Articles

Introduction It is now almost ten years since the Personal Property Securities Act 1999 ("PPSA") was enacted. Despite this, in our insolvency work we still regularly come across suppliers who have not performed the necessary registrations, and as a result lose priority to other creditors. This is highly unfortunate, given that a PPSR registration is simple to do and costs only $3.07. A PPSR registration is a little like income protection insurance - not terribly exciting to think about now, but it can make all the difference if the unexpected happens. We encourage all our clients to check that they, and their own clients, are fully conversant with this vital area. In this short article we attempt to explain the…
Business involves hard work and a bit of luck (or magic, given that only 29% of new businesses survive their tenth year). When things go wrong, a news release or a prosecution does not help creditors. Money in the hand does. Dear Peri Just a quick note to say you have restored some of my confidence in human nature. I received $438.75 from the liquidation of [name removed]. Funds we thought we would never see again. Thanks Steve Remedying the situation monetarily is, however, interesting in a liquidation. Commonly, particularly in a High Court liquidation, any tangible assets of material value have been disposed of prior to liquidation, and the directors may be facing the prospect of bankruptcy. The unsecured…
Are you likely to be forced to repay to a liquidator money previously received from a customer? It has become relatively common for suppliers and others to be challenged by liquidators to repay funds that they have previously been paid. Prior to the change of rules in late 2007, the contentious issue was determining what "the ordinary course of business" meant. The decisions surrounding liquidators' challenges did not discourage conventional or usual debt collection measures. Since the McEntee Hire decision in August 2010 we have observed an increase in liquidators sending out letters seeking to challenge transactions. It is disappointing that some liquidators seem to take an approach of challenging all payments made, rather than first considering whether there has…
Many of our clients don't deal with insolvency on a daily basis, and therefore have only a fairly generalised idea of what we do. This article seeks to provide a better understanding of how the liquidation process works. It also demonstrates how choosing the right insolvency practitioner can result in funds being recovered for creditors that would otherwise not be available.   The liquidation process  Most people have a basic intuitive feel for a liquidator's role. This is usually that he or she closes down a business, dismisses staff, sells assets and collects debts. This may well be true, but generally such activities form only part of a much more involved process. Liquidators have very wide powers to investigate a…
Usain Bolt flashed through the 100 metres at the London Olympics in 9.63 seconds - a new Olympic record. Imagine the uproar there would have been if, at the end of the race, the officials had asked, 'What is the current record?' only to be told, 'I don't know. It's not written down anywhere. From memory it's about ....' Accurate records need to be kept for many different reasons, and in relation to companies the requirements are set out in the Companies Act 1993 and also the Tax Administration Act 1994. Accounting records to be kept - Section 194 Companies Act 1993 The board of a company must cause accounting records to be kept that - Correctly record and explain…
With the recent activity in high profile prosecutions of company directors by the Serious Fraud Office ("SFO"), we thought it opportune to revisit a case in which our firm was involved highlighting the point that it is not only the high profile directors that pay a heavy penalty when events do not go according to plan. We pinpoint some useful tips for your clients who may be considering taking on a governance role in a company for which they do not necessarily have all of the prerequisite skills or experience. The judgment for FXHT was released on 9 April 2009. This case concerns a foreign exchange investment broker. The elements of the case involved fraud, breaches of directors' duties and…
This month we conclude our discussion of the rights of unsecured creditors in various insolvency proceedings, by looking at the position in a liquidation. IntroductionA liquidator is normally appointed either by the shareholders or the High Court. The shareholders choose their own liquidator. The High Court appoints a liquidator chosen by the applicant creditor. More unusually, a liquidator can also be appointed by creditors at the 'watershed meeting' in a voluntary administration - seePart 1of this article. A liquidator has a duty to take possession of, protect, realise, and distribute the proceeds of realisation of the company's assets to its creditors. He or she looks after the interests of all creditors. The plight of the unsecured creditorUnsecured creditors do not…
When a company fails one of four things usually happens:- A receiver is appointed An administrator is appointed It enters into a compromise with its creditors It is put into liquidation (this will be covered in Part 2) This article seeks to explain the rights that creditors have in each of the above insolvency proceedings. It is written from the perspective of the ordinary unsecured creditor. 1 - Receivership The purpose of receivership is to repay the debt owed to the General Security Agreement ("GSA") holder.  GSA holders tend to be banks but can also be private lenders (including directors and family members). The receiver's obligations are primarily to the GSA holder who appointed them. If a receiver holds surplus…
Our clients sometimes express frustration and disbelief when directors of insolvent companies form new companies, often trading as normal, especially when these new companies then also fail.  A frequent question is along the lines of "surely this can't be legal?". In this short article we seek to clarify the law in this complex area. It is important to understand that there is no general prohibition on directors starting out again, even with an essentially identical business.  Instead the law seeks simply to ensure that suppliers are not misled or confused as to which entity they are dealing with, and are aware of any insolvency, and also any related sale of assets to a new company.  It is then up to…
The earthquakes in Canterbury created a disaster on a scale not previously seen in New Zealand during our lifetime. Christchurch will be rebuilt and when it gets into full swing it will be the biggest building project in New Zealand history. Treasury has forecast that the cost of the rebuild will be circa NZ$40 billion. Fortunes will be made out of the rebuild, but like any boom, history tells us there will be some spectacular failures along the way. In this article we will explore the issues facing construction companies waiting for the Christchurch rebuild, the chances of another large construction company collapse and some advice on how you as a professional advisor or construction industry contractor can help protect…
A statutory demand is a claim under Section 289 of the Companies Act 1993.  If you or a client receive a statutory demand you are required to pay the specified sum, enter into a compromise or give charge over property to secure payment of the debt to the reasonable satisfaction of the creditor within 15 working days of the date of service, or such longer period as the Court may order. Received a Statutory Demand? We can help If you have been served with a statutory demand you need to speak to us immediately. The earlier you contact us the more options you have. There is a 10 working day window before your options start to close. Contact us now…
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