Articles

In business, companies often experience fluctuations in performance and face various challenges. However, distinguishing between temporary setbacks and a persistent decline is crucial for business owners and stakeholders. Recognizing the early warning signs of a company in decline allows for timely intervention and strategic decision-making. In this article, we will explore key indicators to identify a company in decline, ranging from business performance and staff morale to reputation, market perception, financial distress, and cash flow crisis. Key indicators to identify a company in decline 1. Business Performance: One of the most evident signs of a company in decline is a consistent decline in business performance. This decline can manifest through decreasing sales revenue, declining profits, eroding market share, or diminishing…
In our 34th Insolvency by the Numbers, we look at our data set for August 2023 and past years to see how the month has tracked and what may be coming up in the coming months. During August we begun to see the political parties get there electioneering into gear and ramp up their campaigns with policy being released left right and centre and billboards going up across the country in every available location. The latest OCR announcement saw no change to the rate, it did push out the timeline when we may begin to see any future reductions in the rate. In the insolvency space there was positive news for the Ruapehu ski fields, the construction sector continues to…
Directors and Liquidators both have rights and duties following a formal liquidation appointment. We address the rights and duties of directors in this article. Rights of Directors following a Liquidation: 1. Right to Information: Directors have the right to access information and records about the liquidation process and the company's financial affairs. This includes access to the liquidator's reports, financial statements, and other relevant documents. 2. Right to Participate: Directors may participate in meetings of creditors and have the right to raise questions or concerns about the liquidation process. 3. Legal Advice: Directors have the right to seek legal advice and representation to protect their interests and understand their obligations during the liquidation process. Duties of Directors to the Liquidator:…
A liquidator in New Zealand is appointed to wind up the affairs of a company that is insolvent or otherwise unable to pay its debts. Liquidators can also be appointed to solvent companies for formal closure. The liquidator's role is to realize the company's assets, distribute them to creditors, and ultimately dissolve the company. There are key rights and powers typically granted to liquidators in New Zealand: 1. Investigation Powers: Liquidators have the authority to investigate the company's affairs, transactions, and financial records to determine the company's financial position, assets, liabilities, and any potential wrongdoing. 2. Recovery and Collection: Liquidators can recover and collect assets that are part of the company's estate, including pursuing legal actions to recover funds owed…
Navigating Financial Difficulty: Essential Steps for Companies in Crisis Business is unpredictable. Even the most successful companies may find themselves facing financial difficulty at some point. Whether due to economic downturns, industry disruptions, or internal challenges, financial distress requires prompt and strategic action. In this article, we will explore the steps a company should take when encountering financial difficulty, encompassing a review of the big picture, operations, cost-cutting measures, tax management, and cash flow. Additionally, we will discuss the concept of company compromise (Part XIV of the Companies Act 1993) as a means to protect a viable business. 1. Review of the Big Picture: When a company encounters financial difficulty, it is essential to step back and take a comprehensive…
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations Company insolvency appointments for July 2023 combined across all insolvency types have come in just under 2019 levels. Court liquidations remain a driver for these increased levels. This increase is following continued strong winding up applications driven by the IRD and its recovery efforts. As a percentage share of appointments, the figures have remained consistent from last month. Total corporate insolvency figures for the year to date continued to sit just behind 2019 figures. The slower start to the years insolvency appointments has yet to be recovered from. While court liquidations have dropped slightly as an overall percentage they still remain above their long team average so remain a large portion of…
In corporate insolvency, two common terms often arise: liquidation and receivership. For businesses facing financial distress in New Zealand, it is helpful to understand the distinctions between these two processes. To gain an understanding we explore the disparities between liquidation and receivership, shedding light on their respective implications and outcomes. Liquidation: The Dissolution of a Company Liquidation, also commonly referred to as winding up, is a formal process that leads to the dissolution of a company. It is typically employed when a company is no longer able to pay its debts and is deemed insolvent. It is also used by solvent companies that have made capital gains and seek to distribute the capital gain tax free on liquidation. The objective…
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations Company insolvency appointments for June 2023 combined across all insolvency types have beaten out all past years shown in the above graph back to 2019. Court liquidations have been a driver for these increased levels showing the highest figures since prior to 2020 with 59 appointments. This increase is following a number of months or stronger than usual winding up applications lead in part by IRD and its recent drive to collect delinquent debtors. Whether this level of court appointments will continue into the election only time will tell what IRD does, or if shareholder appointments will continue to grow due to an ongoing cost of living crisis and general price increases.…
Economic recap May 2023 saw the Reserve Bank lifting the OCR by a final 25 basis points and stepping back saying job done in the belief they have broken the back of inflation with no further raises needed at this time, they do not anticipate any drops till 2024 however when inflation has dropped back somewhat. Of note from the below graphs, you will see the raised levels of appointments compared to the prior two years and heightened winding up application levels that highlight the challenging economic climate and financial difficulties experienced by companies, necessitating closer attention to their financial stability and operational viability. This will likely continue for some time. Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations Company…
We all know it’s frustrating not being paid. What’s worse is that not getting paid affects your cash flow and chasing bad debts takes time that could otherwise be spent doing productive work. If you decide that your best option for resolving the debt is to liquidate the debtor company, the process generally takes at least three months. There are a number of milestones along the way, which are outlined below. Provided the debt is not disputed, the first step is to issue a statutory demand. The purpose of the statutory demand is to test the company’s solvency – the presumption being that, if the company is solvent and the debt is not in dispute, the company will pay the…
Rescuing Struggling Companies in New Zealand: The Power of Creditors Compromise under Part XIV of the Companies Act 1993 Introduction In the challenging business landscape, many companies in New Zealand find themselves facing financial distress and struggling to meet their obligations. Fortunately, the Companies Act 1993 offers several mechanisms to facilitate the recovery of such companies. One option available to financially troubled companies is to consider a creditors compromise under Part XIV of the Act. This article aims to shed light on the benefits of a creditors compromise and highlight its differences from the voluntary administration process. Understanding the Creditors Compromise A creditors compromise is a process that enables a financially distressed company to reach an agreement with its creditors…
Economic recap April saw the latest inflation figures released for the year to March 2023 showing a drop from the highs seen in the last two periods. The bulk of this drop in inflation however was from international factors while domestic figures remained elevated. Because of this and a number of other reasons the Reserve Bank has continued on their track whacking on a further 50 basis point rise to the OCR. We expect to see a final 25 basis points at the next meeting. Comparatively Australia has seen their OCR drop, it is expected we will not see this for some time in NZ. The percentage of mortgage lending that remains at fixed rates is considerably higher in NZ,…
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