This article is reposted here courtesy of MinterEllisonRuddWatts.

The Supreme Court last Thursday released its long awaited decision on directors duties engaged on a company’s insolvency – Debut Homes Limited (in liquidation) v Cooper [2020] NZSC 100. The decision has profound implications for directors confronted with a business experiencing material financial distress and more broadly, for creditors, lenders and the insolvency profession.

This is the first time these issues have come before our highest court, and its decision is significant. In a in which directors have grappled with existential challenges to their businesses, and with the decision of the Court of Appeal pending in Mainzeal, the Supreme Court has raised the stakes for directors operating financially distressed companies. Increased recourse to formal insolvency and restructuring processes seems inevitable.

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