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Video Link Here July has mirrored the insolvency appointment figures over the last couple of months. The pressures affecting our economy have also remained fairly consistent over the last few months:- Countries are continuing to fluctuate in and out of COVID-19 lockdowns - Businesses and consumers are facing ongoing shipping delays and supply shortages- Consumer demand for goods continues to exceed supply in many areas- Labour shortages remain an issue- Inflation remains higher than RBNZ’s targets and the affordability of goods remains an issue To the end of July, the outlook for growth has continued to look positive:- Unemployment rates have now fallen to pre-COVID-19 rates. - The construction industry and the housing market continue to run hot - Consumer…
Video Link Here There is a belief held by some people that the liquidators of a company are paid by the person (or company) that appoints them and, in some cases, that is what happens – but not always. How the liquidators get paid, and by whom, will depend largely on the situation of the company being liquidated, such as solvent or insolvent, shareholder or High Court appointment, but there are two broad categories – • Payment from the assets of the company; or• Payment from a third party – such as shareholders of the company to be liquidated or the applicant creditor for the High Court proceedings to liquidate the company. The other possibility is that the liquidators will…
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…
We have passed the halfway point of 2021 and it is now less than six months until Christmas. Quite a bit has happened in the first half of the year so let’s look at how the NZ economy has tracked to June 2021. The global economy continues to face a number of challenges, which are impacting many countries to varying degrees: - Countries are fluctuating in and out of lockdowns as a result of ongoing COVID-19- Shipping delays are continuing- There are materials shortages affecting many industries- Consumer demand for goods continues to rise while international travel continues to be restricted We see the building industry as one to watch. In New Zealand, COVID-19 brought a further increase in demand…
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Insolvency,
This article was prepared for RITANZ by James McMillan, Patrick Glennie and Nicole Thompson of Dentons Kensington Swan. 2020 was a year of reform in the insolvency sector. Most of the provisions of the Insolvency Practitioners Regulation Act 2019 (IPRA) came into force on 1 September 2020, with several other significant reforms coming in at or around the same time. In this article, we look back at some of the key issues insolvency practitioners were readying themselves to grapple with, and trace developments since the IPRA came into force. Key reforms Some of the key reforms in 2020 were: • Unlicensed insolvency practitioners can no longer accept new insolvency assignments (and have until 31 August 2021 to complete existing assignments).•…
Let’s look at the NZ economy and the insolvency space in May 2021. In the media, the concerns about the current labour shortages grew. While these concerns were previously focused on the horticultural sector (a shortage of pickers during harvest) and the hospitality sector, the number of industries calling out for workers is increasing. Of late, the labour shortages in the construction sector – an issues that has been around for some time – have been noticeable, as anyone who has tried to organise a tradie or become a DIY expert thanks to YouTube can attest to. Supply shortages for building materials is also biting, which is not helping New Zealand’s ever present housing crisis. The pressure points for the…
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Insolvency,
The Income tax Act 2007 allows a company to make a tax free distribution of capital gains “on liquidation”. The IRD issued publication QB20/03 on 11 December 2020. The publication discusses the first step legally necessary to achieve “liquidation” in both the short form (s318(1)(d) Companies Act 1993) and long-form liquidation (s241(2)(a) Companies Act 1993). IRD have confirmed when “liquidation” occurs under each process. It reinforces BR Pub 14/09 that a short form liquidation commences (for tax purposes) when a valid resolution is passed, when the directors (and/or shareholders depending on the constitution) make the decision to wind up the business, pay all creditors, distribute surplus assets and request removal from the register of companies, and then carry out the…
Typically, April is a quieter month for company insolvencies than March is and April 2021 followed this pattern. April starts the new financial year for most companies and, hopefully, allows businesses to put the COVID-disrupted 2021 financial year behind them. We anticipate that the statistics for the 2021 financial year will become the outlier and that the 2020 financial year will be a better measure of insolvency trends. Let’s look at what happened in April 2021. The minimum wage increased $1.10 per hour from 1 April 2021 to $20.00 per hour ($41,600.00 per annum). While the additional cost of $44.00 per employee per week ($2,288.00 per annum) may not have a huge impact on some smaller businesses with very few…
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…
Typically, March is a busy month – it is the end of the financial year for most New Zealand companies and income tax returns for the previous financial year (for clients of tax agents) are due, which means many business owners decide to commit or quit in March. As a result of an alert level increase on 28 February 2021, Auckland spent the first week of March 2021 at Alert Level 3, while the rest of the country stepped up to Alert Level 2. In order to soften the blow, the Government activated two rounds of resurgence support payments plus a two-week wage subsidy payment for eligible businesses. There were also signals from the Government in around mid-March that the…
Voluntary liquidation allows a company to terminate its operations and sell off assets and for any shortfall to be dealt with. Some companies are liquidated because they serve no further purpose. Some are liquidated as they have unfeasible operations or poor operating conditions or technology has moved on. Others are liquidated because the founder has retired or passed and the business cannot operate without that expertise. Some have been affected by the failure of a large customer, the loss of a major contract or an extraordinary event, like Covid-19. Most companies advance an insolvent liquidation because: • The business cannot pay its debts as and when they fall due.• Liabilities exceed total assets.• The business is making losses and there…
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,…
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Liquidation,