Like many fields in finance and business, insolvency comes with its fair share of jargon. Our goal here is to decipher the 'official' terminology and present it in plain English. Below, you'll find explanations for various terms, with key concepts highlighted in bold.
Please be aware that this glossary serves as general guidance only. The provided definitions and explanations are not exhaustive summaries of the law.
Term |
Definition |
| Asset |
A resource of value that is owned by an individual, company, or organisation |
| Bankruptcy |
Formal insolvency process for individuals |
| Companies Act 1993 |
The legislation regulating companies in NZ, including but not limited to all liquidations and voluntary administrations |
| Corporate Insolvency |
The inability of a company to pay its debts which may lead to:
|
| Creditor |
An individual, company, or organisation which is owed money by another person, company, or organisation |
| Debt |
Amount of money owed by an individual, company, or organisation that is expected to be repaid |
| Debtor |
An individual, company, or organisation who owes money to another person or organisation |
| DOCA | Deed of Company Arrangement |
| General Security Agreement (GSA) / Interest | An interest over all of a debtor’s present and after-acquired assets |
| Insolvency Act 2006 |
The legislation regulating personal insolvencies in New Zealand |
| Insolvent |
When a company or individual is unable to pay its debts as they fall due |
| Licensed Insolvency Practitioner (LIP) |
A regulated individual who provides advice and solutions to financially distressed companies or individuals and may be appointed as a liquidator, voluntary administrator, or receiver. |
| Liquidation |
The process of shutting down the company’s operations and selling its assets to repay creditors |
| Liquidator |
A LIP appointed to oversee the liquidation process and distribute money (if any) to creditors |
| MBIE |
Ministry of Business Innovation and Employment |
| Official Assignee |
The Government officer that administers all personal insolvencies (bankruptcies) in New Zealand |
| Preferential creditor |
An unsecured creditor who enjoys a special priority under Schedule 7 of the Companies Act 1993 |
| PPSR |
An online register that records information about a security interest granted by a debtor to a creditor. It is legislated by the Personal Property Securities Act 1999. |
| Realise |
The process of selling assets and recovering money |
| Receiver |
A LIP appointed by a secured creditor or the Court to receive and manage property owned by an individual, company, or organisation |
| Recover |
The act of obtaining or regaining assets that were lost, stolen, owed, or taken |
| Restructure |
The process of making significant changes to a company’s financial, operational, and/or organisational structure to improve its viability and performance |
| RITANZ |
Restructuring Insolvency & Turnaround Association of New Zealand |
| Secured creditor |
A creditor who has a legal claim to specific assets of the debtor for debt owed |
| Security |
A right granted by a debtor to a creditor over an asset or other collateral to secure an obligation owed by the debtor to the creditor |
| Statutory management |
A process designed to deal with complex corporate or individual business failure |
| Trade creditor |
An individual, company, or organisation that is owed money for goods or services provided in the day-to-day operations of a company |
| Unsecured creditor |
A creditor who is owed money by debtor, but who does not have any specific rights to the assets of the debtor |
| Voluntary administration |
Type of insolvency process that is designed to give companies a chance to restructure and negotiate terms with their creditors with a view to maximising returns to creditors and preserving company value whilst avoiding liquidation. The process of negotiation with creditors could result in a Deed of Company Arrangement (DOCA) that outlines how the company will pay its debts. |
| Voluntary liquidation |
A type of liquidation process initiated by shareholders of a company. |
| Winding up |
Refer to liquidation |