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.
• The business cannot pay its debts as and when they fall due.
• Liabilities exceed total assets.
• The business is making losses and there are minimal prospects to turn it around.
• The directors are finding it hard to cope with the stress and pressure of trading.
• Trading is in decline and there is concern of personal liability for trading insolvently
• The directors would like someone else to deal with the creditors and all their claims.
Struggling companies juggle the payment of debts, are often in receipt of formal demands or statutory demands and commonly are on instalment plans with Inland Revenue or certain suppliers that they are having difficulty honouring.
When a company is facing financial distress and having trouble paying its creditors including GST and PAYE, there is a high chance that the business is already insolvent. Company directors who operate an insolvent business must act in the best interests of creditors and cease trading immediately if there is no realistic prospect of recovering from the financial difficulties being experienced.
When a company is in too much in debt to recover from a turnaround strategy or restructuring procedures such as company compromises or voluntary administration, liquidation is often the only viable course of action.
Liquidating leads to dissolving the failed company structure and bringing all activity of that company to a close. It is a way for a company that has run out of funds to deal with the shortfall to creditors.
The role of the liquidator in an insolvent liquidation is essentially to realise the company's assets, and, where possible, to make a distribution to the creditors.
The liquidator also conducts investigations into the failure of the company, the conduct of its directors and, sometimes the conduct of third parties, like creditors.
An insolvent company is generally wound up voluntarily by the shareholders or on a Court application by a creditor. A licensed insolvency practitioner (IP) is appointed to oversee the liquidation process.
The liquidators take steps to realise the company assets and pay outstanding creditors according to a designated hierarchy set out in the Companies Act 1993. If there is a shortfall the creditors receive their entitlement and the balance is written off or possibly pursued under a personal guarantee if one has been granted.
If the company has sufficient funds to pay all creditors, it is solvent and surplus funds are distributed among shareholders according to their percentage shareholding.
If the company is solvent, the company can be wound up following a S218(1)(d) strike off process or by way of a solvent liquidation process. The latter can provide more certainty for companies with larger capital gains.
The process of voluntary liquidation is less stressful than facing a winding up proceeding following a creditors application to the Court. The voluntary appointment can be planned in advance to minimise disruption and the shareholders have the opportunity to select the licensed insolvency practitioner who will manage the entire process. The appointment process is fairly straightforward.
Liquidation may not necessarily mean the end of the business. It may be that the business assets are sold at market value as a going concern and a new company takes over. The IP decides on the best way to maximise value for the creditors and whether that involves closing or trading whilst the business is marketed for sale. With a voluntary process the plan can be discussed prior to the appointment including how staff are managed and assets realised. Often directors can have an involvement or a say in the process because it is in their interests to maximise the recovery and minimise the exposure to creditors who hold personal guarantees.
Although a company structure provides limited liability, this does not mean directors can ignore matters if financial problems arise. Directors have legal obligations to adhere to certain standards. Acting earlier reduces the risk of personal liability.
Continuing to trade with knowledge of insolvency is a risk, where you could find yourself as a director being held personally liable for trading.
Once a director or shareholder knows their company to be insolvent, they must not engage in any activity which could worsen the position of creditors or increase their losses any further. Directors should not increase debt, incur further credit, dispose of assets below market value, or increase their overdrawn current account.
If you do not have sufficient funds to pay everyone you owe, you place your creditors at risk of receiving a voidable transaction if they have knowledge of the demise of your company.
If your limited liability company is facing financial distress but the business is viable, gain advice from a professional. A licensed insolvency practitioner will be able to talk you through the options for rescuing the company (restructuring), giving you the best chance of a successful turnaround, while also ensuring you are adhering to your duties as a director.
There are options such as a hive down process (new company structure), creditor compromises (current company structure with a repayment plan for creditors), voluntary administration (current company with a Deed of Company Arrangement).
For advice, contact the MVP team.
Welcome to the month of double lockdowns and Americas Cup racing.
February is typically the first month of the year where we see a steep uptake in all insolvency appointments across the board after the lower months of December and January. Directors will take a hard look at their company after a quiet Christmas period and January break and make the call on whether they want to continue through another year or pack it in. Individuals will often go through a similar process after having spent up large over the Christmas period and having little to show for it and no prospects of paying off the debts they may have racked up and will need to assess their insolvency options.
So aside from staying indoors and watching boat racing what else happened in the month of February on the insolvency stats front:
• Winding up applications for the month beat all individual 2020 months.
