If your business is struggling with debt and financial difficulties, you may be considering liquidation as a way to address your problems. However, liquidation is not always the best option for every business. Before making any decisions, it's important to consider all the available options and seek professional advice from experienced insolvency practitioners like McDonald Vague.

Liquidation is a process by which a company's assets are sold to pay off debts to creditors, and the company is then dissolved. While it may seem like a quick solution to financial problems, it can have serious consequences for the company's directors, shareholders, and employees. It's important to understand the potential implications of liquidation before deciding whether it's the best option for your business.

One alternative to liquidation is a voluntary administration, which is a process that allows a company to restructure its debts and operations while continuing to trade. Voluntary administration may be a better option for a business that is experiencing temporary financial difficulties and has the potential to return to profitability with the right management and support.

Another option is a formal or informal compromise, which involves negotiating with creditors to reach a settlement on the company's debts. This can be a less expensive and less disruptive option than liquidation, and can help preserve the company's reputation and relationships with its customers and suppliers.

Ultimately, the best option for your business will depend on a variety of factors, including the nature and amount of your debts, the company's assets and liabilities, and the potential for future profitability. It's important to seek professional advice from an experienced insolvency practitioner who can help you evaluate your options and make an informed decision.

At McDonald Vague, we have the expertise and experience to help you determine the best course of action for your business. We can provide you with a clear and objective assessment of your situation, and help you explore all the available options. We can also assist you with voluntary administration, formal or informal compromises, or other alternatives to liquidation, if appropriate.

Don't wait until it's too late to seek help for your struggling business. Contact us today to discuss your options and get the expert advice you need to make the right decisions for your business.

Economic recap

Inflation has remained constant in the final quarter of 2022 at 7.2 the same as at the end of the third quarter in 2022, it is still down from the 7.3 high point seen during 2022. While economists and the Reserve Bank were hoping for a drop this factor will be weighing on the Reserve Banks mind in its ongoing fight against getting inflation back to its 1%- 3% target band. While other developed countries across the world begin to see inflation coming under control we are not yet there in New Zealand.

Coupled with the elevated inflation we have business confidence at all-time lows as seen in surveys run at the end of 2022 and through January 2023, signalling that businesses do not have high hopes for the coming year, and we are likely to see businesses struggle throughout 2023. We have seen unemployment figures rise 0.2% with the latest quarters data being released, however staffing pressures in certain industries remain. Coupled with the extended fuel levy relief through till June 23 that will likely continue to provide some relief to the cost of living crisis.

The next Official Cash Rate review is on 22 Feb 2023 where we will likely see a rise of up to 75 basis points with a number of commentators now predicting a 50 basis point rise. With up to 50% of mortgage holders coming off lower fixed rates in the next 6 months the affect of these OCR lifts continue to be felt by consumers as interest rates double and in some cases triple.

While January is normally a slow news month the change of PM has given the media something to report on along with its increase in personal and corporate insolvency reporting that has also seen an uplift over the Christmas break, particularly if the business operated in the construction sector. In an election year these failing businesses and cost of living crises will likely play a part in election promises by the various parties and how they will mitigate the fallout to the wider economy.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

December’s figures while not as high as November, were typical for the month with less work days in the month due to the Christmas break, the levels seen however were above both the 2020 and 2021 December figures. January on the other hand has started the month with appointments in line with earlier years with no court appointments for the month and professional advisors on leave appointment figures remain low. How the recent floods across the north island remains to be seen with businesses losing substantial stock to water damage and some areas (Coromandel) blocked off to visitors due to slips tourism will likely be affected.

From a yearly point of view total appointment figures for 2022 exceeded the 2020 and 2021 appointments. While there was a slight increase in voluntary administrations in 2022 and a reduction in receiverships the bulk of the new appointments came through shareholder insolvent appointments. Court appointments for the year remained in line with prior year ratios.

Winding Up Applications

December winding up figures saw the traditional seasonal drop. January however exceeded the prior 2 years winding up applications.

