If there was a cliff for the insolvency figures to jump off it would be called “Public Holidays” and they have effects across the board this month, but people taking 10 days in a row off will do that. April felt suspiciously like Christmas where you have a month’s work to do in half the time, so naturally some things get put off to next month.

Coupled with the shorter month we also had global factors playing havoc with the economy and adding to the uncertainty for businesses, a number have started to take the wait and see approach to see what washes out rather than taking action to deal with problems they are facing.

Winding Up Applications

April saw a further drop in appointments for the year, but we remain slightly above the prior year to date figures. Uncertainty and a short month dropping the figures back to 2023 levels.

For the first time this year we have come in under triple figures. I expect we will climb back up next month and will likely see a bounce back for the rest of the year. IRD continues to apply pressure and the their remains a lot of distress in the economy while consumers have not opened their wallets just yet.

IRD made up 47 of the 73 applications for the month, with non IRD applications cut in half when compared to the previous month. IRD continue to be well above the past 5 years cumulative total, so it is safe to assume they are continuing to apply pressure to derelict debtors, this is supported by the coms they are putting out on their increased compliance and recovery work in 2025.

The IRD has continued their 25-month streak of having more applications than all other creditors.

Personal Receiverships

April saw 5 more appointments putting up over double that stats seen in previous years to April figures. As more companies continue to default on their lending personal security agreements are being called up, we believe this will continue to track towards exceeding 2024 figures.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

What did April look like? It mirrored the April 2024 figures. What was this driven by? Public Holidays leaving less actual working days and a fear bit of uncertainty in the economy (some global and some local) helping stakeholders avoid the difficult decisions.

Year to date insolvency figures are just behind those seen in and around 2013 – 2015 and remain slightly above those seen in 2024.

There was a large drop in court appointed liquidations in April with only 28 in the month, well down from February’s 114 and March’s 85. This in turn made the insolvency shareholder liquidation portion (above) appear a lot larger for the month. Another effect of a lot of Public Holidays in the month is the courts not being open, unsurprisingly it is difficult to have court appointed liquidations with the court is closed.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders

 Personal insolvency appointment figures for Bankruptcy, NAP and DRO remain low as seen above. You will note that while IRD has continued to push corporate winding ups, this has not yet been felt in the personal insolvency space with a rise in court appointed bankruptcies.

Where to from here?

While figures have been dropping in the last few months we are not out of the woods yet and will expect to see a turnaround towards the middle of the year along with returning to higher insolvency levels.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

Winding Up Applications

Yet another month where we saw a drop in appointments when compared to the prior month, but we remain above the prior year March figures. Traditionally we would see a drop in March before we begin the climb to the mid-year highs, coupled with the end of financial year keeping creditors distracted with other matters.

The winding up notices advertised still present a strong showing for the month, with triple digits for each month in the first quarter of 2025. It suggests we will continue to see this increased level of creditor activity for the rest of the year.

While the appointments since January have been decreasing, as a cumulative total we remain above the totals in the last 5 years and have already exceeded the total yearly winding up applications seen in 2020. At our current rate I expect we will exceed the yearly total winding up applications in 2021 and 2022 by the end of the 2nd quarter for 2025.

IRD made up 53 of the 104 applications for the month and have reverted to their long-term average of 51% of the total applications. They remain well above the past 5 years cumulative total for the first quarter, so it is safe to assume they are continuing to apply pressure to derelict debtors, this is supported by the coms they are putting out on their increased compliance and recovery work in 2025.

The IRD has only just managed to continue their 24-month streak of having more applications than all other creditors making up 53 vs 51 applications for the month. We are not expecting the drop off since January to continue but rather to stabilise and begin to climb into the 2nd quarter of the year.

Personal Receiverships

A slower March with only two personal receivership appointments in the month, looking back on the last six years however the month of March does not normally see many appointments. As you can see below the total appointment for the first quarter are above the yearly totals seen in 2019, 2021 and 2022. We continue to track towards exceeding 2024 appointments by 25%+.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

The traditional high seen in March did not quite eventuate as we saw a slower month for the end of the financial year. What was this driven by? Digging into the figures we normally see a spike in solvent liquidations at the end of the financial year, in 2025 this did not eventuate. This has been a reoccurring trend for the last few months with solvent liquidations taking a dip, likely driven by the recession and there being less cashed up businesses looking to wind themselves down and distribute funds back to shareholders.

