What Documents Are Creditors Entitled to in a Liquidation? When a company goes into liquidation, creditors have certain legal rights to access documents for the purpose of helping stakeholders understand what’s happening, assess their chances of seeing a recovery on what they are entitled to, and to hold insolvency practitioners accountable when dealing with the assets of the company. What documents can creditors see? Creditors entitlements to documents in a liquidation are set out across a number of acts, these include the Companies Act, Liquidation Regulations, Insolvency Practitioners Regulations and Companies (Reporting by Insolvency Practitioners) Regulations. Creditors are entitled to: Notice of appointment confirmation that the company has entered liquidation including date and time, details of who made the appointment…

Employee Claims in Liquidation: How are Related Party Employee Claims Treated? When a company enters liquidation, one of the liquidator’s key responsibilities is to assess and distribute the company’s remaining assets to creditors in accordance with the Companies Act 1993. Among the creditors, employees are granted preferential status for outstanding wages, holiday pay and redundancy if they are entitled to it under their employment agreement. The situation becomes more complex when the employee is related to a director of the company. Normal Treatment of Employee Claims in Liquidation Under Schedule 7 of the Companies Act 1993, employees are entitled to preferential claims for: Wages and salaries (including commissions and piecework) earned in the four months prior to liquidation. Holiday pay…

To have a meaningful discussion and put a plan in place, it helps to have the important information ahead of time. This allows us to give you a steer on your options and advise on what will likely get the best outcome for stakeholders. So, what do we look for and why? Creditor List To understand the level of company debt and the class of each creditor. If there are secured creditors, we’ll want to know what assets they may be entitled to under a General Security Agreement (GSA) or Purchase Money Security Interest (PMSI), and whether any assets need to be returned to suppliers with valid claims. If we look to trade the business on it is important to…

In today’s volatile economic climate, companies across industries are navigating increasing financial pressure. Rising interest rates, supply chain disruptions, and margin erosion are converging to place directors and business advisors under heightened scrutiny. Now, more than ever, proactive advice from a licensed insolvency practitioner (LIP) can be the difference between a successful turnaround and a forced wind-up. Whether you’re a director, accountant, or legal advisor, understanding when and why to involve an insolvency professional is vital to protecting your client's (or your own) business, assets, and reputation. The Power of Proactive Advice Licensed insolvency practitioners are not just “last resort liquidators.” They are restructuring and risk management specialists trained to assess a business’s position, preserve value, and advise on compliant…

For many businesses, receiving a statutory demand from the Inland Revenue Department (IRD) can be an alarming and stressful experience. It signals that the company has unpaid tax obligations and that the IRD is taking formal steps to recover the debt. If left unaddressed, this can quickly escalate into a winding-up application, resulting in the company’s liquidation. This article outlines what businesses should do when served with a statutory demand by the IRD and how to respond when an instalment proposal is rejected. Understanding a Statutory Demand A statutory demand is a formal notice issued under section 289 of the Companies Act 1993, requiring a company to pay a debt within 15 working days. Failure to comply creates a presumption…

Selling your business and ceasing trading is a significant milestone, but what happens to the company itself? While some business owners leave the company dormant, others take proactive steps to formally close it. The best approach depends on several factors, including tax efficiency, legal certainty, and cost considerations. This article explores the options available, the benefits of a solvent liquidation, and how to manage post-sale company affairs effectively. What Are Your Options? Once you have sold your business and ceased trading, you generally have two primary options for dealing with the company: 1. Short-form removal from the Companies Register 2. Formal solvent liquidation The choice depends on factors such as outstanding liabilities, retained earnings, tax implications, and the level of…

Running a business is a rewarding venture, but it also comes with its fair share of challenges. One of the most critical challenges a business can face is the threat of insolvency. Insolvency refers to a situation where a company is unable to meet its financial obligations and pay off its debts when they become due. If left unaddressed, insolvency can lead to the collapse of the business, affecting not only the company's owners and employees but also suppliers, creditors, and other stakeholders. We discuss some key warning signs that indicate when a business is in serious danger of insolvency and what actions can be taken to address the situation. Key Warning Signs indicating a serious danger of Insolvency 1.…

What's the difference between bankruptcy and liquidation? This is one of the most common questions that we field from directors and individuals we don’t fully understand how the different types of insolvency may apply to their current situation and how it will affect them. Given the current climate we are in with company insolvencies on the rise it pays to understand the difference. While there are a number of detailed differences in simple terms bankruptcy is personal, and liquidation is for commercial entities (companies, trusts, incorporated societies etc.) The confusion often arises because of the use of the bankruptcy term in relation to companies in the USA which we often see in the media and on TV shows -XYZ company…

Many construction companies are facing tough times in the current economic climate. The cost of living and interest rates are creating concern. Managing cashflow and profitability during the uncertainties of long term projects can be an ongoing challenge for many companies. An equally important challenge is knowing when it’s time to get advice on whether your company can survive or not. In April 2024 Centrix reported the highest number of liquidations in nine years with construction companies leading the way. March 2024 liquidations included 56 construction companies. Centrix reported 486 construction company liquidations during the financial year ended 31 March 2024, compared to 415 in March 2023 and 262 in March 2022. Construction companies often fail more than those in…

Many companies find themselves facing financial distress and unable to sustain operations. Voluntary liquidation is a viable option for directors and shareholders to wind up the affairs of the company in an orderly manner. It is imperative to understand the process and implications in the legal landscape, governed primarily by the Companies Act 1993 and the Personal Property Securities Act 1999. Understanding Voluntary Liquidation:Voluntary liquidation is a process initiated by the directors and shareholders of a company when it is deemed insolvent or unable to meet its financial obligations. This process involves the appointment of a liquidator, whose primary role is to realize the company's assets, distribute proceeds to creditors, and ultimately dissolve the company.Steps of Voluntary Liquidation:1. Appointment of…

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:…

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…