December’s corporate applications have remained similar to prior year’s figures, it is the IRD applications that have picked up and continued to rise in January. While IRD has a backlog of derelict debtors how far their recovery collections will continues into 2023 as an election year is yet to be seen.

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

Corporate appointments continue to follow prior years patterns with a slight lift, this has not been reflected in personal insolvency appointments. The numbers track down in the December month, lower than all prior Decembers with no lift in sight. The graph below shows the downwards slope over time and the continued reduction in bankruptcy figures and the increased portion No Asset Procedures have continued to make up of total personal appointments.

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..

Dealing with insolvency is a stressful process. As a director, you have to worry about risk on multiple fronts: corporate survivability, personal liability and how to satisfy the needs of creditors. But perhaps above all, it is critical to ensure your company does not continue to trade if it becomes insolvent. 

RESPONSIBILITIES OF THE DIRECTOR DURING INSOLVENCY

As director, you must ensure that you and your company uphold the provisions and obligations of the Companies Act 1993. The duty imposed by Section 135 of the Act is owed by the directors to the company.  The legislation states that minimum requirements for a director to do so adequately include:

• Making decisions in good faith and for the best interests of the company.
• Only using your power as director responsibly.
• Never putting the business at substantial risk of serious loss to the company's creditors.
• Ensuring you take care, diligence and skill that a reasonable director would take in the same circumstances.
• Making sure the company is able to pay its debts and has greater assets than liabilities.

When trading as an insolvent company, there are also important risks to keep in mind as the director.

RISKS WHEN TRADING AS AN INSOLVENT COMPANY

Liability for civil penalties

If your company is entering insolvency, you could be held liable for reckless or negligent trading. Reckless or wrongful trading is any trading that is likely to create a substantial risk of serious loss to your company's creditors. As the company's director, you are under a duty to not engage in any form of reckless trading.  The Companies Office may also pursue legal action should this occur. 

Insolvent trading can be as simple as assuring creditors that the company is in good shape, while knowing that the opposite is true. This could make you liable under the tort of deceit. To avoid reckless trading you should ensure your company is solvent and able to pay debts when they fall due (and that total debts including contingent liabilities are less than total assets).

If you claim that you did not know about the bad financial situation, however, that could be considered careless and you could be held liable for negligence.  A company director can be found personally liable for losses caused to creditors.

If you fail to disclose that your listed company is unable to pay debts to its investors, you may have a criminal charge brought against you by FMA.  A director will be criminally liable if they know that conduct in breach of directors' duties is either seriously detrimental to the interests of the company, or will result in serious loss to the company's creditors.

If directors of a listed company fail to disclose that the company is unable to pay debts to its investors, the directors may have criminal charges brought against them by FMA and/or the Serious Fraud Office under the Crimes Act 1961.

The FMA will monitor and take enforcement action where it sees conduct that could harm investors or damage the reputation of New Zealand's financial markets.

Theft by a person in a special relationship (such as a director) or deception under section 240 of the Crimes Act 1961 or acting dishonestly by taking or using a document under section 228 of the Crimes Act 1961 all carry maximum penalties of seven years imprisonment per charge.

Loss of director role

Remember that when your company enters voluntary administration or liquidation, you will lose control of management of the company.  If you have acted proactively and in the interests of the creditors and you have not defrauded the company, you will have a stronger legal defence and creditors with personal guarantees may be more willing to negotiate with you.

You will have statutory obligations, such as providing records and to attend creditor meetings and meetings with the external administrator. 

If you act promptly, you may not need a formal insolvency process and may (with the help of a turnaround professional) be able to restructure the business, compromise with creditors and continue as a director.

How to act as a director of an insolvent company

Because of personal risks, directors should take immediate action and gain professional advice on the options for their struggling businesses. There are many options available, such as ceasing to trade (which is best practice) and a sale of business, a hive down action, a company compromise or a voluntary administrator taking control. In more extreme circumstances, you may have to begin an immediate liquidation or a receivership process.  