Year to date insolvency figures line up with those seen in and around 2013 – 2015 and remain above those seen in 2024.

As mentioned above solvent liquidations remained down on the average, 8% in 2025 vs 13% for the long-term average. Comparing 2025 to the average for past March figures the 8% for the month is well below the normal March solvent level of 17%.

There was a lift in insolvent shareholder appointments at 53% compared to their average of 51%. Once again, the bigger increase was from court liquidations making up 31% while the average is normally around 26%, this was driven by the large number of winding up application being pushed through the courts in Jan and Feb 2025.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointment figures for Bankruptcy, NAP and DRO remain subdued with a total for the month of 112 and come in only slightly above 2022 (89), 2023 (106) & 2024 (99).

Cumulatively January and February’s total is 179, only slightly above 2022 (157), 2023 (157) and 2024 (154). While businesses continue to struggle this is not yet showing up in the personal insolvency figures.

Where to from here?

With the first quarter behind us 2025 looks like there will be further businesses failures across all sectors and business sizes, particularly with the global uncertainty and the IRD keeping pressure on businesses.

There will be continued busy times for insolvency practitioners for the next 2-3 years as we deal with the tail from the latest recession.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

Winding Up Applications
 

February applications were down on January but still above what we saw in 2024. Historically February would be a bumper month as the winding up notices that couldn’t be processed in January would spill into February. Regardless it was still a strong showing for the month and is setting the tone for what we expect to see in the rest of the year.

IRD made up 78 of the 118 appointments for the month and continued applying the pressure to derelict debtors.

The IRD has continued with its 23-month streak of having more applications than all other creditors. The last time they made less applications was back in March 2023. I have also included the trend line this month to emphasise the upward trend over the last 5 years.

Personal Receiverships

February posted similar figures to those seen in January 2025, as seen below we remain above those seen the last 6 years. Taking a bit of a leap if this monthly increase continues for the rest of the year we will be up in the 80’s and potentially double what was seen last year and well above earlier years.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

After only a slight lift in January, February 2025 took off to new February highs. The driver behind this was a huge month for court appointments, this was to be expected given the bump in winding up applications seen last month all fell due in February.

So where did the work go? The practitioners that regularly take work each month generally all took between 15 – 20 appointments in the month.

Then there was the Official Assignee who took 82 appointments for the month, the bulk of this work coming from IRD winding up applications, the most they took last year in a month was 73. Regardless of who takes this work 82 appointments in a month is a massive amount of liquidations that need to be managed and administered, fortunately for the OA as you can see below the personal insolvency figures remain low so they have spare resources to allocate to liquidation work for the moment.

Year to date insolvency figures line up with those seen after the GFC but remain well behind what was seen in 2009.

Solvent liquidations remained down on the average (13%), while insolvent shareholder appointments in February were just down on their average of 51%, receiverships were similar to their long term average. The big increased as outlined above was from court liquidations making up 41% while the average is normally around 26%.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointment figures for Bankruptcy, NAP and DRO while not the lowest January on record have remained low.

I have previously predicted that we will see a lift in personal insolvency in the first quarter of 2025, we are not there yet but I may also be pushing that prediction to a later part of the year.

Where to from here?

For 2025 the expectation is that there will be further business failures across all sectors and business sizes as the recovery continues and the IRD keeps pressure on businesses with arrears to be recovered

There will be continued busy times for insolvency practitioners for the next 2-3 years as we deal with the tail from the latest recession.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

2024 was a year that got progressively busier for insolvency practitioners and it looks like it will carry on into 2025 based on the Jan figures. The economy continues to struggle on, with businesses facing shrinking margins and decreased demand. The OCR began to drop from the middle of the year, earlier than originally indicated (originally projected to be mid 2025) with the next announcement due out in a few weeks, pundits seem to be predicting another cut of 25 – 50 points. To date these drops have yet to have the desired effect due to the 12-month lag between the drop taking place and the effect being felt. Latest unemployment figures released in January showed the level of unemployed rising to 5.1%.

