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Statutory management is an insolvency process peculiar to New Zealand. Although seldom used, it has a significant impact on the ability of secured creditors to exercise their rights. It is relevant whenever there are New Zealand obligors. We hope you find this pocket explanation useful.
Appointment process
Under the Corporations (Investigation & Management) Act 1989, the government may appoint statutory managers to any corporation, and to any associated person, in cases involving serious concerns of fraud or reckless operations.
Historically it has been applied to address very complex situations, with large potential losses and widespread impact on the public. Most recently, in August 2024, statutory management was invoked over 70 companies and limited partnerships in the Du Val group.
The Du Val group was involved in large scale property development projects and also offered property investment opportunities. Statutory managers were appointed on the recommendation of the Financial Markets Authority (FMA) given the scale and complexity of the group’s structure.
Powers
A statutory manager has broader powers than a receiver or liquidator, to (among other things) suspend payment or performance of obligations, terminate contracts, pay creditors and compromise claims. Once appointed, an automatic moratorium applies to all claims or proceedings against the relevant corporation or person.
No proceeding or claim can continue against the corporation except in very limited circumstances, with the consent of the statutory manager or the High Court. There is limited scope for a statutory manager’s decisions to be challenged by any party.
The moratorium does not affect the existence of security rights, which continue in property held by the corporation, but does inhibit the ability of secured creditors to exercise their security.
Statutory managers may sell property subject to security, provided they account to the secured party for the proceeds of doing so (after realisation costs and some statutory preferential claims are deducted).
Conclusion
Statutory management can significantly impact creditors and investors, particularly where secured interests are involved. Understanding the appointment process, powers, and implications of statutory management is essential for navigating this unique insolvency process effectively. For more information, about this or other aspects of finance and insolvency law, please reach out to one of our team.