If the company can no longer pay its debts and the likelihood of continuing to trade will increase creditor and personal exposure, take action. In addition, it's important to always be honest, act with integrity and have the best interests of the business in mind.

If you are concerned that your company is close to entering insolvency and want to reduce stress and uncertainty, get in touch with our team at McDonald Vague to discuss our business turnaround solutions.   It is important to check you have the appropriate mechanisms in place and are aware of the financial position of the company and the risks it faces.

OPTIONS FOR STRUGGLING NZ BUSINESSES

If your business is at the point of spiralling out of control, speak to your professional advisors who may be able to help your business. The pressures now on business are high and it is difficult. There are options for struggling businesses to consider whether that be to restructure or to bring the business to its end.

There are three rescue procedures in NZ, the compromise (Part 14), the Court approved scheme of arrangement (Part 15) – an option seldom used, and Voluntary Administration (Part 15A).

The Rescue Procedures

Receivership can be a rescue procedure. It can result in the rescue of viable parts/businesses but the primary duty of a Receiver is to get the best return for the secured creditor (usually the bank). Business survival may be an outcome. Banks may agree to a VA proceeding to avoid the negative publicity from appointing a Receiver or to protect the value of the business goodwill achieved from the stay in an Administration.

A company goes into receivership when a receiver is appointed by a secured creditor who holds security over some or all of the company's assets. The receiver's primary role is to collect and sell sufficient of the company's charged assets to repay the debt owed to the secured creditor. Sometimes there is nothing much left and liquidation can also follow.

A company compromise under Part 14 of the Companies Act 1993 is a useful method without (in theory) having to go to Court. There is however no automatic moratorium (like with a VA) so sometimes you go to Court anyway. A compromise requires the identification of classes of creditors and 75% approval by class. There is often no outside independent manager involved. The compromise is the likely least expensive option but it requires approval to essentially be assured in advance. It works well for smaller companies with lesser creditors involved.

A Voluntary Administration is advanced where the company is cash flow insolvent or likely to become insolvent. No Court application is required. The Board of directors can appoint an Administrator. If there is a winding up application (by a creditor) on foot, the Court will likely adjourn the winding up application if the Court is satisfied that it is in the interests of the creditors (Section 239ABV, Companies Act 1993).  A business must be truly viable to be successfully rehabilitated. The appointment of an administrator for any other reason apart from rehabilitation is unlikely to gain the requisite support.

Voluntary administration is designed to resolve the company's future direction. The voluntary administrator takes full control of the company to try to work out a way to save either the company or the company's business.

The aim is to administer the affairs of the company in a way that results in a better return to creditors than they would have received if the company had instead been placed straight into liquidation.

A mechanism for achieving these aims is a Deed of Company Arrangement. VA however suits certain companies and can be a costly exercise.  A company compromise can achieve similar results.

Liquidation versus Administration

Liquidation is not a rescue procedure. It is usually a terminal procedure. Liquidators typically trade only for a short term for the purposes of the liquidation. The purpose of liquidation is to realise and distribute assets, not business survival.  Some companies however advance liquidation for the purpose of restructuring and to purchase back part of the business from the liquidator (at market value). Some companies advance liquidation with a known purchaser lined up to purchase the business in a clean structure. The consideration attributed is often pre approved by the secured creditors in these cases.  A liquidator can only trade on for limited purpose of winding up. An administrator on the other hand has wide powers including the power to borrow. Some contracts will have termination clauses on liquidation but not on Administration. Both options have their advantages.

The best option is best discussed and well considered before advancing. Contact our team for advice on the options available if your business is in need of rescue, restructure or an orderly termination.

 If any of these options may help you bring an end to a messy situation or to survive and thrive, contact one of our Licensed Insolvency Practitioners or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. for some advice.

 DISCLAIMER
This article is intended to provide general information and should not be construed as advice of any kind. Parties who require clarification on issues raised in this article should take their own advice

Economic recap

The OCR continues its march on an upwards trajectory, with the latest Reserve Bank rise of 75 basis points to 4.25 and a supporting narrative outlining future raises in 2023 of up to 125 basis points to bring the OCR to 5.0 and over.