Winding Up Applications

January is traditionally one of the slower months for winding up applications being advertised (public holidays, Christmas break etc.) but not so in 2025. Last month there were more winding up applications than any other single month in the last 5 years (the next closest was October 2024 with 125).

What was this driven by? In a nutshell IRD. They advertised 100 of the 130 applications for the month. That's 3x what the advertised in January last year and 13 above their next highest months (August & October 2024).

If this is how the year is starting the courts will be pumping with liquidation work and the Official Assignee will be needing to hire a few new staff to deal with all the IRD work it will be seeing. Historically a fair chunk (around 70%) of the IRD applications end up in liquidation.

The 2024 total year applications were up almost 30% on 2023 and close to double the 2021 and 2022 total year figures. Definitely a sign of the times as creditors continue to get tough with debtors and pile on the pressure to recover their funds.

Of the total appointments for 2024, IRD made up 702 of the applications or 63%, the balance of the applications were made by all other creditors combined. The averages over the last 5 years for IRD applications is generally between 55% and 60% of the total (though January 25 was 77%). The IRD's activity remains up on past years as expected given the tax arrears they are trying to recover ($8 billion as at June 2024) through increased enforcement and the additional funding the government are providing them to achieve these recovery goals.

The IRD has continued with its 22-month streak of having more applications than all other creditors. The last time they made less applications was back in March 2023.

The Auckland High Court deals with more winding up applications than the rest of the country combined. That is a fair bit of creditor enforcement and a wide margin between Auckland and the rest of the country. Of interest Christchurch managed to nab the 2nd spot ahead of the capital, potentially the result of the slowdown in building work in the region following the rebuild finishing up and a general slowdown across the industry.

The top 5 were in the same order as the population cap from the Stats NZ 2024 data - Auckland, Canterbury, Wellington, Waikato & Bay of Plenty

Personal Receiverships

Personal receiverships jumped 50% in 2024 up from the 2023 numbers, comparatively personal receiverships soured 400%+ when compared to the 2022 numbers.

As a percentage those are big changes and appear to be driven by the preference of some lenders take towards obtaining a personal general security agreement from borrowers which allows them to appoint receivers upon default, rather than the traditional approach used by the bulk of lenders of relying on the, often slower to enforce, personal guarantee to recover their debts.

January 2025 has started slightly above January 2024 aligning with the winding up applications that we are likely to be in for a busy year of various insolvency appointments. This increase in personal receiverships is yet to be reflected in the formal personal insolvency appointments (bankruptcy, NAP and DRO) yet.

Because there is no public record or available reports on the result of the receiverships (unlike when a company is in receivership the report is available on the register) it is difficult to see how successful the appointment may be and if any funds are recovered along with what the costs involved were on each appointment.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

December 2024 saw a jump on past years. The increase come from shareholder insolvent liquidations which have doubled on past years, while court insolvent liquidations have remained steady and solvent liquidations have seen a slight drop. January 2025 has started the year on a similar level to 2018 figures, so while not a massive start we have broken 100 appointments in January for the first time in 6 years.

Total insolvency appointments for the year continue to increase beating out all appointment figures back to 2013, so there have been more appointments in 2024 than in any of the last 10 years. With 2,784 appointments in the year. We expect the higher insolvency appointment levels will continue into 2025 at least due to a large backlog at IRD and a struggling economy affecting most industries and restricting consumer spending.

The total corporate appointments are still down 1000 odd appointments on the highs of 2009 when the levels were up to 3,797.

Solvent liquidations remained down on the long-term average (13%), while insolvent shareholder appointments in December far exceeded their long-term average of 51%. The other appointment types donated a point down on their long-term averages to see this rise. I have not provided the breakdown for January 2025 as it is largely insolvency shareholder appointments with the courts not dealing with winding up applications for most of the month.

The gap that has grown between corporate and personal insolvencies has continued to remain sizable; they are yet to return to their long-term trend of tracking each other. This has largely been caused by the rise in corporate insolvency and the continued low levels of personal insolvencies.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointment figures for Bankruptcy, NAP and DRO dropped to their lowest December seen in the above graph.

