Insolvency: Termination of Liquidation
Section 250 of the Companies Act 1993 states that “The Court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company”. The only basis on which the plaintiffs could apply under this section is if there was a valid liquidation and they were “any other entitled person”.
It has been said that “[s]ection 250 can only apply where there has been a valid order for the liquidation of the company. Where there has not been a valid order for the liquidation of the company (for example where it has been found that the statutory demand and the application for liquidation was never served on the company) the liquidation is to be regarded as a nullity. In those circumstances the Court retains an inherent jurisdiction to set aside a liquidation order to ensure that its processes are not abused in such a way as to cause injustice”.[1]
In Bridon New Zealand Limited v Tent World Limited, the respondent was wound up by an order of the Court on the ground it was insolvent.[2] However, the company was not insolvent and was not aware of the proceeding. All parties agreed that the liquidation should be stayed. The question arose, however, whether the court order for liquidation could be rescinded rather than stayed. This was a decision made in the context of a Court order so is a far cry from the present.
This Court has recognised on many previous occasions the right and ability of the Court to declare a liquidation a nullity even where the liquidation exists by dint of court order.[3]
[1] Company Law (Westlaw, online looseleaf ed) at [CA250.07].
[2] Bridon New Zealand Limited v Tent World Limited [1992] 3 NZLR 725 (HC).
[3] Goh v Ridgeview Properties Ltd (in liq) (2009) 10 NZCLC 264,537 (HC); Re Samoana Press Co Ltd (1988) 4 NZCLC 64,119 (HC); Sam’s Fukuyama Food Service v RWJ Enterprises Ltd HC Auckland CIV-2011-404-6558, 14 December 2011.