Liquidation

The winding up of a company in New Zealand can occur in three ways – • A voluntary liquidation initiated by the shareholders of the company (solvent or insolvent companies); or• A Court ordered winding up initiated by a creditor of the company; or• A short form removal also known as Section 318(1)(d) process (solvent companies) The purpose of this article is to set out the different processes involved with these options. Voluntary Winding Up: The process to be followed by the directors and shareholders of a company to wind the company up depends on the financial position of the company, that is whether it is solvent or insolvent. Solvent Companies: When the decision has been made that a solvent…
As the creditor of a company that is failing to make payment of amounts owed, the process you have to follow, to have liquidators appointed in relation to that debtor company, can be slow and frustrating. It will be even more frustrating, and worrying, if you have concerns about what will happen with the assets of the debtor company while the process takes place? There is an option, pursuant to Sections 241(4)(d) and 246 of the Companies Act 1993 (“the Act”) to have an interim liquidator appointed by the Court to take control of and preserve those at-risk assets. NORMAL PROCESS In the normal course of events, when liquidating a debtor company, the process starts with the serving of a…
We are often asked ‘how do liquidators’ work’ and what are their rights regarding access to company records and information. To clarify we have put together this article. When a liquidator is appointed over a company, either by the shareholders or by order of the High Court, one of the first steps taken will be to locate and uplift the books and records of the company and to seek information about the business, accounts or affairs of the company to enable a full review to be undertaken. The purpose of the review is to – Establish the financial position of the company at liquidation; Ensure that all assets have been properly accounted for; Identify any other avenues of recovery for…
A recent case in the Hamilton High Court looked at the requirements on a liquidator to accept the claims of creditors and to call a meeting of creditors to decide if a replacement liquidator should be appointed. The Law on Calling a Meeting with Creditors Where a liquidator is appointed by shareholder resolution they are required to call a meeting of creditors within 10 working days of their appointment pursuant to section 243 (1)(a) of the Companies Act 1993 (“the Act). This requirement can be dispensed with, pursuant to section 245 of the Act, if the liquidator considers, having regard to the assets and liabilities of the company, the likely result of the liquidation and any other relevant matters, that…
Global Textiles Limited (In Liquidation) We were appointed liquidators of Global Textiles Limited (“Global Textiles”) on 13 March 2015 and are now in the final stages of the liquidation. Prior to our appointment, Global Textiles had been in business for nearly 20 years.  It supplied textiles to a number of brands in New Zealand and Australia from Jean Jones to small businesses.  It was also the designer and wholesaler of a popular clothing brand. With the emergence of globalisation and technology allowing easy access to markets outside of New Zealand, the local textiles industry has moved into the sunset phase of its life cycle. With cheaper imports from overseas coming into the market, Global Textiles’ traditional customers were increasingly demanding…
From time to time we are approached by persons or companies pursued by liquidators of other insolvency firms. We are also asked to provide guidance or opinions on how a liquidator should act, what is reasonable and how to respond to demands/requests. Insolvency specialists take different approaches and some Insolvency Practitioners ("IP") do not always act in the best interests of the company creditors. There have been several reported instances in recent years. At McDonald Vague our objective is to maximise the return for creditors. We do not always achieve a return for unsecured creditors but have a good reputation for taking a firm and fair approach and getting returns. Cost/benefit is always a consideration. This blog post discusses the…
One of the first tasks facing liquidators after their appointment is to ascertain and communicate with those people and entities who can rightly register a claim in the liquidation as a creditor. Generally, this information will be provided by the directors of the company, along with copies of unpaid invoices or statements on the individual accounts, but not all eligible creditors are that easily identified. Section 303 of the Companies Act 1993 ("the Act") sets out the admissible claims in a liquidation - Claims admitted - Subject to subsection (2) of this section, a debt or liability, present or future, certain or contingent, whether it is an ascertained debt or a liability for damages, may be admitted as a claim…
Part 2 of 2   Following on from our earlier article dealing with how liens over company records are treated in a liquidation, we will now cover how liens are dealt with in receiverships and bankruptcies, and how to handle a lien held over the assets of the entity. Bankruptcy lien over records and documents Upon the adjudication of a bankrupt all of their property is vested in the Official Assignee under Section 101 of the Insolvency Act 2006.  For those records that are not in the possession of the Official Assignee a written request is made for their surrender under Section 171 of the Insolvency Act 2006.  This request encompasses any document that relates to the bankrupt's property, conduct,…
The solvency test is not required to be met each day a company trades.  It is required for certain transactions including distributions and dividends and requires the company to demonstrate it can meet two tests.  These tests are the trading solvency/liquidity test and the balance sheet solvency test.   To satisfy the solvency tests, a company must be able to pay its debts as they become due in the normal course of business; and the value of its assets must be greater than the value of its liabilities (including contingent liabilities). One objective of the solvency test is to control all transactions that transfer wealth from a company.  In a liquidation context, where transactions have occurred when the company did not…
Part 1 of 2  Having a customer go into liquidation is never appreciated.  There is a potential loss of profit, and as such, creditors generally seek to secure and protect their situation through whatever means necessary. In a perfect world, the creditor will be secured by way of a perfected security interest under the Personal Properties Security Act 1999 that leads to gaining a super priority to recovery of equipment or to unpaid stocks and potentially a recovery from proceeds relating to those unpaid stocks.  However, often there is no security and no assets on liquidation. On occasion, however, the creditor will find themselves in possession of company assets and records over which they have no registered security, and the…
On 15 September 2014, insolvency and business recovery specialists McDonald Vague advised 288 former employees and unsecured creditors totalling $13.112 million that a total dividend pay-out of 100 cents in the dollar had been made to most of them. Given that this was a large corporate failure with initial unsecured claims in excess of $25 million this is a significant pay-out. Early on in the liquidation it looked like creditors would face a nil dividend.  The steps taken to achieve this result include: Engaging in, and winning, a significant arbitration award relating to DML's mining operations at Waihi. Establishing the unsecured creditors' position by disputing and settling several significant unsecured claims for amounts primarily owed by other companies related to…
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…
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