While we are expecting to see corporate insolvencies continuing to grow into next year, I don’t believe we will see a lift in personal insolvencies till early 2025. There is traditionally a slow down over Christmas and January, in part due to the closure of the courts but also as people return to work in February and have to deal with the Christmas overspend, this may be when we see a lift in personal insolvency figures.

Where to from here?

As mentioned last year moving into 2025 the expectation is that there will be further large businesses to fail as the recovery continues and the IRD keeps pressure on businesses with arrears to be recovered

There will be continued busy times for insolvency practitioners for the next 2-3 years as we deal with the tail from the latest recession.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

Paying tax debts to the Inland Revenue Department (IRD) on time is a critical obligation for businesses in New Zealand. Neglecting this responsibility can lead to severe repercussions, including statutory demands, winding-up notices, and even liquidation. The New Zealand Herald reported that IRD ramped up compliance efforts in January 2025, following last year’s Budget boost. This trend is continuing.  Companies failing to pay taxes are facing swift action, including liquidation applications. The IRD appears to have "started the war drums early."

We discuss the importance of timely IRD debt payments, the benefits of proactive communication, and practical steps businesses can take to manage tax obligations while navigating financial challenges.

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Why Timely Payment Matters

IRD tax debt is a legal obligation. Failing to pay it can:

• Accumulate Penalties and Interest: Outstanding tax debts incur penalties and compounding interest, significantly increasing the total debt over time.

• Damage Business Reputation: Non-payment can harm relationships with suppliers, creditors, and stakeholders.

• Trigger Legal Action: Persistent non-payment may lead to statutory demands, court action, or liquidation proceedings.
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 Proactive Communication with IRD

When facing financial constraints, the worst thing a business can do is ignore the problem. Instead, proactive communication with IRD is key:

• Engage Early: Contact IRD as soon as you anticipate difficulties in meeting payment deadlines.

• Explain Your Situation: Transparency about your financial position helps IRD assess your case fairly.

Contact McDonald Vague if you need help with reaching a settlement or negotiating an instalment plan.

By engaging early, businesses demonstrate good faith and increase their chances of receiving leniency.
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Preparing for Instalment Plans

An effective instalment plan requires careful preparation:

1. Prepare Cashflow Forecasts: Assess your income and expenses to determine what you can realistically pay without jeopardizing operations. You must be able to show you can honour any arrears and keep current debt up to date. Your business needs to show it is viable.

2. Prioritize Essential Expenses: Ensure critical costs like wages, rent, and key supplier payments are covered while allocating funds for tax obligations.

3. Monitor and Adjust: Regularly review cashflow forecasts and adjust your instalment plan if necessary, keeping IRD informed of any changes.
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What to Do (and Not to Do)

Do:

• Engage Early: Delay only compounds the issue.

• Keep Records: Document all communications with IRD and maintain accurate financial records.

• Seek Professional Advice: Accountants and licensed insolvency experts can provide tailored guidance and advocacy.

Don’t:

• Ignore Notices: Failing to respond to IRD communication escalates matters rapidly and reduces the options if you overrun deadlines

• Overpromise: Committing to payments you cannot sustain undermines credibility.

• Delay Filing Returns: Even if you cannot pay, file your tax returns on time to avoid additional penalties.
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Consequences of Inaction

Failing to address tax debt can lead to:

1. Statutory Demand: IRD may issue a statutory demand, requiring payment within 15 working days. Ignoring this can result in a court application for liquidation.

2. Winding-Up Notice: If the statutory demand is not satisfied, IRD can proceed with liquidation, effectively ceasing the company’s operations and appointing a liquidator to sell assets/business to recover debts.

