Risk management

Debt collection actions are gaining momentum. Winding up proceedings are on the rise. There is a climb in IRD initiated winding up proceedings. Many NZ companies have been impacted by Covid-19 and are facing insolvency. To be insolvent means one of two things: Debts can’t be paid when they’re due. Total debt is more than the value of all assets. The Commissioner of Inland Revenue has increased debt recovery actions. The CIR is able to issue a statutory demand as a step necessary to advance a proceeding against a company. Ignorance Isn't Bliss It is recommended for any business struggling to meet tax arrears that negotiations are entered into promptly to avoid a potential winding up proceeding. Taxpayers are required…
Problems in a business generally arise slowly. Problems can become disasters if not recognised and managed. Directors have some latitude in choosing to trade out of a temporary liquidity problem or to advance an insolvency procedure. Directors must carefully consider the responsibility they have to creditors and their duties under the Companies Act 1993 and if they can turn the business around. Steps towards Solvency for a Viable Business Insolvency is the inability to pay debts when they become due. Steps can be taken to avoid insolvency. The following are steps that can be considered for a viable business: Start with a review of overheads. When considering cutting expenditure take steps to analyse the costs involved. The restructure and reduction…
COVID-19’s impact on the business world is unprecedented, presenting a challenge to all companies and businesses. Some companies have evolved quickly and some have or are falling behind. Managing a business is a delicate balance anyway. The deadlines, the finances, cashflow, controlling costs, the need to generate income and improve margins, the human emotions, staff needs, skill shortages and with Covid-19 in the mix, it is simply hard to navigate. Many businesses will rise to the challenge and get through it. Some businesses are no longer viable. Many have closed the doors or considering it. Struggling NZ Business in First Quarter 2022 – the Why NZ business owners have struggled in the last while with lockdowns, inflation, increased oil prices,…
Business Advice to Auckland based businesses The Business Advice & Implementation Grants are now available for application. Auckland businesses can apply for up to $3000 + GST through Business Advice support. An Implementation Grant will pay for specific services to put your business advice or plan into action. If you’re looking for expert advice and support in areas such as Continuity, Financial Planning, Business Hibernation, Compromises or Exit, we can help get you there. You can access advice if you are considering hibernating or closing your business, or are looking to restructure. The advice should lead to a plan to overcome challenges and/or identify opportunities and map out the scope of the work required to achieve the plan. Implementation Grant…
The Impact of Covid-19 Delta Outbreak on Companies under Level 3 restrictions Many small and medium businesses are in serious strife, some hanging on by a thread. Businesses are seeking certainty about how and when they can get back to business. A recent MYOB survey has revealed confidence among small and medium businesses is plummeting and states SME revenue has taken its biggest hit since the 2008 global financial crisis. The drop in revenue and profits smashed from the current Covid-19 lockdowns, staff retention and skill shortages, the supply chain crisis, surging house prices, rising interest rates, closed borders, climbing inflation and general consumer confidence are all impacting business and will continue to have an impact for the foreseeable future.…
Economic Rundown Pressure and frustration continues to build for business owners and the wider economy; due to the lack of transparency, a proper plan in place as to when we may once again open up the country and what needs to be achieved to have these lockdown restrictions lifted. We have now had our first full calendar month with Auckland and the surrounding regions at Alert Levels 3 & 4; while the rest of the country remains at Alert Level 2. The lockdown effects are being felt across the country, both financially and emotionally. As we saw with the first round of lockdowns in 2020, lockdowns have a negative effect on insolvency figures, which have once again taken a sudden…
August 2021 has been a story of two halves. Between 1 and 17 August 2021, the outlook for economic growth was continuing to look positive. On 17 August 2021, the government called a press conference and, at 6:00 pm that evening, Jacinda Ardern told New Zealand that the country would be moving to alert Level 4 from 11:59 om that night. From 18 August 2021, most businesses were again forced to shut their premises as we returned to Level 4 lockdown and our home bubbles. Those of us that could, readjusted to working from home but Level 4 left many businesses unable to operate. The short notice also meant that many businesses – including those in hospitality, agriculture (who do…
When a company is placed into liquidation, one of the first actions of the liquidators is to give public notice of their appointment in the New Zealand Gazette, and an appropriate newspaper, and to invite creditors to file their claims. The vast majority of claims received will relate to specific amounts that are owed because invoices for goods or services haven’t been paid when due or loan repayment obligations haven’t been met. There is, however, the ability for claims to be filed for contingent debts. WHAT IS A CONTINGENT CLAIM? In the circumstances of a liquidation, a contingent claim relates to a debt that will be owed by the company in liquidation only if certain circumstances occur. This could include…
It’s day three of the latest Level 4 lockdown and, while we know the current lockdown is going to impact businesses, there’s still a lot we don’t know. It’s not yet clear how long we will spend in Level 4, what impact the latest lockdown will have on different business, or what overall impact on the New Zealand economy will be. Last week, most were expecting an OCR increase. On Wednesday, it was held at 0.25%, due at least in part to the lockdown. The Level 4 rules are a bit different to the last time around and can be found here. The current locations of interest are listed here. Our team is working remotely and are available to discuss…
IRD pressure on the Construction Industry It is important to keep proper books and records and ensure you meet your tax obligations. IRD say “declare it all or risk everything” in a recent announcement. Late payments and bad debts are the main triggers of insolvency in construction companies. The payment of taxes however contributes to cash flow problems. IRD’s recent release is heavily focussed on enforcement. Winding up applications by the Revenue are also on the rise generally. For more information on the Revenue’s latest release relating to “cashies” read here. Dealing with IRD We recommend communicating early and negotiating a time payment arrangement if your company falls into arrears but generally your business is viable. The IRD will likely…
The directors of a company have all the powers to decide what will be done, when it will be done and how – but with that power goes the responsibility to the company and its shareholders, to the company’s creditors and last, but not least, to themselves. The Responsibility to Others As a director, whether that be as the sole director of a small company or one of many in a large company, you have duties imposed on you under legislation, such as the Companies Act 1993 (“the Act”), and the company’s constitution. In any circumstances, you must firstly comply with the duties imposed by legislation, which are set out in sections 131 to 138A of the Act. Your first…
On 3 April 2020, the Government announced that it would be making changes to the Companies Act 1993 to provide insolvency relief for businesses affected by COVID-19. Yesterday, 5 May 2020, the first reading of the COVID-19 Response (Further Management Measures) Legislation Bill) took place. That bill introduces, amongst other measures: Reducing the voidable transaction and voidable charge period for non-related parties to six months (Schedule 2) The safe harbour provisions for directors (Schedule 3) The COVID-19 business debt hibernation (Schedule 4) Extensions to the periods mortgages and rent can be in arrears before default notices can be issued and enforcement action can be taken under the Property Law Act 2007 (Schedule 14) Both the Safe Harbour provisions and the…
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