From an economic perspective there continue to be a number of factors affecting businesses. The labour crunch remains with immigration not making up for the continued brain drain as people leave on OE’s or delayed travel plans. Shipping and product delays continue with China’s lockdowns as they struggle to grapple with a continued covid outbreak. On the construction front while councils continue to catch up on the backlog of buildings consents keeping the monthly consent numbers at elevated levels. The vibe from people on the ground however is that 2023 is looking like a slower year moving forward, no doubt a number of the issued consents may lapse incomplete.

ANZ business confidence can be detailed quite simply with their own blurb from their website “Business confidence fell 14 points in November to -57, while expected own activity fell 11 points to -14, only 8 points shy of 2009 lows. Activity indicators fell. Residential construction intentions tanked. Employment intentions were negative for the first time since Oct 2020. Inflation pressures remain intense, though pricing intentions eased.” So generally, the feeling is 2023 is looking rough for businesses.

Of note from our own purely unscientific observations we have seen an increase in the level of enquiries coming into the office over the last few months and an uplift in both solvent and insolvent jobs. What this has been driven by is difficult to say but likely the above factors affecting businesses along with a recent increase in IRD collections action and the cut back in government businesses subsidies seen over the last two years since the commencement of Covid lockdowns.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

The elevated levels of appointments of the 3 prior months continued into October and November 2022.
Of interest November reached over 200 appointments for the first time in three years, Sept 2019 – 206 being the last time.

The breakdown of total appointments saw a constant levels of solvent appointments, court appointments and receiverships, the jump was seen in insolvent shareholder appointments jumping by almost 50% of earlier months from 67 in September, 83 in October to 115 in November.

The media has taken a recent interest in insolvency appointments in particular tiny home builders and Voluntary Administrations appear to be the flavour of the month. Where administrators have been appointed the recent trend of combining the appointment with a receivership to tie up creditors powers continues by a few practitioners.

From a yearly point of view total appointment figures for 2022 after 11 months are above the full 2021 calendar year. At this point it appears likely total appointments will exceed 2020 appointments before the year is out but are unlikely to reach 2019 levels as December is typically a slower month overall with the Christmas break and courts shutting.

Winding Up Applications

The gradual drop often seen over the 2nd half of each year changed in both October and continued on further in November 2022. This was a higher monthly total winding up applications than any other month in the last two years.

While corporate applications have risen, IRD applications continue to do the bulk of the heavy lifting in total applications. IRD will have a back log of derelict debtors from the last two years and are only now beginning to play catchup. How far this continues into 2023 as an election year will be a question yet to be determined.

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

While there has been a jump in corporate appointments this has not been reflected in personal insolvency appointments. The numbers continue to track down to lower levels than 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.

How confident are you of your business's financial health? More importantly, what is the data that you've used to arrive at this conclusion? If the answer to these questions is that you 'think' your business is in trouble because your gut tells you it is, then you're probably right. 

A gut feeling however, may not tell you how much trouble your business is in, which is important. Measuring financial distress is helpful as the potential solutions available for companies in distress can change depending on the severity of the problems, and it is beneficial for all parties that problems are dealt with before the impact on creditors is made worse.

Instead, what you should be using is a tried and tested system that takes your firm's financial data, crunches the numbers and produces an accurate measure of corporate financial health. Better yet, the results should be presented in such a way that directors can easily compare their firms to others that have become insolvent. Fortunately, there's simple way to work out exactly where you stand. Enter, the Z Score. 

About the Z Score

In a nutshell, the Z Score is a quick and simple way of estimating the likelihood of financial distress at some point in a company's future. The system was developed by Edward I. Altman in 1968, while he was an Assistant Professor of Finance at New York University. At the time, Altman was looking for a way to easily distinguish between financially healthy businesses and others with more risk. He used data from 66 publicly held manufacturing brands - 33 of which had filed for insolvency - and came up with an intricate formula that would combine key financial ratios in order to arrive at a 'score.'