3. Personal Liability: Directors may face personal liability if found to have traded recklessly while insolvent. Non payment of GST and PAYE (trust moneys) will create significant personal risk for the directors.
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Lessons from IRD’s Recent Actions

IRD is committed to enforcing compliance. Businesses must heed this warning: IRD is actively monitoring and pursuing non-compliant entities. The recent uptick in liquidation applications serves as a stark reminder of the risks of neglecting tax obligations.
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Conclusion

Managing IRD debt requires vigilance, transparency, and proactive planning. By engaging with IRD early, setting up realistic instalment plans, and maintaining robust cashflow management, businesses can navigate financial challenges effectively. Conversely, inaction risks severe consequences, including liquidation and personal liability for directors. Seeking professional advice can provide valuable insights and support, ensuring businesses remain compliant while safeguarding their operations.
The war drums of IRD’s compliance efforts have sounded. The time to act is now.  Contact us for a confidential discussion.

2024 saw a steady rise in corporate insolvencies across the year, driven by a number of factors including businesses shrinking margins, increased creditor action, historical debts incurred over Covid catching up with businesses, a stalled property finance market along with an increasing Official Cash Rate and a decrease in consumer spending amongst others.

A key creditor of every business in NZ the Inland Revenue Department, has awoken from its Covid induced collection policy slumber and is now vigorously pursuing its delinquent debtors with increased funding coming from the government to do so. The most recent statistics out of IRD show that they have 8 billion dollars outstanding that need to be collected from individuals ($2 billion) and businesses ($6 billion).

The effects of this large debtor’s book will be seen in 2025 with increased winding up applications being pursued through the court (roughly 70% of these end up going into liquidation). At the same time there are a number of businesses that do not wait for the IRD to take action and take the appropriate steps themselves often under the increased pressure to pay the tax arrears while at the same time attempting to keep all other obligations current as they trade on.

Aside from enforcement action we have also seen the IRD announce and begin a new focus on certain industries for audits and checks particularly those that accept cash all driven by the extra funding being provided to IRD to take enforcement action. For some business this new approach may seem overbearing having had multiple years of little enforcement action over covid and the years following as the government funded businesses through small business loans and wage subsidies, it is however more inline with pre-covid IRD recovery action levels.

From a liquidation recovery point of view we are seeing that asset prices continue to hold up, but that could negatively change as the market becomes flooded with liquidated assets, coupled with less enthusiasm to finance those assets from lenders.
We predict a continuation of the short-sighted practice of shareholders drawing funds out of businesses without declaring annual salaries. If a business entity cannot afford to pay its director/shareholder (and the tax consequences) then there are probably far more problems in the business than the tax consequences of declaring a shareholder salary.

On many occasions it is better to acknowledge the business is not sustainable and its is better to close it than try to continue with increased risks mounting up.

We are expecting to see corporate insolvency to increase in 2025, it is important to keep in mind however that this is off a particularly low base following Covid. In 2024 we only saw the corporate insolvency levels return to 2013 levels, they remain 1,000 appointments down on the GFC where we saw appointments reach 3,700 per annum.
In 2024 we saw all sectors affected by the rise in appointments and this will continue into 2025. The surprise has been the liquidation of some quite long-standing businesses.
Construction is likely to remain subdued until house prices see some upward movement while physical retail and hospitality will continue to struggle in a tight economy where consumers are hesitant to spend.

On the personal insolvency side, we expect to see the rise we saw in 2024 to personal receiverships continue to increase. This has been driven by the rise in taking General Security Agreements over individuals as lenders have sought all-encompassing loan securities providing those lenders with another collection option, rather than just relying on Personal Guarantees which can be time consuming to enforce.

During 2024 personal insolvency (bankruptcy, NAP and DRO) reached some of its lowest levels and has yet to increase in line with corporate insolvency, we are expecting to see this increase in 2025. Individuals continue to struggle from the increased cost of living, while inflation may have decreased it is deflation, so the inflation experienced over the last few years has meant that prices rose and have continued to stay high while wages have yet to catch up. While we may see the OCR will likely decrease in 2025 it can take between 12 - 18 months for this to flow through to the economy.

Following another OCR drop (50 points) we are now heading into the Christmas break with no new announcements till February, 3 months does seem a long time to wait for any further changes. Once again this will take some time to flow through to the rest of the economy, but it will have an earlier benefit for those borrowers rolling 6 monthly mortgage periods or on the floating rate.

