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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…
Rule number one in insolvency is to "secure the asset".The recent catastrophes around the world have had a dramatic effect on the New Zealand insurance industry and the ability to obtain insurance.  In particular the Christchurch earthquakes have made it more difficult and costly to obtain insurance cover for some of the properties and goods we need to secure.  We asked Geoff Blampied, CEO, Aon New Zealand to provide some comments and advice on the subject. Geoff writes: Global Perspectives Firstly, we need to look at the Christchurch earthquake losses from a global perspective in order to understand the issues.  Christchurch has now suffered three major quake losses and numerous aftershocks with total estimated insured claims of $26 billion.  These…
Are you likely to be forced to repay to a liquidator money previously received from a customer? It has become relatively common for suppliers and others to be challenged by liquidators to repay funds that they have previously been paid. Prior to the change of rules in late 2007, the contentious issue was determining what "the ordinary course of business" meant. The decisions surrounding liquidators' challenges did not discourage conventional or usual debt collection measures. Since the McEntee Hire decision in August 2010 we have observed an increase in liquidators sending out letters seeking to challenge transactions. It is disappointing that some liquidators seem to take an approach of challenging all payments made, rather than first considering whether there has…
Background McDonald Vague partners have been appointed receivers on a number of major appointments, including the recent receivership of Tawera Land Company Limited "TLC". This is an entity owning millions of dollars of farmland associated with bankrupt businessman Ken Thurston. Mr Thurston (formerly a director of 14 other companies) had a rocky financial period which reached its climax in October 2010 when he was adjudicated bankrupt. Since then a number of his companies have failed. TLC owned and operated significant land holdings in the Manawatu and Taumarunui regions comprising 15,000 acres. Over the past six months, our Agri-Business team has managed the farming operations which include a dairy farm as well as sheep and beef farms. One significant event was…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. McDonald Vague strongly recommends that businesses register their security interests on the Personal Property Securities Register ("PPSR"), and increase their awareness of the consequences of non-registration.  Failure to utilise the PPSR can be a doubly expensive process in the event that their debtor company becomes insolvent. Many companies are not aware that the legislation applies to suppliers of goods on retention of title terms, leases of more than one year (or indefinite terms), and consignment goods. Jonathan Barrett, an Associate with McDonald Vague, says valid terms and conditions of trade, as well as registration of a Financing Statement on…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. The Companies Amendment Act 2006 implemented on 1 November 2007 increases the transparency and accountability of Insolvency Practitioners and means significant changes to the administration of Insolvencies. The key changes are as follows: •Liquidation by Shareholder appointment allowed within a 10 day time frame from the date of service of a winding up application. •Phoenix Companies - where a new company is formed using the name, similar name or trading name of a failed company, directors can be made personally liable for the debts of the failed company. •More disclosure required of liquidators. •Further Grounds of Liquidator Disqualification -…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. I empathise with creditors who are concerned about cowboys operating and competing in the insolvency field of expertise. These individuals want to make a fast buck and can give the whole profession a bad name. It is time to crack down on the cowboys! Allowing inexperienced and unskilled or less than reputable insolvency practitioners to operate is not in the interest of the economy as a whole. The current practice leads to unsatisfied and uninformed creditors, lack of confidence in the system and uncertainty. Creditors are ultimately bearing the costs of the inexperienced cowboy who is failing to meet…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. The Sons of Gwalia decision which was handed down by the High court of Australia in January of this year, clarified three earlier decisions which were made in the years 2005 and 2006. The Sons of Gwalia case and the earlier decisions set out the circumstances where in Australia a shareholder or shareholders can make a claim against a company which will rank equally with the claims of the unsecured creditors. The earlier cases formulated the following principles:- a. Clarification that shareholders who have bought shares under a prospectus that contained misleading or deceptive statements or omissions can claim…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. THE CHARTERED ACCOUNTANT AS A BUSINESS PARTNERChartered Accountants think of themselves as something quite different from bookkeepers. They regard themselves as business partners who can and do add value to the business of their clients. If they are sincere in this, they need a good working knowledge of company law, commercial law and the law of meetings and need to be in a position to advise their clients accordingly. They need to have the judgment to know when the services of a solicitor are required and need to be able to select the requisite solicitor. A FAILING OF THE…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. Introduction - DefinitionTraditionally the following entities have been used to conduct business - • Sole Traders• Partnerships• CompaniesOver past recent years it has become more common for the trading entity to be a Trading Trust. A Trading Trust is a trust which is formed for the purpose of carrying on a business. The obvious advantages of trading through such a trust are - • The ability to distribute profits and assets to beneficiaries• The ability to organise the tax affairs of the trust so that beneficiary income is distributed to beneficiaries at lower tax rates and thus reduce the…
The content of this article may be out of date - please refer to our more recent articles for up-to-date information. Some years ago some meat processing companies failed. Workers lost their jobs and whereas wages and holiday pay were preferential, redundancy due ranked as unsecured.   Recently the Government determined that redundancy should be preferential and the Status of Redundancy Payments Bill was passed into law in the form of the Insolvency Amendment Act 2004 and the Companies Amendment Act 2004. These Acts come into force 60 days after the 30 March 2004, which is the date they received the Royal Assent. I calculate the effected dated as being 29 May 2004. Both Acts make redundancy preferential and increase…
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