liquidation have a new and perhaps more positive term to get used to - "voluntary administration".  
“In Australia, "VAs", as they are known, are the most common form of company insolvency.  Research has shown that the process can lead to creditors recovering more money than they would have in a liquidation.  
“New Zealand has largely copied Australia's law, but experts are hopeful that the law will work even better here as the New Zealand legislation tries to correct some of the problems that have occurred in the Australian regime,” he said.
Starting tomorrow, the Companies Act allows directors to put their failing companies into the hands of an independent administrator who has a month's grace period to try to come up with a rescue plan.  
“After a month, creditors vote on whether to accept or reject the plan at a ‘watershed meeting’, which decides the company's future.  They can vote to put the company into liquidation, or to accept the plan.  
“The plan usually involves creditors forgiving some of the debt and being paid the balance over time,” he said.
Mr Hattaway said that these changes to the insolvency law will affect a lot of businesses and a lot of people's lives, so it's important that people understand them.
“There are seminars being held on this topic around New Zealand over the next week and they are well supported, which is probably indicative of the affects that this new legislation will have,” he said.


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