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Generally speaking, in the liquidation of a company, creditors of equal ranking in the liquidation are treated equally. So, if there are funds to distribute, they will all receive the same proportion of the amount that they have claimed. This is known as the Pari Passu Rule. The exception to this rule is when there is a mutual set-off between the company in liquidation and another party that is both a creditor to whom the company owes money, and a debtor that owes the company money. The requirement for the mutual set-off is set out in section 310 of the Companies Act 1993 as follows - 310 Mutual credit and set-off (1) Where there have been mutual credits, mutual debts,…
Welcome to the month of double lockdowns and Americas Cup racing. February is typically the first month of the year where we see a steep uptake in all insolvency appointments across the board after the lower months of December and January. Directors will take a hard look at their company after a quiet Christmas period and January break and make the call on whether they want to continue through another year or pack it in. Individuals will often go through a similar process after having spent up large over the Christmas period and having little to show for it and no prospects of paying off the debts they may have racked up and will need to assess their insolvency options.…
Murphy’s Law (or one version of it) states "whatever can go wrong, will go wrong" and that can appear to be the case when you are running a business in the current environment. If it’s not a lockdown, it’s a shortage of supply, or it’s a major client failing, or it’s another of the myriad of things that can go wrong. While having good contingency plans in place, including cash reserves or access to a fighting fund, can help your business get through the hard times, when these problems come at you one after another in quick succession, things can turn to custard very quickly. When that happens, there are things that, as a director of the company, you should…
Welcome to the 2021 statistics. January is traditionally a quiet month for appointments across all forms of insolvency and 2021 is no exception. With the courts closed for most of January, many companies extending their Christmas close down periods well into January, and the bulk of the country holidaying at the bach or camping in the great outdoors with the children, not a lot happened on the insolvency front. Typically, appointments begin to track up from February onwards. Many of the woes from 2020 – changes in consumer demand, shipping delays, the loss of overseas tourists, domestic tourism visiting different destinations and spending less than their overseas counterparts, lower than expected income over the summer trading period, minimum wage increases,…
With one month now under our belts into 2021 it is timely to have a look back on 2020 and how the year played out when lined up to past years so we can gauge the full affect of COVID-19. January 2021 figures will be published in a separate article when they are compiled over the next few days. I’m not sure that we need to do a full recap of the major events of 2020, the notable ones were COVID-19 lockdown #1, COVID-19 lockdown #2 for Auckland then an election. In any normal year with two economic lockdowns for an extended period you would expect there to be an upswing in the insolvency cases for an economy. This was…
With the NZ election behind us and certainty of which party will maintain the lead in government, we move into a busy Christmas period. The wage subsidy is beginning to fall off. From September we are starting to see businesses having to stand on their own two feet once again. From an industry standpoint of the economy what are we expecting to see for businesses over this time and into 2021? As we all know the NZ government has injected massive amounts of cash into the NZ economy in a reasonable short time frame propping up a number of industries and supporting our job market. Because of this, unemployment figures continue to stay subdued with September quarter figures set at…
We know that deciding to let your business close can be hard, whatever the reason. If there are still creditors to pay, it can also be stressful, especially if all of the company’s assets have already been sold. There’s a lot to be done after the company’s doors have shut and its assets have been sold. If you don’t want to be dealing with these issues on a piecemeal basis, we recommend that the company be put into liquidation. We recognise that 2020 has been especially difficult for a lot of business owners. That’s why we’ve decided to offer shareholders our services to liquidate their non-trading, no asset companies for a one-off contribution of $3,000 plus GST towards the cost…
On 24 September 2020, the Supreme Court delivered its judgment on a case taken by the liquidators of Debut Homes Limited (In Liquidation) (Debut) against its director, Leonard Wayne Cooper. In this case, the liquidators alleged that the director had been in breach of duties as director under the Companies Act 1993 (the Act) and were seeking orders against the director. The liquidators were successful in the High Court, but that decision was overturned by the Court of Appeal. The liquidators were then granted leave to appeal to the Supreme Court, where they were successful, and the orders made in the High Court were restored. The background to the case was that Debut was a property developer and Mr Cooper…
The October election is fast approaching and campaigning by all parties is underway. As policies and promises continue to be released, economic policies are likely to be front and centre for many voters. Not all parties have released their policies detailing how they plan to guide our economy through the post lockdown period, any tax policy changes they would like to see, and how they plan to pay New Zealand’s lockdown debt. For some, the wage subsidy extension they received will have come to an end in August 2020. For other businesses who did not see a 40% downturn in their income following the end of the first lockdown period, the second lockdown period meant that they have now qualified…
One of the obligations on the liquidators of insolvent companies, whether appointed by the shareholders or the Court, is to review the books, records and affairs of the company to identify any potential causes of action that could lead to a benefit for creditors. This could include identifying potentially voidable transactions, where an individual creditor has received a payment, giving it preference ahead of the body of creditors, or the transfer of assets or property to other parties for no, or insufficient, consideration. It could also include identifying breaches of duties by the directors which has caused creditors of the company to suffer increased losses. While many such causes of action are identified and settled by agreement between the liquidators…
We are expecting August and September to be interesting months with the electioneering that will be taking place, we will see promises from all parties on how they will be spending our taxes if they are elected and hopefully some more details on their plans for how they will guide the economy post covid. The latest unemployment rate figures have been released for the June 2020 quarter showing 4.0%. This is down 0.2% on the first quarter for the year. While the politicians will crow that this is well down on treasurers estimates for the same time frame there was an additional wage subsidy extension introduced which has assisted businesses in keeping people employed with 400,000 employees still utilising the…
On 1 September 2020, the remaining provisions of the amendments to the Companies Act 1993, and Insolvency Practitioners Regulation Act 2019 (IPRA) will come into force. Some changes that creditors, directors, shareholders, and their advisors need to know about are: Restriction on Shareholders or Board Appointing Liquidators The 10-working day window for shareholders to appoint liquidators from service of winding up proceedings is gone. Once a company has been served with Winding Up proceedings brought by a creditor, the company’s shareholder(s) or board will be unable to appoint liquidators unless they have the consent of the creditor who is pursuing the winding up proceeding. For shareholders needing or wishing to appoint liquidators we encourage them to start the process as…
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