New Zealand, a dynamic economy in the South Pacific, has seen significant growth in project finance. This guide provides a detailed overview of legal considerations, market trends, and practical advice for project finance in New Zealand.

I. Legal Framework for Project Finance

A. Security Interests

• General Approach: Project financing typically involves a general security agreement granting security interests over all assets. This eliminates the need to individually identify assets in security documents.

• Perfection Methods: Perfection of security interests varies by asset type. For land, the Land Transfer Act 2017 governs, while personal property is subject to the Personal Property Securities Act 1999. Registering a financing statement on the Personal Property Securities Register is a common and efficient method.

B. Security Over Specific Assets

• Real Property: Security over land can be an unregistered charge in a general security deed or a registered mortgage. Registered mortgages take priority and are processed online through Land Information New Zealand.

• Receivables: Security over accounts receivable is usually taken under a general security agreement. The chargor can continue to collect receivables in the absence of default. A notice of assignment is typically delivered to contractual counterparties.

• Bank Accounts: Security over bank accounts is covered by a general security agreement. The account bank is usually notified and acknowledges the security interest. Controls over project accounts are common.

• Shares: Security over shares can be taken under a general or specific security agreement. Possession of shares, either through holding certificates or noticing interests in the share register, is common practice.

C. Security Trustee

New Zealand recognizes the concept of a security trustee. It is usual for project security to be held by a security trustee on behalf of lenders. The security trustee enforces the security following an event of default and applies the proceeds in accordance with a pre-agreed waterfall.

II. Enforcement of Security

A. General Considerations

Enforcement of security interests is generally free after default, subject to compliance with relevant laws and agreements. For personal property, Part 9 of the PPSA provides statutory remedies. For land, the PLA sets out specific requirements and procedures.

B. Foreign Investors and Creditors

Foreign creditors are not treated differently from domestic creditors in enforcement sales. New Zealand has a stable legal system that protects the rights of secured creditors.

III. Bankruptcy and Restructuring

A. Insolvency Procedures

The main insolvency procedures in New Zealand are voluntary administration, liquidation, and receivership. Voluntary administration aims to maximize the chances of a company continuing or achieving a better return for creditors. Liquidation involves the realization and distribution of a company’s assets. Receivership allows a secured creditor to appoint a receiver to realize assets or manage the business.

B. Director’s Liabilities

Directors of insolvent or near-insolvent companies have a duty to consider the interests of creditors. Breaches of these duties can result in personal liability for directors.

IV. Foreign Investment

A. Restrictions and Controls

Foreign investment is regulated by the Overseas Investment Act 2005. Consent is required for overseas persons acquiring significant business assets or sensitive land. The Overseas Investment Office reviews applications and decides whether to consent to the proposed transaction.

B. Bilateral Investment Treaties

There are treaties that provide some exceptions from the OIA regime in relation to residential land for Australian and Singaporean nationals. However, these exceptions are not relevant to project finance transactions.

V. Government Approvals and Restrictions

A. Relevant Government Agencies

A number of government agencies have oversight over projects in New Zealand. These include the procuring department or agency for PPPs, the Treasury, the Infrastructure Commission, and local authorities.

B. Licensing Requirements

Landowners, developers, and infrastructure operators need to obtain resource consents under the Resource Management Act 1991. Various other licenses may be required depending on the nature of the project.

VI. Tax Considerations

A. Withholding Taxes

New Zealand has two types of withholding tax that apply to interest: non-resident withholding tax and resident withholding tax. The rates and applicability depend on the residency of the lender and the nature of the loan.

B. Tax Incentives

There are no specific tax incentives offered preferentially to foreign investors or creditors in project finance transactions.

VII. Other Considerations

A. Environmental, Health and Safety Laws

The Resource Management Act 1991 and the Health and Safety at Work Act 2015 are key legislations that impact project financing. Compliance with these laws is essential for project companies.

B. Project Agreements and Governing Law

Project agreements and financing agreements are typically governed by New Zealand law. New Zealand is a common choice for governing law due to its stable legal system and international recognition.

C. Limited Partnerships

Limited partnerships are a common structure for project SPVs in New Zealand. They offer limited liability for limited partners and a “look-through” tax treatment.