There continue to be a number of interesting insolvent businesses covered by the media, particularly the regional publications from pie makers to solar providers. The expectation continues that there will still be further larger businesses to fail as the recovery continues and the IRD keeps pressure on businesses with arrears to be recovered. The industry focus seeing high levels of insolvency continues to be led by construction, though anecdotally we have seen numerous appointments in retail, logging and commercial property ownership in the last few months.

Christmas/New Year Hours
The team are closing on Friday 20 December and officially returning on Monday 13 January however emails will be monitored during the closedown period and staff will be available should the need arise. If the matter is urgent we will have a skeleton staff over the break.

Winding Up Applications

November saw a drop in total applications from the rising levels seen the last 4 months. While above 2023 the figures for the month were under 2022.

The year-to-date applications (1061) is towering above all prior year full year figures 2020 (239), 2021 (562), 2022 (623) and 2023 (864).

Breaking down the winding up applications by creditor we can pinpoint the drop in application coming from IRD for November, the reason behind it may just have been how the month shook out or perhaps they are winding up early for Christmas. Of note however as at 6 December 2024 and the IRD have already advertised 12 applications for the month. On that basis it does not appear they are slowing down, when compared to prior Decembers unless they don’t advertise any other applications for the month.

The above graph does highlight the “be kind” mentality taken by IRD over Covid with numerous zero appointment months in 2020.

Personal Receiverships

November had 3 personal receiverships, a total of 46 for the past 12 months. Lenders who have taken personal general security agreements from borrowers continue to make appointments when borrowers and their companies default appointing receivers over both entities simultaneously.

The bulk of the personal receivership appointments continue to be driven by a small number of business lenders using these practises and exercising the enforcement rights the borrower granted them on signing up for the loan. From a practitioner perspective there are 3 firms showing up repeatedly for personal receivership working exclusively for certain creditors.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

November 2024 has dropped back down to past years Novembers. The drop was across the board in all appointment types, the reasons behind this may have been driven by the end of year winding up or potentially the changes in business confidence as decision makers try to hold out to see how they do over the Christmas period.

Total insolvency appointments for the year continue to increase in line with 2015/2016 figures. Month on month November had 207 total appointments, still above the long-term average of 164. With 2538 appointments in the year to date we are above full year figures back to 2016. We expect the higher insolvency appointment levels will continue into 2025 at least due to a large backlog at IRD and a struggling economy in most sectors.

Solvent liquidations picked up on last month’s 3% but remain almost half their long-term average, this loss has been picked up as a percentage equally by insolvent shareholder appointments and insolvent court appointments which in the below graph make up 88% of appointments. The long-term average for the two sectors has traditionally been around 75%.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointment figures for Bankruptcy, NAP and DRO remain low for the year to date in line with the very low levels seen back to mid 2021.

As outlined in the introduction the latest drop in the OCR is unlikely to make a huge difference to business with the flow through projected to take 12 – 18 months till it takes effect and will only drop certain costs, the price of goods we need day to day won’t go back down to pre-2020 levels.

While we are expecting to see corporate insolvencies continuing to grow into next year, I don’t believe we will see a lift in personal insolvencies till early 2025. There is traditionally a slow down over Christmas and January, then as people return to work and have to deal with the Christmas overspend, this may be when we see a lift in personal insolvency figures.

Where to from here?

There looks to me more pain for the NZ economy in the next 12 months as we begin the slow recovery. We foresee continued rising appointments when compared to prior years and continued busy times for insolvency practitioners for the next 2-3 years as we deal with the tail from the latest recession.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

The festive season is a time for joy and giving, but for many businesses, it also presents challenges with cash flow as customers struggle to settle their accounts. Managing overdue debts effectively during and after the Christmas period is critical for maintaining financial stability. What are the best practices for handling overdue debts, responding to excuses, and escalating action when necessary under New Zealand law?

1. Proactive Debt Management: The Pre-Holiday Checklist

Communication Is Key:

Pre-emptive Reminders: Send reminders about due invoices early in December, emphasizing the importance of payment before the holiday break.

Flexible Arrangements: Offer payment plans or early settlement discounts to encourage compliance.

