Winding Up Applications
 

February applications were down on January but still above what we saw in 2024. Historically February would be a bumper month as the winding up notices that couldn’t be processed in January would spill into February. Regardless it was still a strong showing for the month and is setting the tone for what we expect to see in the rest of the year.

IRD made up 78 of the 118 appointments for the month and continued applying the pressure to derelict debtors.

The IRD has continued with its 23-month streak of having more applications than all other creditors. The last time they made less applications was back in March 2023. I have also included the trend line this month to emphasise the upward trend over the last 5 years.

Personal Receiverships

February posted similar figures to those seen in January 2025, as seen below we remain above those seen the last 6 years. Taking a bit of a leap if this monthly increase continues for the rest of the year we will be up in the 80’s and potentially double what was seen last year and well above earlier years.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

After only a slight lift in January, February 2025 took off to new February highs. The driver behind this was a huge month for court appointments, this was to be expected given the bump in winding up applications seen last month all fell due in February.

So where did the work go? The practitioners that regularly take work each month generally all took between 15 – 20 appointments in the month.

Then there was the Official Assignee who took 82 appointments for the month, the bulk of this work coming from IRD winding up applications, the most they took last year in a month was 73. Regardless of who takes this work 82 appointments in a month is a massive amount of liquidations that need to be managed and administered, fortunately for the OA as you can see below the personal insolvency figures remain low so they have spare resources to allocate to liquidation work for the moment.

Year to date insolvency figures line up with those seen after the GFC but remain well behind what was seen in 2009.

Solvent liquidations remained down on the average (13%), while insolvent shareholder appointments in February were just down on their average of 51%, receiverships were similar to their long term average. The big increased as outlined above was from court liquidations making up 41% while the average is normally around 26%.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointment figures for Bankruptcy, NAP and DRO while not the lowest January on record have remained low.

I have previously predicted that we will see a lift in personal insolvency in the first quarter of 2025, we are not there yet but I may also be pushing that prediction to a later part of the year.

Where to from here?

For 2025 the expectation is that there will be further business failures across all sectors and business sizes as the recovery continues and the IRD keeps pressure on businesses with arrears to be recovered

There will be continued busy times for insolvency practitioners for the next 2-3 years as we deal with the tail from the latest recession.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

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 of insolvency, allowing a creditor, including the IRD, to apply to the High Court to wind up the company.  

When an Instalment Proposal is Rejected

If the IRD declines a company’s proposal for an instalment arrangement and advises that a statutory demand and subsequent winding-up proceedings will follow, the company must take decisive action. The rejection often indicates that IRD has lost confidence in the company’s ability to meet its obligations or that past compliance history has influenced its decision.

At this stage, directors should:

• Seek Professional Advice Immediately – Insolvency practitioners can explore restructuring options, negotiate further with IRD, or assess alternative financing solutions.

• Consider a Voluntary Administration or Creditor Compromise – Under Part 15A of the Companies Act 1993, a voluntary administration or compromise with creditors may provide breathing room to restructure debts.

• Avoid Personal Liability Risks – Directors have duties under the Companies Act 1993, including avoiding reckless trading. Continuing to trade while insolvent could expose directors to personal liability.

Immediate Steps Upon Receiving a Statutory Demand

Time is of the essence when dealing with a statutory demand. Here’s what businesses should do immediately:

1. Review the Demand Carefully – Ensure the details, including the debt amount, are accurate. If there are discrepancies, seek legal or insolvency advice promptly.

2. Assess the Company’s Financial Position – Can the company pay the debt in full? If not, are there alternative arrangements available?

3. Respond Within 10-15 Working Days – The company must either pay the debt (within 15 working days), negotiate a settlement (within 15 working days), or apply to the High Court to set aside the demand on valid grounds (within 10 working days) (e.g., a genuine dispute over the debt or a counterclaim exceeding the debt amount).

Failing to act within this period allows the IRD to commence liquidation proceedings, which can be extremely difficult to halt once initiated.

 Act Now—Time is Limited

The moment a statutory demand arrives, or an instalment proposal is rejected, directors must act swiftly. The sooner expert insolvency advice is sought, the more options remain available to preserve the business or mitigate potential risks.

If a statutory demand is ignored judgment will be gained and then under the Companies Act 1993, the creditor, in this case the Inland Revenue Department (IRD), can serve the company with a winding-up proceeding to put the company into liquidation. 

