Many of our clients don't deal with insolvency on a daily basis, and therefore have only a fairly generalised idea of what we do. This article seeks to provide a better understanding of how the liquidation process works. It also demonstrates how choosing the right insolvency practitioner can result in funds being recovered for creditors that would otherwise not be available.   The liquidation process  Most people have a basic intuitive feel for a liquidator's role. This is usually that he or she closes down a business, dismisses staff, sells assets and collects debts. This may well be true, but generally such activities form only part of a much more involved process. Liquidators have very wide powers to investigate a…

The following are some issues which tend to crop up on many of our liquidations. Vehicles claimed by directors A minor, but often emotive issue, is the car "owned" by the director. The director states it is their car, and it is registered in their name. Registration, however, does not prove ownership and if the car is in the company's accounts and shown on the depreciation schedule, the liquidator will fulfill one of their principal duties by taking possession of the car and selling it. Share capital not paid up Under modern company law, shares have no nominal value. Too many times we hear that if a company has 1,000 shares then there is an obligation on the shareholders to…

McDonald Vague provides a specialist service conducting solvent liquidations. Companies are often put into liquidation this way when a business has been either sold, closed down or reorganised for tax and/or management purposes.   Capital gains on company sales Under current New Zealand law, companies that have sold their business at a capital profit can then, on liquidation, distribute that profit to their shareholders tax free (arm's length transactions only) under Section CD26 of the Income Tax Act 2007. There is often debate as to whether a formal liquidation process is necessary to distribute tax free capital profits, or whether it is sufficient to simply have the company struck off the Companies Register. When large sums of money are involved,…

Question: How can a liquidator be removed from office? Legislation: The legislation which applies is the Companies Act 1993. Introduction Apart from the normal procedures, the office of liquidator also becomes vacant if the person holding office dies or becomes disqualified under Section 280 of the Companies Act 1993. This is the section which deals with qualifications of liquidators. For example, the office would become vacant if the liquidator were to be made bankrupt or were to become subject to a compulsory treatment order under the Mental Health Act. In normal circumstances however, a liquidator is removed from office in one of the four ways: - 1.Removed by Resignation A person may resign from the office of liquidator by appointing…

Question: Liquidators have different views regarding proxies and representatives of company creditors at creditors meetings. What is the correct procedure? Legislation: The legislation which applies is: The Companies Act 1993, Section 314 The Fifth Schedule to the Companies Act 1993, Clause 6 and Clause 9 The Companies Act 1993 Liquidation Regulations 1994, Regulations 23 and 27. Answer: An examination of the legislation shows that a company may be represented at a meeting of creditors in two separate ways (refer the legislation for full details): - Formally by proxy (in writing): The company may appoint a proxy. The proxy may be any person including the liquidator or if there is no liquidator, the chairperson of a meeting. Where the person appointed…