Liquidation
Directors and Liquidators both have rights and duties following a formal liquidation appointment. We address the rights and duties of directors in this article. Rights of Directors following a Liquidation: 1. Right to Information: Directors have the right to access information and records about the liquidation process and the company's financial affairs. This includes access to the liquidator's reports, financial statements, and other relevant documents. 2. Right to Participate: Directors may participate in meetings of creditors and have the right to raise questions or concerns about the liquidation process. 3. Legal Advice: Directors have the right to seek legal advice and representation to protect their interests and understand their obligations during the liquidation process. Duties of Directors to the Liquidator:…
Tagged under
Liquidation,
A liquidator in New Zealand is appointed to wind up the affairs of a company that is insolvent or otherwise unable to pay its debts. Liquidators can also be appointed to solvent companies for formal closure. The liquidator's role is to realize the company's assets, distribute them to creditors, and ultimately dissolve the company. There are key rights and powers typically granted to liquidators in New Zealand: 1. Investigation Powers: Liquidators have the authority to investigate the company's affairs, transactions, and financial records to determine the company's financial position, assets, liabilities, and any potential wrongdoing. 2. Recovery and Collection: Liquidators can recover and collect assets that are part of the company's estate, including pursuing legal actions to recover funds owed…
Tagged under
Liquidation,
We all know it’s frustrating not being paid. What’s worse is that not getting paid affects your cash flow and chasing bad debts takes time that could otherwise be spent doing productive work. If you decide that your best option for resolving the debt is to liquidate the debtor company, the process generally takes at least three months. There are a number of milestones along the way, which are outlined below. Provided the debt is not disputed, the first step is to issue a statutory demand. The purpose of the statutory demand is to test the company’s solvency – the presumption being that, if the company is solvent and the debt is not in dispute, the company will pay the…
If you have sold your business or business assets and ceased trading and you are considering liquidating your solvent company, there are a number of benefits to completing the process before the end of the financial year. A solvent liquidation, is a process by which a company is wound up and its assets are distributed to its shareholders because it is no longer needed or wanted. The benefits of doing so include: Tax advantagesBy completing your solvent liquidation before the end of the financial year, you can take advantage of tax benefits that are only available to companies that are wound up before the end of the financial year. In particular, you may be able to claim a tax deduction…
Tagged under
Solvent Liquidations,
If your business is struggling with debt and financial difficulties, you may be considering liquidation as a way to address your problems. However, liquidation is not always the best option for every business. Before making any decisions, it's important to consider all the available options and seek professional advice from experienced insolvency practitioners like McDonald Vague. Liquidation is a process by which a company's assets are sold to pay off debts to creditors, and the company is then dissolved. While it may seem like a quick solution to financial problems, it can have serious consequences for the company's directors, shareholders, and employees. It's important to understand the potential implications of liquidation before deciding whether it's the best option for your…
In normal circumstances there is no need for a party to go to Court to seek the liquidation of an apparently solvent company – but it is not “normal circumstances” when the relationship of the shareholders and directors of a company has broken down to the point that they cannot all agree on anything. This puts the individuals involved under a lot of stress and puts the viability of the company at risk. Section 246 of the Companies Act 1993 provides for an interim liquidator to be appointed by the Court, if it is satisfied, on an application being made, that it is necessary and expedient for the purposes of maintaining the value of assets owned or managed by the…
Liquidations advanced through the High Court require Court fee approval in most cases. Shareholder appointments also subject to some form of review and oversight. In some liquidations a committee is appointed. Every insolvency practitioner now needs to be licensed and is subject to a complaints and disciplinary process. A reasonable and competent liquidator should take into account the amount owed to creditors, the prospects of recovery and consider the cost versus benefit of advancing claims and legal actions. It is a liquidator's obligation to maximise the return to creditors and to act in a reasonable and efficient manner. There have been a number of cases now where liquidators have been scrutinised for charging excessive fees. Liquidators facing criticism It was…
Tagged under
Liquidation,
Video Link Here There is a belief held by some people that the liquidators of a company are paid by the person (or company) that appoints them and, in some cases, that is what happens – but not always. How the liquidators get paid, and by whom, will depend largely on the situation of the company being liquidated, such as solvent or insolvent, shareholder or High Court appointment, but there are two broad categories – • Payment from the assets of the company; or• Payment from a third party – such as shareholders of the company to be liquidated or the applicant creditor for the High Court proceedings to liquidate the company. The other possibility is that the liquidators will…
The Income tax Act 2007 allows a company to make a tax free distribution of capital gains “on liquidation”. The IRD issued publication QB20/03 on 11 December 2020. The publication discusses the first step legally necessary to achieve “liquidation” in both the short form (s318(1)(d) Companies Act 1993) and long-form liquidation (s241(2)(a) Companies Act 1993). IRD have confirmed when “liquidation” occurs under each process. It reinforces BR Pub 14/09 that a short form liquidation commences (for tax purposes) when a valid resolution is passed, when the directors (and/or shareholders depending on the constitution) make the decision to wind up the business, pay all creditors, distribute surplus assets and request removal from the register of companies, and then carry out the…
Typically, March is a busy month – it is the end of the financial year for most New Zealand companies and income tax returns for the previous financial year (for clients of tax agents) are due, which means many business owners decide to commit or quit in March. As a result of an alert level increase on 28 February 2021, Auckland spent the first week of March 2021 at Alert Level 3, while the rest of the country stepped up to Alert Level 2. In order to soften the blow, the Government activated two rounds of resurgence support payments plus a two-week wage subsidy payment for eligible businesses. There were also signals from the Government in around mid-March that the…
Voluntary liquidation allows a company to terminate its operations and sell off assets and for any shortfall to be dealt with. Some companies are liquidated because they serve no further purpose. Some are liquidated as they have unfeasible operations or poor operating conditions or technology has moved on. Others are liquidated because the founder has retired or passed and the business cannot operate without that expertise. Some have been affected by the failure of a large customer, the loss of a major contract or an extraordinary event, like Covid-19. Most companies advance an insolvent liquidation because: • The business cannot pay its debts as and when they fall due.• Liabilities exceed total assets.• The business is making losses and there…
Generally speaking, in the liquidation of a company, creditors of equal ranking in the liquidation are treated equally. So, if there are funds to distribute, they will all receive the same proportion of the amount that they have claimed. This is known as the Pari Passu Rule. The exception to this rule is when there is a mutual set-off between the company in liquidation and another party that is both a creditor to whom the company owes money, and a debtor that owes the company money. The requirement for the mutual set-off is set out in section 310 of the Companies Act 1993 as follows - 310 Mutual credit and set-off (1) Where there have been mutual credits, mutual debts,…
Tagged under
Liquidation,