Assess Your Accounts Receivable:

Prioritize high-value debts and long-overdue accounts for immediate follow-up.

Conduct credit checks on customers with large outstanding balances to gauge the risk of non-payment.

2. Handling Overdue Debts: Strategies and Excuses

Common Excuses and Responses:

“We’re waiting on payments ourselves.”  - Suggest a part-payment option to reduce the balance and demonstrate goodwill.

“Our accounts team is on holiday.” - Request payment before their break or arrange for automated transfers.

“Cash flow is tight after Christmas.” - Propose a manageable payment schedule to ease the strain.

Best Practices for Follow-Up:

Maintain regular contact via phone and email.

Keep all communication professional and documented for future reference.

Consider involving a third-party debt collector if the debtor becomes unresponsive.

3. Taking Action: When to Escalate for Default

Warning Signs for Escalation:

Repeated failure to adhere to agreed payment terms.

Non-responsiveness to communication efforts.

Debtor denies liability without substantiation.

Steps for Debt Collection:

Send a Formal Demand Letter:  Clearly state the overdue amount, due date, and consequences of non-payment.

Engage a Debt Collection Agency:  If the debtor remains unresponsive, a collection agency can add pressure and negotiate on your behalf.

Legal Action Under the Companies Act 1993:  If the debtor is a company, a statutory demand can be issued for debts over $1,000.

Issuing a Statutory Demand:

This formal notice requires payment within 15 working days.

Non-compliance allows you to apply to the High Court to liquidate the company.

Winding Up Proceedings:  If granted, a liquidator is appointed and generally the company’s assets will be sold to pay creditors.

This is a last resort and should be approached with legal advice and/or by consulting an insolvency practitioner to ensure compliance with procedural requirements.

4. Post-Holiday Recovery Plan

Reassess Credit Policies:  Tighten credit terms for new customers or those with a history of late payments.

Monitor Trends:  Track payment patterns over time to identify seasonal risks and adjust your strategies accordingly.

Engage Professional Help Early:  If payment disputes arise, consult legal professionals to mitigate risks and recover debts efficiently.

Final Thoughts

Managing overdue debts around the Christmas period requires a blend of empathy, strategy, and assertiveness. By acting promptly and adhering to best practices, businesses can safeguard cash flow and reduce the impact of defaults.

Remember, the key is to remain proactive, professional, and prepared to escalate when necessary to protect your interests. For complex cases or substantial debts, seek guidance from an insolvency practitioner, a debt recovery expert or lawyer experienced in insolvency law. We are here to help www.mvp.co.nz

The end of one year and the start of the next year can be a challenging time for many business owners, especially with extended breaks over the Christmas and New Year period taken by staff. The pressure is compounded by the need to settle various financial obligations, from employee holiday pay to tax payments.

Many businesses face the strain from having to pay employees holiday pay entitlements, a period where income is not being generated due to closure and then to face IRD obligations such as November GST due 15 January, Paye due on 20 January, Oct to Dec FBT due on 20 January, provisional tax due on 15 January and for the larger employers more PAYE due on 5th of February. Some are now already struggling with the reality that these obligations are upcoming.

Managing cash flow during this period is critical, and proactive steps can make a significant difference. We explore strategies to handle the cash crunch, options for arranging instalment plans with Inland Revenue, and the point at which seeking professional advice from a Licensed Insolvency Practitioner becomes necessary.

1. Assess Your Cash Flow: Begin by conducting a thorough assessment of your cash flow. Understand your current financial position, taking into account outstanding invoices, upcoming expenses, and the various tax obligations due in January and February. This knowledge forms the basis for creating a realistic plan to navigate through the financial challenges.

2. Prioritize Expenses: Identify and prioritize essential expenses. This may involve distinguishing between critical operational costs and discretionary spending. By focusing on what's necessary for day-to-day operations, you can allocate funds strategically and ensure that vital aspects of your business are not compromised.

3. Communicate with Creditors: Open and honest communication with creditors is key. If you foresee difficulties meeting payment deadlines, approach your creditors early to discuss your situation. Some may be willing to negotiate payment terms or provide temporary relief. Establishing transparent communication builds trust and can lead to more favourable arrangements.

