Liquidation Surplus Account
What is the Liquidation Surplus Account?
Funds that cannot be distributed from a liquidation must be paid to the Public Trust and will become part of the Liquidation Surplus Account (LSA).
Liquidators can apply to the Official Assignee for New Zealand for a payment from these funds to cover the cost of proceedings, advice or expert witnesses.
The liquidator must prove it is fair and reasonable for the costs to be met out of the LSA.
There should be a public interest element in the proceedings eg to sue auditors who failed to protect the interests of creditors. The application must relate to the claims of the creditors in liquidation.
Find more information in section 316(4) in the Companies Act 1993.
Funding of Proceedings
The Act provides for payment of the cost of proceedings, advice or expert witnesses. Liquidator’s costs cannot be met from the LSA.
The Official Assignee will take into consideration:
- the merits of the case;
- the likely amount that would be recovered;
- an estimate of the total cost of the proceedings;
- the proportion of the amount requested from the LSA in relation to the total cost of proceedings (where possible the Official Assignee will expect that the creditors make a contribution); and
- whether the proceedings have a public interest element.
How to apply
In all applications for funding, the following details must be provided;
- a list of the creditors who have filed proofs of debts, along with the amount each creditor has claimed
- a list of all assets recovered and assets still to be recovered
- whether the creditors have been asked to fund the proceedings.
In some circumstances funding will be provided on a staged basis. Bulk sums will only be granted in certain circumstances.
Any assets that are recovered must be used to reimburse the Liquidation Surplus Account as first priority.
Making an application
An application for funding can be made to:
Official Assignee for New Zealand at email@example.com
Official Assignee for New Zealand
Ministry of Business, Innovation & Employment
Private Bag 4714