• IRD finally began pulling the trigger on winding up applications.
• Personal insolvency figures were up to the 2020 high point levels.
• February figures were still down on prior years.
We continue to hear grumblings from businesses around the country with the upcoming minimum wage increases to $20 per hour and the additional pressure this will put on already tight margins. Banks have not eased up stringency with which they are lending to small to medium size businesses making it increasingly difficult for new businesses to get the necessary funding, while residential lending powers are forward fuelling the property market. We are also seeing increasing material and shipping/logistic costs as product shortages continue as goods cannot be brought into the country fast enough with backlogs at ports across the country.
The latest two lockdowns have done no favours for businesses with the government maintaining some level of support for those businesses negatively affected the most by the lockdowns if they manage to meet the application criteria.
While the February numbers are still behind the previous year’s February figures, they have begun to approach the higher points of 2020. The bulk of the 129 appointments were made up by shareholder resolution liquidations at 87 followed by court appointments making up 31. This is a reflection on the lower winding up applications figures seen over the closing months of 2020 and the slow January start where the courts remain closed for a time and people remain on holiday. This will likely flow through to later months of the year.
While the personal insolvency figures remain down on the past 4 years Februarys, similar to the corporate insolvency figures, they come close to the higher points of 2020 levels. Bankruptcies and No Asset Procedures continue at similar levels respectively of 73 & 72, with Debt Repayment Orders dragging up third contributing 27.
Finally, a graph and figures showing figures higher than 2020 levels across the board. This was boosted hugely by the IRD finally chasing some overdue debts and progressing to winding up applications of 18 for the month compared to non IRD applications of 15. Given IRD had only advertised 7 total applications in the prior 6 months they were long due to pull the trigger on these delinquent debts. Will this be a sign for the remainder of 2020 and the increased winding up applications will flow through to actual appointments? Only time will tell.
McDonald Vague have a team of licenced insolvency practitioners with experience across corporate insolvencies and assisting individuals with alternative options to bankruptcy. We can assist with company compromises, voluntary administrations, receiverships, liquidations, and personal proposals.
Murphy’s Law (or one version of it) states "whatever can go wrong, will go wrong" and that can appear to be the case when you are running a business in the current environment. If it’s not a lockdown, it’s a shortage of supply, or it’s a major client failing, or it’s another of the myriad of things that can go wrong.
While having good contingency plans in place, including cash reserves or access to a fighting fund, can help your business get through the hard times, when these problems come at you one after another in quick succession, things can turn to custard very quickly.
When that happens, there are things that, as a director of the company, you should be doing and, equally as important, things that you shouldn’t be doing.
The first thing to do, when you have run out of ideas on what can be done to rescue your business, is to seek professional advice. Sometimes, all it needs is for someone who has the required expertise and experience and is one step back from the frontline, to look at what is happening and come up with viable rescue options. These could include –
Consider your duties as a director of the company – to act in the best interests of the company or, if the company is insolvent, to consider the interests of the creditors. Take steps to ensure that you don’t allow the company to continue operating if it is going to increase the risk to creditors of the company.
Don’t put your head in the sand and decide that the only option is to keep working harder in the hope that things will come right in the long run. All you may be doing is digging the hole deeper.
Don’t put your personal interests ahead of those of the company or its creditors.
If liquidators are appointed to the company, either by the shareholders or by the High Court, the liquidators will look at the steps you have taken, as director, and consider how your actions have impacted on the creditors.
If you took actions that were to the detriment of the creditors, you may be held personally liable for the losses they incurred.
The failure of the company may not have been as a result of anything that you did, or didn’t, do, but your actions once the issues have arisen can have a marked effect on the outcome for creditors and on any personal liability you may face.
As soon as you identify that your company is, or will become, insolvent, you need to get the professional advice required and take the appropriate actions required of you as a director.
If your company is facing solvency issues, please contact one of the team at McDonald Vague for a free initial discussion about your company and the options available.
Welcome to the 2021 statistics.
January is traditionally a quiet month for appointments across all forms of insolvency and 2021 is no exception. With the courts closed for most of January, many companies extending their Christmas close down periods well into January, and the bulk of the country holidaying at the bach or camping in the great outdoors with the children, not a lot happened on the insolvency front. Typically, appointments begin to track up from February onwards.
Many of the woes from 2020 – changes in consumer demand, shipping delays, the loss of overseas tourists, domestic tourism visiting different destinations and spending less than their overseas counterparts, lower than expected income over the summer trading period, minimum wage increases, and labour shortages – are expected to continue to affect businesses well into 2021.
