NOTICE TO CREDITORS – UNCLAIMED MONIES - FOURTH AND FIFTH DISTRIBUTION DML Resources Limited (In Liquidation) was placed into liquidation by order of the High Court at Auckland on 7 May 1998, pursuant to Section 241(2)(c)] of the Companies Act 1993. The liquidation is in the final stages of being completed. The funds received over the period of liquidation funded distributions to unsecured creditors. Most unsecured creditors received 100 cents in the dollar. Of the five distributions, the liquidators have unclaimed monies from the fourth distribution in June 2013 and the fifth distribution in September 2014. The Liquidators invite those creditors/employees who believe that they have a claim to these distributions to make contact with us, on 0800 30 30…

Many businesses are facing hard times in the current market with cashflow stretched and delayed creditor payments. Your business might be one of them. Early action is critical in determining whether your business can be rescued or not. Taking steps to ensure your company remains financially sound will minimise the risk of an insolvent trading action and facing personal liability. It may also improve your company's performance. There are serious penalties and consequences of insolvent trading including civil penalties and criminal charges. Insolvency can be established by either of the Cashflow test or Balance Sheet tests. Note, importantly, that only one of these tests needs to be met to establish insolvency. The Cashflow Test is simply whether your company can…

Whether or not a business decides to transact all or part of its business by way of barter, rather than by cash payment, is a decision for the directors but, in making that decision, directors need to remember the old business adage – “Cash is King”. There can be advantages in using the barter system to settle transactions between your business and your clients, but you will still need to have sufficient cashflow. There are still wages and taxes, including GST on the barter transactions, which you will have to pay using money and there will be other goods and services that you require that you cannot make payment for using barter credits. If you cannot find enough business expenses…

The much-delayed City Rail Link (CRL) is having an enormous impact on businesses affected by its mammoth construction works. A cluster of financially devastated Albert St businesses are struggling for their financial future due to a blow-out in the completion of the CRL construction works. City Rail Link Limited was set up in June 2017 and is a joint venture between the Government and Auckland Council. Initial excavation work on Albert St commenced in July 2017. The CRL is New Zealand’s biggest ever transport-related infrastructure project. It is designed to double Auckland’s rail capacity. It comprises a 3.45-kilometre dual-tunnel underground rail link sunk up to 42 metres beneath the centre of Auckland’s CBD. Businesses Under Stress Debt levels are rising…

In many cases, the director of a company will also be a shareholder – but the roles are separate and have different powers and responsibilities. There can also be different levels of control within those roles. In this article we will look at the differences and discuss how those can be managed to lessen the chances of an impasse on any issue. SHAREHOLDERS: The Shareholders of a company have the rights and obligations set out in Part 7 of the Companies Act 1993 (the Act). For the most part, those powers can be exercised by an ordinary resolution passed by a simple majority of those shareholders entitled to vote and voting on the question. There are, however, certain powers which…

You wouldn’t pick a tradie on price alone so why would you pick an insolvency practitioner solely on this basis? You expect your tradie to work to industry standards when working on your house or car so why wouldn’t you take the same care before you hand over control of a business to an insolvency practitioner, who will be dealing with your company, its assets, its creditors, and its stakeholders? Not all insolvency practitioners are created equal. They have different levels of experience and qualifications, work in different size firms, and may or may not be accredited. If you appoint the wrong insolvency practitioners, it can be difficult to remove them. If it’s shortly after appointment, the company’s creditors may…

The recent judgment against Robert Walker for a breach in the confidence and privacy rights of David Henderson a prior director of Property Ventures Limited is a timely reminder that even liquidators can be held liable for breach of privacy. In this case Mr Walker is required to pay $5,000 in damages. What rights do you have when you are dealing with a liquidator who has control of the company books and records? When a liquidator is appointed over a company, either by the shareholders or by order of the High Court, one of the first steps taken will be to locate and uplift the books and records of the company and to seek information about the business, accounts or…

It is, unfortunately, an all too common result of a company failure – customers who have paid a deposit for an item or service only to have the provider placed into liquidation before the goods or service are delivered, are left as unsecured creditors in the liquidation or receivership, with little likelihood of any recovery. Why are Prepayments Made? Prepayments by customers help give certainty to a business that the customer is genuine in their intention to complete the transaction proposed and will not leave the business holding unwanted stock or with preparation costs incurred that will not be met. Paying a deposit to a property developer when buying off the plans secures one of the planned properties in the…

Accounts receivable, or debtors, are recorded as an asset on the company balance sheet on the basis that they represent funds that will be paid to the company by customers in the normal course of business. That’s fine if the amount recorded is accurate and properly reflects the anticipated level of income but, if it isn’t accurate, it inflates the level of current assets and may be disguising the true financial position of the company and becomes a potential liability for the company’s directors. In a recent liquidation, the accounts receivable figure for the company, at the date of liquidation, was approximately $155,000 however, when the process of collecting the outstanding amounts was started, it was quickly discovered that the…

What is a Shareholder Current Account? During the life of the company, funds taken out or put into the company by the shareholders is recorded to the shareholder current account. Usually at the start of a company, working capital is introduced. This balance is usually the opening balance of the shareholder current account. This is separate to the funds paid for share capital. A shareholder current account is a record of the net balance of funds introduced and withdrawn by the shareholder. This moving balance is recorded on the balance sheet and may fluctuate from being an asset of the company to a liability of the company. Drawings are recorded as deductions from the current account. Drawings are where you…

It is probably stating the obvious – but if you don’t ask your customers for payment for the goods or services you provide, there is a good chance they won’t pay you. A lack of cashflow causes issues for any business and particularly so for small businesses that operate on modest turnover and small margins of profit. It leads to the slow payment of creditors and can, if left unchecked, lead to the winding up of the business. The problem usually comes about, primarily in small businesses, when the owner is working in the business providing the goods and services etc during the week and the paperwork is done later if there is time. I am aware of one occasion…

Companies cease trading for many reasons including technological change, competition, ill health, directors’ retirement, ongoing financial problems, or simply because the company has sold its business or assets and serves no further purpose. When a business is profitable, a business can cease to trade following sale of its business or sale of its business assets and can resolve to wind up via a section 318(1)(d) procedure (known as the “short form removal”) or follow a formal solvent liquidation. In current New Zealand law, solvent liquidations are advanced to distribute capital gains and capital reserves tax free and to provide more certainty of finality. In insolvency, directors have a legal obligation to cease trading in accordance with insolvency laws and to…