A company in receipt of a statutory demand from IRD has a limited window to appoint a voluntary liquidator of its choice if paying the debt is not an option and the company is not viable to continue (without the support and a structured instalment plan with IRD). Specifically, the shareholders can pass a resolution to voluntarily appoint a liquidator within 10 working days from the date of service of the winding-up application.  If the company fails to appoint a liquidator within this timeframe, any subsequent appointment of a voluntary liquidator would be deemed to be an invalid appointment unless the consent of the applicant creditor (in this case, IRD) is gained first and the proceedings are withdrawn.  The usual process is the company needs to await the Court's decision to appoint a liquidator.

If your business is facing tax debt pressure from IRD, don’t wait until it’s too late. Contact us today for expert assistance and a confidential discussion on your options.  Our team of experienced insolvency specialists can assess your situation and help develop a tailored strategy. Whether it’s negotiating with IRD, restructuring, or managing voluntary administration, we provide clear, practical guidance to safeguard your business and your interests.

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 certainty you require.

When to Consider a Formal Solvent Liquidation

A solvent liquidation, is a formal process under the Companies Act 1993 where a liquidator is appointed to wind up the affairs of a solvent company. This process provides certainty that all liabilities, including tax obligations, are properly dealt with before the company is removed from the Companies Register.

A solvent liquidation is advisable when:

• The company has significant retained earnings or assets to distribute to shareholders.

• There are potential contingent liabilities (e.g., tax risks, guarantees, or warranties provided as part of the business sale).

• You want legal certainty and finality, reducing the risk of future claims.

• You need to distribute capital in a tax-efficient manner.

When is a Short-Form Removal Suitable?

A short-form removal is a simpler, lower-cost option where a company applies for removal from the Companies Register under section 318 of the Companies Act 1993. This approach is suitable when:

• The company has no outstanding debts or liabilities.

• Retained earnings and assets have been fully distributed before applying for removal.

• There are no anticipated future claims against the company.

However, a short-form removal does not provide the same legal certainty as a formal liquidation. If a claim arises after deregistration, the company can be restored to the register, potentially causing issues for former directors and shareholders.

Why Does a Solvent Liquidation Provide More Certainty?

A solvent liquidation ensures:

• All liabilities, including tax obligations, are settled before the company is removed.

• Proper distribution of assets is conducted under the supervision of a licensed insolvency practitioner.

• Future risks of restoration or unexpected claims are minimized.

• Tax-efficient distributions are managed correctly, reducing the risk of disputes with Inland Revenue.

Reducing the Costs of a Formal Liquidation

Business owners can take steps to minimize liquidation costs by:

• Settling all outstanding liabilities and closing accounts before appointing a liquidator.

• Distributing non-cash assets before liquidation (where tax-efficient to do so).

• Providing clear financial records and ensuring tax filings are up to date.

• Minimizing the number of shareholders, as distributions to multiple shareholders increase administrative work.

Tax Issues in Liquidation

A key consideration in liquidation is the tax treatment of distributions to shareholders.

• Retained Earnings: If the company has accumulated profits, these are generally distributed as a taxable dividend, subject to Dividend Withholding Tax (DWT). Usually an imputation credit balance is available to offset much of the tax liability.

• Capital Distributions: Distributions of capital (e.g., proceeds from selling assets or paid-in share capital) are generally tax-free, provided they are correctly structured.

• Final Tax Returns: The company must file final tax returns with Inland Revenue, including a final GST return (if applicable) and confirmation of the liquidation process.

How Does the Liquidator Distribute Retained Earnings?

The liquidator is responsible for distributing retained earnings and capital however often the company’s accountant can do much of this to save costs. This is as follows:

1. Settling all outstanding creditors – Ensuring all debts, including tax obligations, are cleared.

2. Paying retained earnings to shareholders – Retained earnings are usually distributed as taxable dividends, subject to DWT.

3. Distributing capital to shareholders – Share capital and capital reserves are distributed by the liquidator tax-free on liquidation.

4. Final removal of the company – Once all matters are settled, the liquidator files for the company’s removal from the Companies Register.

Key Takeaways

• A formal solvent liquidation provides legal certainty and tax-efficient distributions, especially when retained earnings are involved.

• A short-form removal is suitable for simple cases but carries the risk of company restoration if claims arise.

• Understanding the tax treatment of final distributions is crucial for shareholders to avoid unexpected liabilities.

• Business owners can reduce liquidation costs by ensuring all financial affairs are in order before liquidation begins.