January saw winding up application advertising increase compared to both January and December 2020 but none of these applications were made by the IRD. A preliminary look at February 2021 figures to date suggest that the IRD has finally begun to put some formal pressure on some companies, after months of generally being trigger shy. We will discuss this further in our February stats analysis.
February 2021 brought another lockdown but this time it was only for a week. Still, the flow on effects will be felt in the months to come, especially because many businesses rely heavily on sales over the summer trading period to carry them through the slower winter months. Now more than ever, for many businesses, every dollar counts.
There were fewer corporate insolvency appointments in January 2021 than in any other month going back to January 2016 (when our monthly appointment stats start) and every month of 2020 saw more than double the number of appointments when compared to January this year. As expected there were no court appointments.
We continue to see both personal and corporate insolvencies tracking down over time, as has been happening over the last decade. The last big upward spike in appointments flowed from the global financial crisis.
We found only one January 2021 number that was higher than its 2020 counterpart – the number of winding up applications advertised. Is it an omen that there will be an increase in creditor applications this year? Will more applications lead to more court appointments of liquidators? Only time will tell.
We expect that many marginal businesses that survived 2020 thanks to financial support from the government and inaction by their creditors will start to have real difficulties in 2021, as the leniency granted to debtors by many institutional, corporate, and SME creditors in 2020 in order to “be kind” starts to be withdrawn.
McDonald Vague have a team of licenced insolvency practitioners with experience across corporate insolvencies and assisting individuals with alternative options to bankruptcy. We can assist with company compromises, voluntary administrations, receiverships, liquidations, and personal proposals.
With one month now under our belts into 2021 it is timely to have a look back on 2020 and how the year played out when lined up to past years so we can gauge the full affect of COVID-19. January 2021 figures will be published in a separate article when they are compiled over the next few days.
I’m not sure that we need to do a full recap of the major events of 2020, the notable ones were COVID-19 lockdown #1, COVID-19 lockdown #2 for Auckland then an election.
In any normal year with two economic lockdowns for an extended period you would expect there to be an upswing in the insolvency cases for an economy. This was not to be. While the average Joe and Jane off the street were sitting at home working and getting updates via mainstream media, they expected the insolvency industry was going gangbusters during the 2020 year, this was however far from the case.
The election had a similar effect to what it normally does every 3 years, the economy and in particular new insolvency appoints move into a wait and see holding pattern.
Let’s look at some pretty graphs and see how the numbers fell over the last 12 months to give us some context.
As you can see corporate insolvency appointments started off normally in the first quarter, took a large drop at the time of the first lock down and struggled to recover for the rest of the year coming in under 2018 & 2019 levels in almost every month. 1,611 total appointments compared to 1,960 in 2019 and 2,168 in 2018.
Bankruptcy adjudications followed a similar pattern to corporate insolvency trends and across the board figures were down on the previous two years. 908 total bankruptcies compared to 1,220 in 2019 and 1,481 in 2018.
The last graph we will take a look at is the Winding Up Applications. You will note a strong start to the year with drops around both lockdowns as the courts could not open to process the applications. This was followed by a complete drop off in IRD applications from August to November also the time of the election and the new governments first 100 days.
We have a government that has injected massive amounts of cash into our economy to keep it propped up in the short term while we try deal with lockdowns and to support several industries and the job market.
This influx of cash has kept unemployment figures under the 6% mark, but the negative effects on the economy are beginning to creep through in other measures with the underutilisation rate slowly creeping up to 13.2% and the number of people receiving the main benefit at 12.4%.
While these figures would have been higher without the stimulus packages used by the government, households have increased both their savings and spending on big ticket items that would normally be spaced out over a 1 – 5-year period. With less overseas travel and house prices increasing across the country, homeowners are spending their paper gains on all manner of big-ticket items.
Low interest rates have made access to funds easier for individuals, along with the mortgage deferral scheme pushing out repayments into the future.
If you/your client has closed down a business and needs some advice on what to do with the company (with creditors remaining or possibly a capital gain), we are available.
With the NZ election behind us and certainty of which party will maintain the lead in government, we move into a busy Christmas period. The wage subsidy is beginning to fall off. From September we are starting to see businesses having to stand on their own two feet once again.
From an industry standpoint of the economy what are we expecting to see for businesses over this time and into 2021?
