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Covid-19 bringing the Courts’ discretionary powers to the fore – Voluntary Administration and the requirements regarding a first creditors’ meeting during lockdown

In these times of economic uncertainty, the Courts are playing an important role in providing some direction as to how companies can continue to move forward with their options in a context not contemplated by the current legalisation.

In the recent decision of EncoreFX (NZ) Limited [2020] NZHC 674 the Court had to consider how the legislation relating to the voluntary administration of companies, and particularly the requirements surrounding calling a first creditor’s meeting, apply in the current Covid-19 climate.  Voluntary administration of companies is governed by Part 15A of the Companies Act 1993 (Act).

The administrators of EncoreFX sought orders from the Court allowing for a variation of the usual postal requirement for notices, and to allow for an electronic creditors’ meeting, including voting by email.  The application was made pursuant to s 239ADO of Act which gives the Court the power to “make any order that it thinks appropriate about how the Part is to operate in relation to a particular company.”  The overriding principle is that the Court should only exercise this power in order to ensure that the objectives of the Part are being met.

The objectives of Part 15A of the Act, crucially, are:

  1. To maximise the chances of the company, or as much as possible of its business, continuing in existence; or
  2. If it is not possible for the company or its business to continue in existence, create a better return for the company’s creditors and shareholders than one resulting from an immediate liquidation of the company.

While we ride the beginning of a likely recessionary wave, the application of the rules regarding how companies are managed in order to minimise the negative impact on creditors (in so far as that is possible) are going to be essential.

In this case the Court held:

  1. Notice of the meeting could be sent electronically, as the current lockdown means that the postal systems may be delayed or usual postal addresses are inaccessible, and posting mail increases the risk of transmission;
  2. Allowing the creditors’ meeting to be convened by audio visual means is consistent with the objectives of Part 15A, and allows the meeting to be held in a timely way while also allowing for effective participation by creditors; and
  3. Postal votes are ordinarily allowed and, in the circumstances, it is appropriate for postal votes to be accepted electronically (by email).

Each case will be fact-specific.  It was noted, for example, that the due to the nature of EncoreFX’s business (as a retailer of foreign currencies used by importers and exporters to hedge foreign currency risks) “it is likely that the creditors will have the necessary technology to attend such a meeting.

If you have any queries about managing your company through credit issues including the appointment of administrators, and how the ordinarily stringent requirements of the Act apply to your situation, contact one of our team for further expert advice.


This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

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Jessica Matena

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