If you have sold your business and are unsure about the best approach for closing your company, we can provide expert guidance. Contact us today for a consultation on your post-sale company obligations and tax-efficient strategies for finalizing the business.

Walking away from a company without fulfilling your obligations can have legal and financial implications. It is simply not wise to cease trading your company and ignore your creditors and obligations.  It is also important to take the right steps when you are one of a number of directors and you want out.  Your actions or inaction can come back to bite you.  Here are some risks to consider and why the option of a formal liquidation may be worthwhile considering particularly if your company is struggling or no longer viable.

The Risks for a Director

Breach of Fiduciary Duty: Directors owe fiduciary duties to the company and its shareholders. These duties include acting in the best interest of the company, exercising due care and diligence, and avoiding conflicts of interest. By abandoning the company without proper transition or fulfilling your obligations, you may be seen as breaching your fiduciary duties.

Legal Consequences: Resigning as a director does not automatically absolve you of your legal responsibilities. If your actions or negligence during your tenure as a director result in harm to the company, its shareholders, or other stakeholders, you may still be held legally accountable. This can include potential legal claims and liability. Any claim would likely be limited to the period up to your exit.

Regulatory Compliance: Directors have responsibilities to ensure compliance with various laws and regulations. Walking away without ensuring that the company continues to meet its regulatory obligations, such as filing tax returns, financial statements, or maintaining licenses, can result in penalties and legal consequences for the company and its remaining directors.

Reputational Damage: Resigning abruptly and leaving the company in a difficult situation can harm your professional reputation. Future business prospects may be negatively affected if potential partners or employers view your actions as irresponsible or unethical.

Steps to protect you/the company

If you intend to resign as a director, it is important to follow the proper process and take necessary steps to protect yourself and the company:

Review Company Documents: Thoroughly review the company's constitution, shareholder agreements, and any relevant contractual obligations to understand the resignation procedure and any specific requirements.

Inform the Board and Shareholders: Provide written notice of your resignation to the board of directors and shareholders. This notice should be in accordance with the company's constitution and any legal requirements.

Fulfil Duties and Obligations: Prior to resigning, ensure that you fulfil your duties as a director, such as completing ongoing projects, handing over necessary information to the remaining directors, and assisting in the smooth transition of responsibilities.

Seek Professional Advice: Consider consulting with a lawyer who specializes in corporate law to ensure that you comply with all legal obligations and minimize potential risks.

Resigning as a director should be done in a responsible and ethical manner, keeping the best interests of the company and its stakeholders in mind. It is always recommended to seek legal advice specific to your situation to fully understand your obligations and protect your interests.

Formal Liquidation

Winding up a company through a formal liquidation process can be a better option in certain circumstances compared to simply resigning and walking away.  Advancing a liquidation is a straightforward process where the shareholders are in agreement that the company is no longer viable and it is time to wind up the company.  Here are some reasons why formal liquidation may be preferable:

Orderly Distribution of Assets: Formal liquidation ensures that the company's assets are distributed in an orderly and transparent manner. A liquidator, appointed to oversee the process, will identify and sell the company's assets to maximize the return for creditors and shareholders. This can provide a fair and equitable distribution of assets among stakeholders.

Clearing Debts and Obligations: Liquidation allows for the orderly resolution of the company's outstanding debts and obligations. The liquidator will assess and address creditor claims according to their priority, following the established legal framework. This process can provide closure and legal protection against future claims for the company and its directors.

Legal Protection for Directors: By opting for formal liquidation, directors can obtain legal protection from potential personal liability for future debts that may arise after the completion of the liquidation process and strike off of the company. This is on the basis that the liquidators have given pubic notice and called for claims.

Regulatory Compliance: Liquidating a company through a formal process ensures compliance with legal and regulatory requirements. The liquidator will handle the necessary paperwork, tax filings, and notifications to government agencies, relieving the directors of these administrative burdens.

Closure and Finality: Liquidation provides a definitive end to the company's operations. It allows for the closure of the business in an official and recognized manner, giving certainty to stakeholders and facilitating the transition to other endeavours. Once a company is struck off it is not an easy task to restore. There must be strong argument for the Registrar of Companies to consider reinstatement and the legal cost involved is not small.

It's important to note that the decision to wind up a company through formal liquidation should be made after careful consideration of the company's financial situation, the preferences of shareholders, and the advice of legal and financial professionals. It is recommended to seek expert guidance specific to your circumstances to fully understand the implications and make an informed decision. If you would like to discuss your options with our team contact us here.