As we all know the NZ government has injected massive amounts of cash into the NZ economy in a reasonable short time frame propping up a number of industries and supporting our job market. Because of this, unemployment figures continue to stay subdued with September quarter figures set at 5.3%. A large chunk of the unemployment is coming from a select few sectors that were heavily affected by the border closures and lockdowns (tourism, hospitality, accommodation, retail, entertainment).
One of the benefits of the lockdown has been that it has allowed households to save some funds over this time that has led to a bump in spending from these savings and funds normally used for overseas travel. This spending has been focused around big ticket items for around the house and domestic travel. Unfortunately, this type of spending is something that happens every few years as the big-ticket items typically last a number of years so while there will be an initial bump with the saving, it is not something that can realistically continue year on year.
From the business perspective, the low interest rates currently on offer from the banks have made access to funds easier along with the mortgage deferral scheme for those operators in need. The lower interest rates have also led to a bumper housing market across a number of regions that has a positive affect on the economy as homeowners feel equity rich. It is expected that the interest rates will remain low for the next few years to come.
Corporate insolvencies remain lower than 2019 & 2018 levels, with a drop in appointments in the lead up to the election which is typical.
Out of interest we ran the total insolvencies from the 2017 election vs the 2020 election, it seems hard to believe that from an economic standpoint there have been less insolvencies in 2020 than there were in 2017. Is the 2020 economy in a better position than the 2017 economy? Probably not, so the obvious answer is that the government assistance provided to date continues to prop up a number of businesses and individuals.
September and October saw a lift in the number of creditors initiating winding up proceedings against debtors. Of the 199 advertised in 2020, 113 have ended up with liquidators or receivers being appointed. You will note that in August, September and October there were no winding up applications advertised by the IRD which is common in the lead up to an election, along with the increased leniency they have shown as the result of Covid-19. We expect to see that backlog get remedied in the coming months.
The September drop off remains at odds with the projections generated by MBIE and discussed in our last article as personal insolvency figures across the board drop off. We expect to get the October figures mid-month.
McDonald Vague have a team of licenced insolvency practitioners with experience across corporate insolvencies and assisting individuals with alternative options to bankruptcy. We can assist with company compromises, liquidations, voluntary administration, and personal proposals.
The October election is fast approaching and campaigning by all parties is underway. As policies and promises continue to be released, economic policies are likely to be front and centre for many voters. Not all parties have released their policies detailing how they plan to guide our economy through the post lockdown period, any tax policy changes they would like to see, and how they plan to pay New Zealand’s lockdown debt.
For some, the wage subsidy extension they received will have come to an end in August 2020. For other businesses who did not see a 40% downturn in their income following the end of the first lockdown period, the second lockdown period meant that they have now qualified for the wage subsidy extension. For these businesses, the wage subsidy extension will run out around the start of the Christmas trading period.
There were 147 new insolvency appointments in August 2020, which brings the total appointments for 2020 to 1102. Insolvency appointments in August 2020 are comparable to August 2019 levels (149) but the year to date figure is still down on both 2019 (1,290) and 2018 (1,492). There was an uptake in appointments in the last week of August 2020, which looks to be a result of non-licensed insolvency practitioners taking a number of appointments before the 1 September 2020 licensing requirements came into effect.
In August 2020, there were 12 winding up applications advertised, none of which were brought by the IRD. In 2020, only April had fewer applications advertised. In both these months, the country was in a Level 3 or 4 lockdown for some of it.
Of the winding up application advertised in 2020 (152), 92 of those applications (roughly 61%) have resulted in liquidators and/or receivers being appointed. Some of the applications advertised will still be before the High Court awaiting resolution. Around 70% of the applications advertised in January and February resulted in liquidators or receivers being appointed.
Personal insolvencies in August 2020 were at 95 (July 2020 was 81), driven largely by bankruptcies and Debt Repayment Orders. The No Asset Procedures figures remained consistent with earlier months.
All types of personal insolvencies in the year to date (642) continue to be down on the levels seen in 2018 (1,014) and 2019 (808).
We have compared corporate and personal insolvency appointments since 2018. The graph shows that, the appointments followed roughly the same pattern and spiked and dropped at roughly the same times, with neither being a lagging or leading indicator of the other.
Earlier this year, MBIE predicted that personal insolvency appointments in the final quarter of 2020 would rise to as high as 3,200, which would be a quadrupling in appointments when compared to the same quarter in 2019. While appointments in the first quarter of 2020 were higher than 2019, this year has seen lower personal insolvency appointment numbers since April 2020 when compared to last year. While MBIE has advised that revised projections will be released in October 2020.