There can be a lot of variation between Z Scores, but in general the most important consideration is whether the number is greater or lower than three. If a company's Z Score is 2.99 or below, the chances of financial distress in the next two years are pretty high, while anything below 1.80 indicates that the company is already in significant financial distress.

It's not the most precise system in the world, but that's because Z Scores aren't actually supposed to reveal when or why a company is going to become insolvent. Instead, the Z Score simply shows how similar a company's situation is to other businesses who have filed for insolvency. 

Workout out your company's Z Score can be quick and easy - just use our calculator.

Accurately calculating your company's Z Score

A Z Score can provide you with an instant indication of how stable your company is, but how accurate are the results really? Well, in Altman's initial tests, the Z Score was discovered to be 72 per cent accurate in terms of predicting company bankruptcy (insolvency) two years early. By the year 2000, after some refinement, that number had risen to between 80 and 90 per cent. 

For an example of Z Scores at work, Business Insider points out the work of Morgan Stanley, strategy analyst Graham Secker, who used the system to rank various European companies, finding "that a company with an Altman Z Score of less than 1 tended to underperform the wider market by more than 4 per cent."

If you're at all worried about your business, finding out its Z Score is an absolute necessity, but surely that requires all sorts of complex spreadsheets and powerful computer software, right? Not at all! Calculating a Z Score is quick and easy when you use the McDonald Vague Z Score Calculator. All you'll need are a few key bits of financial information. These are:

• Total assets
• All current and long-term liabilities 
• Retained earnings
• Earnings before interest and taxes (EBIT)
• Market value
• Net worth (total assets minus total liabilities) 
• Sales

Of course, working out a Z Score is just the start of things. If the results aren't good, you'll need the right help to either turn your business around or provide alternatives. McDonald Vague can assist, so get in touch with our team to find out more.  

Economic recap

With the third quarter of 2022 inflation results coming in at 7.2 well above a number of economists and banks predictions of 6.5 we will likely be seeing jumps in the OCR at a steeper rate than expected with the next rate rise projected to be 75 – 100 basis points up from the prior estimation of 50 points. This will keep the pressure on homeowners with mortgages and businesses with lending as consumers role off fixed rates. With inflation well above the target levels of 1%-3% business continue to struggle on with constrained capacity and labour issues.

Leading into the Christmas period we will no doubt see the seasonal jump in retail sales followed by regional growth as holiday makers vacate the city centres for the traditional January break away. How this will affect insolvency figures will no doubt follow the usual course as businesses wind down as they head into Christmas and courts close for the break we will see the usual lower Dec and Jan figures. The question will be in the lead up months of Oct and Nov will the heightened levels seen in the last 3 months carry on, time will tell.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Corporate insolvency appointments in September saw the usual drop for this time of year but appointments for the month remain above the past two years, likely a result of elevated winding up applications from the past two months beginning to flow through with a chance to remain elevated to the end of the year.

What we did see during the month was the continued elevation in Receivership appointments at 9 however total appointments remain below the 2021 levels at this stage.

Winding Up Applications

September saw a continuation in the gradual drop-in total appointments, but the levels remain in the higher end of appointment in the 2022 year when compared with earlier months. From the above graph you can see the drop was directly attributable to the IRD drop in winding up applications. This is likely in part due to the end of year wind down as IRD collection slow in the lead up to Christmas and won’t kick off again till February.

The above figures are however difficult to compare to August/September 2021 due to the lock down that took place at that time.

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

Personal insolvencies have seen a lift on past months numbers largely related to Debt Repayment Orders and No Asset Procedures. While September 2022 is above the 2021 figures these are not an accurate comparison as we were in lockdown at this time last year.

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..

Picture yourself at the beach. It’s a beautiful day, and you decide to go for a swim. You’re so busy enjoying the sunshine and the refreshing water, you don’t realise you’re drifting further and further from the shore.

