CBL Insurance's interim liquidators are not allowed to go ahead with a pay-out to its reinsurer and largest creditor, Gibraltar-based Elite Insurance.
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In a High Court judgment released today, Justice Patricia Courtney dismissed the liquidator's application for an order to be granted the power to make the immediate payment of cash and assets.
The amount and the assets involved were confidential, and would remain that way after the court decided to keep confidentiality orders in place.
At least 68 percent of CBL Insurance's (CBLI) claims liabilities are owed to Elite.
Liquidators Kare Johnstone and Andrew Greenfell of McGrathNicol wanted to pay out Elite, to remove liabilities owed to it from its balance sheet.
In a letter to shareholders, they said it would better CBLI's financial position.
The judgment said the interim liquidators "consider that the remaining creditors will be in a better position as a result of removing the exposure to Elite than if Elite were to be treated in the same way as all other creditors".
But CBLI's two directors, shareholders and second largest creditor Alpha Insurance all opposed it in court, arguing it was not in their best interests and would leave them worse off when trying to secure their debt payments.
CBLI's directors still wished to restructure the firm to revive it.
The Reserve Bank - which placed CBLI in interim liquidation in February - said in a written statement that it supported the payout to Elite, but accepted the court's decision.
It still wanted all confidentiality orders removed.
The Reserve Bank's adjourned hearing for its liquidation application will be heard in the Auckland High Court on 12 November.
The Reserve Bank, the Financial Markets Authority and the Serious Fraud Office continue to separately investigate CBL Insurance and its parent CBL Corporation.