In the last quarter of 2019, there were 464 corporate insolvency appointments. If corporate insolvency appointments continue to follow the same patterns as personal insolvency appointments, on MBIE’s current predictions, the last quarter of 2020 could see a significant number of companies fail in the lead up to Christmas. Only time will tell whether the government measures that have been implemented to save businesses has been enough to keep corporate insolvency numbers from growing exponentially.
One of the obligations on the liquidators of insolvent companies, whether appointed by the shareholders or the Court, is to review the books, records and affairs of the company to identify any potential causes of action that could lead to a benefit for creditors.
This could include identifying potentially voidable transactions, where an individual creditor has received a payment, giving it preference ahead of the body of creditors, or the transfer of assets or property to other parties for no, or insufficient, consideration.
It could also include identifying breaches of duties by the directors which has caused creditors of the company to suffer increased losses.
While many such causes of action are identified and settled by agreement between the liquidators and the parties concerned there are also cases where there is no agreement and the liquidator is left with the options of either initiating legal proceedings or dropping the matter.
In making that decision, the liquidator will consider the strength of the case, the likely costs to be incurred in proceeding and how these could be funded, and the level of return to creditors that could eventuate from such action.
The funding of the proceedings is the major obstacle the liquidators need to overcome and many good cases are not actioned because of the inability to raise the funds.
Broadly speaking, a liquidator has 5 potential avenues of funding available –
If the liquidators have realised sufficient funds from the liquidation of the company’s unencumbered assets, they are entitled to use those funds to cover the costs of their investigation and any legal proceedings.
In those circumstances, the liquidators have to give careful consideration to the likelihood of success in the legal proceedings and, if those proceedings are successful, the likelihood that any amounts ordered are collectable and will result in a distribution to creditors.
It could leave a liquidator open to criticism if they use up funds, that could have been distributed to creditors, on a risky action against a director and ended up with no recovery or only sufficient recovery to cover the costs of the liquidator’s investigations and the legal costs incurred in running the case.
The Liquidators can decide to fund the proceedings from their own resources. This will be done by allowing their time to accumulate as unpaid Work in Progress (WIP) and by paying any legal costs from their own funds and recording those payments as a disbursement to be recovered when, or if, funds are available.
This is a reasonably common practice amongst insolvency practitioners, but the same things will be considered when making the decision. The bottom line is, will the actions lead to a return to creditors?
It is not the liquidator’s job to take proceedings that will lead to a penalty being imposed on the defendant that only pays the liquidators costs. If legal actions are not likely to lead to a benefit for the creditors, but the director’s actions warrant it, the Liquidators can, and should, report the breaches committed by the director to the Registrar of Companies, with a view to having them banned.
Creditors of a company in liquidation can be approached by the liquidators to see if they are prepared to provide funding to allow legal action to be undertaken. Those creditors that do agree to provide funding receive a priority ahead of other unsecured creditors pursuant to clause 1 (1) (e) of the Schedule 7 of the Companies Act 1993.
This allows payment of the unsecured debt of that creditor, and the amount of the costs incurred by that creditor in helping to recover the funds, ahead of some other preferential creditors and the rest of the unsecured creditors.
The use of 3rd party litigation funders is increasing in New Zealand but is generally limited to the larger cases, such as the Mainzeal Property & Construction Limited (in Liquidation) claim against its directors.
There have been questions raised about the ethics of this form of funding but, whilst there is no specific legislation about the use of 3rd party funding, it has been approved in various proceedings. The Law Commission is currently undertaking a review of class actions and litigation funding
The 3rd party funders provide the funding for proceedings, which would otherwise be unaffordable, in exchange for a percentage of any recoveries. If there are no recoveries, the 3rd party funder carries the cost, so there is no downside for the creditors.
Section 316 of the Companies Act 1993 establishes, and regulates the use of, the Liquidation Surplus Account (“the account”).
Funds that represent unclaimed assets from a liquidation must be paid to the Public Trust and will, if they remain unclaimed for a period of 12 months, become part of the account.
Liquidators can apply to the Official Assignee for New Zealand for a payment from these funds to cover the cost of proceedings, advice, or expert witnesses.
To be eligible for the funds, the liquidator must prove that it is fair and reasonable for the costs to be met out of the account. There should be a public interest element in the proceedings and the application must relate to the claims of the creditors in the liquidation.