Little do you know you’re heading right into shark-infested waters.

Being in business can be the same. Sometimes, you are focused on the day-to-day tasks and you miss the bigger picture. It can be difficult to see when you’re heading for trouble. But it’s important to know there are five huge warning signs pointing you to change before it’s too late.

SIGN 1: YOUR BUSINESS CANNOT PAY YOU A WAGE

If your business is not generating a return to you, why are you doing it? Are you risking or spending your personal equity in a business that is out of fashion or no longer sustainable?

When was the last time you asked yourself these questions? If the answer to the first is no, and there is no realistic prospect of a change in your circumstances, then you should get advice. Your personal equity may be at risk.

SIGN 2: THE IRD IS ASKING QUESTIONS

The IRD will only investigate a business if they see activity that is in some way out of the ordinary or you are in arrears. If the IRD is requesting an investigation, then it’s a sure sign you’re not compliant and need to clean up your accounting in terms of your tax obligations. Speak to your accountant immediately about how you might be in breach of your obligations.

If you are in arrears contact the IRD and arrange a repayment plan. If you are suffering from hardship you may qualify for a debt reduction or some form of relief.

SIGN 3: YOU’RE STRUGGLING TO PAY DEBTS

- Are you juggling money from one account to another in order to find the cash available to pay your debts?
- Are you finding it difficult to restock shelves?
- Is your overdraft exceeding its limit regularly?
- Have you lost key customers?
- Are you missing forecasts and budgets?
Answering yes to any of these questions suggests a poor cash flow strategy, and it can sink a business if caught unawares. You could also be in breach of your Director’s Duties if you do not have enough funds to pay your debts as they become due.

Speak to your accountant or an insolvency specialist about your debt situation. A simple solution might be to tweak your terms of trade, use invoice factoring, or to seek a creditor compromise to pay down debt over time. You may be able to give yourself more of a cash flow buffer to create a successful business turnaround.

SIGN 4: YOUR BEST STAFF ARE LEAVING

If they sense the ship is sinking, are your staff going to brave those stormy waters instead of staying on the boat? Oceanic metaphors aside, if you’re seeing a huge exodus of staff, this could be a clue that your company is in trouble.

Luckily, you have an opportunity here to hire some great minds who can help you turn things around. By hiring some clever people with great problem-solving abilities, you may be able to rescue much of what has been lost.

SIGN 5: YOUR ACCOUNTS ARE A SHAMBLES

Do you have a balance sheet that you’re regularly reviewing? When was the last time you reviewed a profit and loss statement? Do you know at any given time what your liabilities are or if your business passes the “Solvency Test”?

This is where a business turnaround specialist – like McDonald Vague – can help. We can spot issues in your business and help you repair them … before they result in insolvency or liquidation. Contact us now This email address is being protected from spambots. You need JavaScript enabled to view it. 

Economic recap

We make our way through another winter month where we finally saw the NZ boarder fully re-open for the first time since 2020, this has helped our net migration, but levels remain lower that pre pandemic. We also saw our first cruise ship landed back in the Auckland CBD since 2020 making news stories across the country.

There remain a number of adverse factors affecting businesses starting with a weakening NZ dollar, staff shortages continuing, the seasonal downturn in industries during the winter months coupled with the sports related downturn resulting from the All Blacks continued losing and patch performances. Coupled with overseas influences of China’s covid policies affecting supply chains along with the ongoing war in Ukraine affecting commodity prices.

The Xero SME index saw a drop back by 6 points from June 22 highs that were still well above the index average. Businesses found that their days to be paid remained consistent at 23.5 days while sales fell 1.5%, the first decline in sales since Sept 2021.

Unsurprisingly the August 2022 OCR announcement saw the Reserve Bank lift the Official Cash Rate a further 50 basis points as indicated in their earlier announcements. The OCR lifts are expected to continue for the remainder of the year and into next year as they use what tools they have available to try and tackle rising inflation.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Company insolvencies saw a jump in July 2022 to levels not seen since pre pandemic, of the 172 total appointments court appointments made up 44 of these, a doubling in court appointments compared to June 2022. We also saw the solvent appointments double from June 2022 figures back to the levels seen earlier in the year.

