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The content of this article may be out of date - please refer to our more recent articles for up-to-date information. I empathise with creditors who are concerned about cowboys operating and competing in the insolvency field of expertise. These individuals want to make a fast buck and can give the whole profession a bad name. It is time to crack down on the cowboys! Allowing inexperienced and unskilled or less than reputable insolvency practitioners to operate is not in the interest of the economy as a whole. The current practice leads to unsatisfied and uninformed creditors, lack of confidence in the system and uncertainty. Creditors are ultimately bearing the costs of the inexperienced cowboy who is failing to meet…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. The Companies Amendment Act 2006 implemented on 1 November 2007 increases the transparency and accountability of Insolvency Practitioners and means significant changes to the administration of Insolvencies. The key changes are as follows: •Liquidation by Shareholder appointment allowed within a 10 day time frame from the date of service of a winding up application. •Phoenix Companies - where a new company is formed using the name, similar name or trading name of a failed company, directors can be made personally liable for the debts of the failed company. •More disclosure required of liquidators. •Further Grounds of Liquidator Disqualification -…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. The Sons of Gwalia decision which was handed down by the High court of Australia in January of this year, clarified three earlier decisions which were made in the years 2005 and 2006. The Sons of Gwalia case and the earlier decisions set out the circumstances where in Australia a shareholder or shareholders can make a claim against a company which will rank equally with the claims of the unsecured creditors. The earlier cases formulated the following principles:- a. Clarification that shareholders who have bought shares under a prospectus that contained misleading or deceptive statements or omissions can claim…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. THE CHARTERED ACCOUNTANT AS A BUSINESS PARTNERChartered Accountants think of themselves as something quite different from bookkeepers. They regard themselves as business partners who can and do add value to the business of their clients. If they are sincere in this, they need a good working knowledge of company law, commercial law and the law of meetings and need to be in a position to advise their clients accordingly. They need to have the judgment to know when the services of a solicitor are required and need to be able to select the requisite solicitor. A FAILING OF THE…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. A recent article discussed how companies on the verge of going bust are settling with trade and other creditors, then voluntarily winding up their businesses leaving the Inland Revenue Department out on a limb. This happens all too often. Also, there are as the title suggests too many "friendly liquidators". Various solutions were offered. My view is that those solutions are not the only solutions. Registration of Insolvency PractitionersThe one thing upon which many professionals agree is the need for the registration of insolvency professionals. As it stands, at the present time a liquidator needs no academic qualifications, no…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. New Zealand is the home of small business. Each year thousands of businesses are started, and each year many businesses fail. Traditionally a person starting a business formed a company, put some assets or cash into the company, and borrowed money from a bank under the security of a debenture. The debenture was a charge over the whole undertaking of the business, and invariably the bank was covered. There are now so many preferential creditors who rank ahead of the debenture that the security of a debenture holder has been watered down. Those standing in front of the bank…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. The intention of these articles was to give Chartered Accountants an appreciation of insolvency matters. If I have concentrated on the potential liability of the Chartered Accountant this is because the risks of the accountant being sued are very real and are not just theoretical or perceived. THE CASEIn the recent case which I am about to discuss, the accountant was not on trial. He was merely a witness. He was however, severely criticised by the Judge. The case has two aspects which are common to many companies in financial difficulties:- •The directors were conscientious and put more money…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. Graeme McDonald and John Vague attended a Business Law Reform seminar in Wellington on Thursday, 22 November 2001. At that seminar Laila Harre, the Associate Commerce Minister, announced changes to the laws dealing with preferential payments. You may be aware, that both Graeme and John, other Insolvency Practitioners, the Law Commission and the Credit & Finance Institute have made submissions recommending that the amount of preferential payments should be reduced so that the amount which will be available to unsecured creditors can be maximised. In the circumstances we found it hard to come to grips with the announcements of…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. Insolvency Practitioners liaise with the law profession on a daily basis. As in all professions it is easy to communicate with some practitioners and difficult to communicate with others. In such circumstances time and effort is wasted. Increased costs reduce the amount which will be available to creditors and delay any payout. We are invariably happier when the solicitor on the other side has the skill to present his or her clients' case clearly, concisely and in a way we understand. We have an ongoing case in our office which is an extreme example of what we encounter. The…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. Some years ago some meat processing companies failed. Workers lost their jobs and whereas wages and holiday pay were preferential, redundancy due ranked as unsecured.   Recently the Government determined that redundancy should be preferential and the Status of Redundancy Payments Bill was passed into law in the form of the Insolvency Amendment Act 2004 and the Companies Amendment Act 2004. These Acts come into force 60 days after the 30 March 2004, which is the date they received the Royal Assent. I calculate the effected dated as being 29 May 2004. Both Acts make redundancy preferential and increase…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. Introduction - DefinitionTraditionally the following entities have been used to conduct business - • Sole Traders• Partnerships• CompaniesOver past recent years it has become more common for the trading entity to be a Trading Trust. A Trading Trust is a trust which is formed for the purpose of carrying on a business. The obvious advantages of trading through such a trust are - • The ability to distribute profits and assets to beneficiaries• The ability to organise the tax affairs of the trust so that beneficiary income is distributed to beneficiaries at lower tax rates and thus reduce the…
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