It is understandable that the creditors of a failed company want to see errant directors held to account and forced to cover the losses they have incurred because of that director’s actions and they expect liquidators to do that.
The options outlined above all include one party or another taking on the often substantial risks and costs involved in taking legal proceedings, so, while the main objective is always to recover funds for the benefit of the creditors, any actions taken have to be carefully considered and reviewed objectively.
Throwing good money after bad, or spending money, that could have provided some return to creditors, without any recovery, is not in the best interests of either the creditors or the liquidators.
We are expecting August and September to be interesting months with the electioneering that will be taking place, we will see promises from all parties on how they will be spending our taxes if they are elected and hopefully some more details on their plans for how they will guide the economy post covid.
The latest unemployment rate figures have been released for the June 2020 quarter showing 4.0%. This is down 0.2% on the first quarter for the year. While the politicians will crow that this is well down on treasurers estimates for the same time frame there was an additional wage subsidy extension introduced which has assisted businesses in keeping people employed with 400,000 employees still utilising the subsidy.
Unsurprisingly, the unemployment rate lines up with the Insolvency figures we have seen in 2020 which continue to be down on 2019 levels. The true litmus test is yet to come as the wage subsidy comes to an end in September.
There were 142 new insolvency appointments in July 2020, which brings the total appointments for 2020 to 953. Insolvency appointments in July 2020 and for the year to date are still down on both 2019 and 2018.
Out of interest we have also begun tracking winding up applications in 2020 as a guide for what may be coming for the economy and the creditors tolerance for debtors. While there will be some creditors using it as a tool to prompt debtors to make payment a reasonable number have been following through with their application.
The IRD has for 2020 advertised the liquidation of 49 companies, of these companies 35 or 71% have subsequently entered liquidation as at the date of writing. The conversion rate on non IRD creditors being set lower with only 45 of the 90 advertised winding up applications ending in liquidation. Presumably an alternative satisfactory outcome was reached, or the liquidation may be included in next months figures and is only delayed.
Personal insolvencies in July 2020 saw a drop in bankruptcies but a lift in both No Asset Procedures and Debt Repayment Orders.
Numbers across the board though continue to be down on the levels set in 2018 and 2019.
After last month it looked like bankruptcy figures were tracking back to 2019 level but that only looks to have been a blip with figures again dropping off in July.
On 1 September 2020, the remaining provisions of the amendments to the Companies Act 1993, and Insolvency Practitioners Regulation Act 2019 (IPRA) will come into force. Some changes that creditors, directors, shareholders, and their advisors need to know about are:
The 10-working day window for shareholders to appoint liquidators from service of winding up proceedings is gone.
Once a company has been served with Winding Up proceedings brought by a creditor, the company’s shareholder(s) or board will be unable to appoint liquidators unless they have the consent of the creditor who is pursuing the winding up proceeding.
For shareholders needing or wishing to appoint liquidators we encourage them to start the process as soon as they are concerned about insolvency, and at the latest following an unsatisfied statutory demand.
If a company disposes of property after the company is served with a winding up application but before it is placed into liquidation by the High Court and that property was disposed of other than:
(a) In the ordinary course of business (eg sales of inventory); or
(b) By an administrator, a deed administrator, or a receiver (who will need to be a LIP); or
(c) Under an order of the Court;
the Company’s liquidators will have the ability to set aside those dispositions as voidable. The procedure is broadly similar to the insolvent transactions regime.
Only Licensed Insolvency Practitioners (LIPs) will be able to accept insolvency appointments from 1 September 2020. Transition arrangements mean that current CAANZ/RITANZ Accredited Insolvency Practitioners (AIPs) can be treated as LIPs for the period up to 1 September and the AIP will be able to continue to accept appointments while their LIP application is decided.
Anyone who is not an AIP by 1 September 2020 and who does not become a LIP in the meantime, will be able to continue to act on their existing insolvency assignments until 31 August 2021. If the insolvency practitioner does not become a LIP by 31 August 2021, any insolvency assignments that have not been completed by this date will need to be taken over by a LIP.
McDonald Vague employs 5 current AIP’s with a further AIP as a consultant. We are well placed.
If an administrator or liquidator considers that a related creditor is voting on a resolution, the related creditor’s vote must be disregarded unless the related creditor has given written notice to the administrator or liquidator that the creditor is a related creditor and that it intends to apply to the Court for an order that its vote be taken into account. The related creditor must make the application to the Court within 10 working days of [after] the creditors meeting in which the vote is held.