4. Explore Inland Revenue Instalment Plans: Inland Revenue understands the challenges businesses face, especially during the holiday period. If you're struggling to meet your tax obligations, consider reaching out to them to discuss instalment plans. Inland Revenue is often open to working with businesses to find a manageable repayment schedule.

5. Seek Professional Financial Advice: For some businesses, the financial strain may become overwhelming, and navigating complex tax obligations may seem daunting. In such cases, seeking professional financial advice is crucial. Engage with a financial advisor who can provide personalized guidance tailored to your business's unique circumstances.

6. When to Contact a Licensed Insolvency Practitioner: If your financial situation is facing the strain and is likely to continue to worsen, and you may find it impossible to meet your obligations, it may be time to consult a Licensed Insolvency Practitioner. Insolvency specialists can assess your business's viability, explore restructuring options, or guide you through the insolvency process if necessary. Early intervention increases the likelihood of finding a viable solution and reduces the prospects of being held liable for trading insolvently.

Ending one year and starting the next year on a financially sound note is essential for the success of any business. By proactively managing cash flow, communicating with creditors, and exploring available options with Inland Revenue, business owners can navigate the holiday cash crunch successfully. When faced with insurmountable challenges, seeking professional advice from a Licensed Insolvency Practitioner is a responsible and strategic decision to protect the long-term interests of your business. Remember, there are resources and professionals available to help you weather the storm and emerge stronger on the other side. Contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.

Winding Up Applications

Another big month with the 3rd month in a row posting new highs in winding up applications. This high was in large part driven by the IRD pushing through application before the Christmas closedown making up 87 of the 125 applications. All other creditor applications has remained constant when compared to the last three months in the high 30’s. We expect this drive from IRD to continue into November in a race to collect funds and apply pressure to derelict debtors before the courts close. It is important to keep in mind however that while this is a high when compared to the last five years it is off a very low base.

The year-to-date applications (972) is eclipses the last five years yearly total and reinforces the point that this increase continues off a very low base from the 2020 lockdowns.

Personal Receiverships

October saw a further 5 personal receiverships, all from the same lender who has made up 19 of the 41 personal receiverships in 2024. There has been a total of 44 personal appointments for the rolling past 12 months. Lenders who have taken personal general security agreements from borrowers continue to make appointments when borrowers and their companies default.

Why have we seen this increase in personal receiverships that historically was not the case, one of the reasons is likely the difficulty and time it takes to enforce personal guarantees while a personal general security agreement allows the lender almost immediate access on default to the borrowers assets.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

With the normal October dip as we head to the end of the year we remain above past Octobers. The Official Assignee once again took the largest amount of appointment in the month taking 72 appointments.

Total insolvency appointments for the year continue to track up in line with 2015/2016 figures. Month on month October had 244 total appointments, well above the long-term average of 163 and past September’s (2023: 171, 2022: 146, 2021: 112, 2020: 114, 2019: 139, 2018: 166, 2017: 177)). With 2331 appointments in the year to date we are above full year figures back to 2018. We expect the higher insolvency appointment levels will continue into 2025 at least due to a large backlog at IRD and a struggling economy in most sectors.

Solvent liquidations remain well below the long term 13% with the lost 10% picked up by court appointments whose long term average is traditionally 26%. This is a flow down from the strong winding up application in the year to date.

As you can see above the gap between personal and corporate insolvency has continued to grow and will continue to do so into 2025.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointment figures for Bankruptcy, NAP and DRO remain low for the year to date in line with the very low levels seen over the last two years. This is reflected in both graphs.

While we are expecting to see corporate insolvencies continuing to grow into next year, I don’t believe we will see a lift in personal insolvencies till early 2025. There is traditionally a slow down over Christmas and January, then as people return to work and have to deal with the Christmas overspend, this may be when we see a lift in personal insolvency figures.

Where to from here?

The signs continue to point to the NZ economy being in for continued pain for the foreseeable future, it is likely to get worse before it gets better regardless of the potential OCR decrease. We foresee continued rising appointments when compared to prior years.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it.