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 (now open) Trans-Tasman bubble would be in place by the end of April 2021. These developments likely gave some businesses on the brink a bit more time, whether for better or for worse.
Over the last 12 months, many businesses have been planning for the short term but few have been making longer term decisions, due in large part to the uncertainty that has prevailed over the last 12 months.
As at 31 March 2021, there were 679,617 companies registered on the Companies Register.
The start of a new financial year will bring many opportunities as well as many challenges. As the IRD’s activity continues to increase and the Reserve Bank’s mortgage deferral scheme expires (it ended 31 March 2021), the effects of the last financial year will likely start to be felt by many businesses.
If you want to have a free chat about any issues your business is experiencing or about any other insolvency matter, contact us on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it..
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations
We saw another upswing in the insolvency figures in March 2021 when compared to February 2021. There were 170 insolvency appointments in March 2021, which was only four fewer than March 2020. The composition of the appointments, however, is quite different:
|
Type |
March 2020 |
March 2021 |
|
Solvent liquidation |
10 |
33 |
|
Shareholder appointed liquidation |
111 |
103 |
|
Court appointed liquidation |
27 |
24 |
|
Receivership |
22 |
8 |
|
Voluntary administration |
4 |
2 |
|
Total |
174 |
170 |
The decrease in receiverships is not unexpected, given the concessions made by New Zealand’s banks in response to Covid-19. As the deferral periods and other support measures come to an end, we expect that there will be more activity from secured creditors.
The increase in the top personal tax rate from 1 April 2021 likely contributed to the increase in solvent liquidations in March 2021, which allowed for distributions to be made before the higher tax rate took effect.
While company insolvency appointments are still down compared to the first quarter of 2019 and 2020, the gap between 2021 and previous years is continuing to narrow.
Personal Insolvencies - Bankruptcy
Personal insolvencies continue to be lower than in the pre-Covid-19 period. March 2021 personal insolvencies were down 32.5% on March 2020 and the March 2021 quarter were down 34.5%. Of the total personal insolvencies, the percentage entering into debt repayment orders (formerly summary instalment orders) in 2021 has increased when compared to 2020.
