In the life cycle of a company, disputes between shareholders or directors are not uncommon. Tensions may escalate due to differing visions, a breakdown in trust, or major life events—like the death of a key shareholder-director. When parties are no longer aligned and cannot find a viable path forward, liquidation is often seen as a last resort. But it can also be a strategic tool for resolving conflict and unlocking value in a deadlocked business. When Business Relationships Break DownMany small-to-medium enterprises (SMEs) in New Zealand are closely held, often by friends, family members, or long-time business partners. These relationships can deteriorate over time due to: Disagreements on strategy or financial direction Disparities in workload or contribution Retirement plans or…

Winding Up Applications Yet another month where we saw a drop in appointments when compared to the prior month, but we remain above the prior year March figures. Traditionally we would see a drop in March before we begin the climb to the mid-year highs, coupled with the end of financial year keeping creditors distracted with other matters. The winding up notices advertised still present a strong showing for the month, with triple digits for each month in the first quarter of 2025. It suggests we will continue to see this increased level of creditor activity for the rest of the year. While the appointments since January have been decreasing, as a cumulative total we remain above the totals in…

Winding Up Applications February applications were down on January but still above what we saw in 2024. Historically February would be a bumper month as the winding up notices that couldn’t be processed in January would spill into February. Regardless it was still a strong showing for the month and is setting the tone for what we expect to see in the rest of the year. IRD made up 78 of the 118 appointments for the month and continued applying the pressure to derelict debtors. The IRD has continued with its 23-month streak of having more applications than all other creditors. The last time they made less applications was back in March 2023. I have also included the trend line…

2024 was a year that got progressively busier for insolvency practitioners and it looks like it will carry on into 2025 based on the Jan figures. The economy continues to struggle on, with businesses facing shrinking margins and decreased demand. The OCR began to drop from the middle of the year, earlier than originally indicated (originally projected to be mid 2025) with the next announcement due out in a few weeks, pundits seem to be predicting another cut of 25 – 50 points. To date these drops have yet to have the desired effect due to the 12-month lag between the drop taking place and the effect being felt. Latest unemployment figures released in January showed the level of unemployed…

2024 saw a steady rise in corporate insolvencies across the year, driven by a number of factors including businesses shrinking margins, increased creditor action, historical debts incurred over Covid catching up with businesses, a stalled property finance market along with an increasing Official Cash Rate and a decrease in consumer spending amongst others. A key creditor of every business in NZ the Inland Revenue Department, has awoken from its Covid induced collection policy slumber and is now vigorously pursuing its delinquent debtors with increased funding coming from the government to do so. The most recent statistics out of IRD show that they have 8 billion dollars outstanding that need to be collected from individuals ($2 billion) and businesses ($6 billion).…

For solvent companies that have ceased trading, particularly those that have made a capital gain through the sale of their business, now is the ideal time to consider a solvent liquidation before the end of the financial year on 31 March. Under New Zealand law, specifically Section CD 26 of the Income Tax Act 2007, companies that have sold their business at a capital profit can distribute that profit tax-free to their shareholders upon liquidation, provided the transaction was conducted at arm’s length. Why Liquidate Before 31 March? 1. Maximising Tax-Free Distributions o A solvent liquidation ensures that capital profits from the sale of a business can be distributed tax-free. o Delaying the liquidation may expose the company to changes…

Following another OCR drop (50 points) we are now heading into the Christmas break with no new announcements till February, 3 months does seem a long time to wait for any further changes. Once again this will take some time to flow through to the rest of the economy, but it will have an earlier benefit for those borrowers rolling 6 monthly mortgage periods or on the floating rate. There continue to be a number of interesting insolvent businesses covered by the media, particularly the regional publications from pie makers to solar providers. The expectation continues that there will still be further larger businesses to fail as the recovery continues and the IRD keeps pressure on businesses with arrears to…

The end of one year and the start of the next year can be a challenging time for many business owners, especially with extended breaks over the Christmas and New Year period taken by staff. The pressure is compounded by the need to settle various financial obligations, from employee holiday pay to tax payments. Many businesses face the strain from having to pay employees holiday pay entitlements, a period where income is not being generated due to closure and then to face IRD obligations such as November GST due 15 January, Paye due on 20 January, Oct to Dec FBT due on 20 January, provisional tax due on 15 January and for the larger employers more PAYE due on 5th…

Winding Up Applications Another big month with the 3rd month in a row posting new highs in winding up applications. This high was in large part driven by the IRD pushing through application before the Christmas closedown making up 87 of the 125 applications. All other creditor applications has remained constant when compared to the last three months in the high 30’s. We expect this drive from IRD to continue into November in a race to collect funds and apply pressure to derelict debtors before the courts close. It is important to keep in mind however that while this is a high when compared to the last five years it is off a very low base. The year-to-date applications (972)…

We are due for the October OCR announcement to come out this week with pundits predicting that we may see a 50pt drop given the current state of the economy. However, we won’t have the CPI and inflation figures available for public release for another few weeks/months so at this stage the OCR decision could conceivable go either way (hold or drop) In insolvency news, I understand we saw the first Licenced Insolvency Practitioner lose their license following a CAANZ disciplinary tribunal hearing for a number of breaches including misconduct, conduct unbecoming, Rules and Code breaches in insolvency engagements and non-response to NZICA. The full decision can be found here. Winding Up Applications September came in just behind the August…

When you pay a deposit for a service or product and the company fails to communicate, it's a frustrating and concerning situation. This article explores how/when to use a statutory demand to recover your funds if you suspect the company may be insolvent. We also discuss steps for smaller disputed debts within the Disputes tribunal, recovery of larger deposits, and specific considerations for building agreements in New Zealand. Additionally, we will cover the possible costs and time involved in pursuing legal action, and why such cases are often not pursued due to economic reasons. Scenario: Unresponsive Company Holding Your Deposit Imagine you paid a significant deposit to a company for a building project. The company has since ceased all communication,…

In our 44th Insolvency by the Numbers, we look at the July 2024 data set and we review how the month has tracked compared to prior months and years. Unsurprisingly the Reserve Banks made no change to the OCR at their July 2024 announcement. Banks and independent economists now expect the first drop may come in November 2024. June quarter inflation figures came in at 0.4, bringing the annual inflation rate to 3.3. This was driven largely by tradable inflation coming down, non-tradeable (“domestic”) inflation appears to be a bit stickier however. No doubt the next quarter inflation figures may not show as much of a drop with the recent rates rises pushing through and the adjustment to tax bands…