Of note in the year-to-date receiverships have been very low but did see a jump in July to double digits. The year to date however is well below past years figures. 2021 saw total receiverships of 88 whereas up to June 2022 total receivership were only 18. Add to this the 13 in July 2022 (largely work taken by Australian based practitioners) brings to total to 31 but still well below 2021 and prior year levels.

Winding Up Applications

July saw the IRD put in some heavy lifting around their winding up applications. Having pulled back following the August 2021 lockdowns July 2022 was the first time IRD have reverted back to putting serious pressure on debtors with a tripling in their winding up applications. Other non IRD creditors kept their pressure consistent. It was only a matter of time for this to occur given the doubling in IRD debt levels since the beginning of 2020. They could not “be kind” indefinitely.

We expect to see his increased level of IRD activity into the early months of 2023 where it will likely drop off. The reason behind this is that 2023 will be an election year and the IRD typically pull back on their enforcement action in election years.

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

Personal insolvencies were one of the few insolvency stats that saw a slow decline in July, this is not unsurprising however as it is normally a month or two behind corporate insolvency figures. The breakdown between Bankruptcy, No Asset Procedures and Debt Repayment Orders was consistent with earlier months.

As we see corporate insolvencies rise, we will likely see a rise in personal insolvency rates as personal guarantees get called up and director/shareholders begin to feel the pressure.

 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..

Economic recap

International and domestic market factors continue to affect the economy and have and effect on businesses in New Zealand. Supply shortages, increasing costs of living and inflation continue to put pressure on businesses margins, this coupled with an inability to find staff to fill empty rolls is causing a number of issues for businesses trying to retain staff or grow.

Unsurprisingly the July 2022 OCR announcement saw the Reserve Bank lift the Official Cash Rate a further 50 basis points as indicated in their earlier announcements. The OCR lifts are expected to continue for the remainder of the year and into next year as they use what tools they have available to try and tackle rising inflation.

In that vein inflation figures for the June Quarter saw inflation continue to increase bringing yearly inflation up to 7.3% slightly ahead of the economics and media prediction of 7%

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

June 2022 saw drop-in appointments in line with prior years. It remains the lowest June to date but starting off a lower base of total insolvencies for the year it is not unexpected.

Of note compared to prior months solvent liquidations have begun to tail off baking up only 18$ of total appointments while court appointments remain low at only 26% of total appointments. We will likely not see this rise until the winding up applications begin to peak, court appointments will follow in the coming months following this event.

Notable Mentions:

NZ Medical Association Placed into liquidation in July following an urgent liquidation recommendation from its board.

Insolvency by Industry

“Construction & Property Development” remain the largest chunk of the pie followed by “Accommodation & Food Services” makeing up over 60% of the total insolvency appointments in the month of June 2022.

Winding Up Applications

June 2022 saw a drop in winding up applications as non IRD creditors dropped off. IRD’s numbers have remained consistent, however.

We expect in the coming months IRD will likely be applying pressure to debtors to collect outstanding revenues. The reasoning behind this is IRD has 6 months remaining before we are into 2023 and an election year. Historically IRD have slowed their formal recovery proceedings in election years.

Given the large outstanding debt IRD currently has for PAYE, GST and income tax they will be wanting to get a wiggle on and bring those recoveries in.

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

The breakdown of personal insolvency figures continues to fluctuate with the only consistent one being No Asset Procedures making up 41 of the 102 appointments. Bankruptcies see a drop from 60 last month down to 39 this month with Debt Repayment Orders rounding out the last 22 personal insolvency appointments.

Of the 39 bankruptcies only 10 were the result of court appointments. We expect this will increase over the coming months if we see more corporate insolvencies, this leads to personal guarantees being called up after the business defaults.

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..