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..

In the life cycle of a company, disputes between shareholders or directors are not uncommon. Tensions may escalate due to differing visions, a breakdown in trust, or major life events—like the death of a key shareholder-director. When parties are no longer aligned and cannot find a viable path forward, liquidation is often seen as a last resort. But it can also be a strategic tool for resolving conflict and unlocking value in a deadlocked business.

When Business Relationships Break Down
Many small-to-medium enterprises (SMEs) in New Zealand are closely held, often by friends, family members, or long-time business partners. These relationships can deteriorate over time due to:

• Disagreements on strategy or financial direction
• Disparities in workload or contribution
• Retirement plans or exit timing
• Breakdown in communication or personal relationships

When the business becomes paralysed by disagreement—and particularly where the shareholders are also directors—the day-to-day running of the company can grind to a halt, harming profitability and increasing the risk of insolvency.

In such cases, liquidation may provide an orderly, impartial process for resolution.

Liquidation as a Structured Exit Mechanism
Solvent liquidation (commonly via a shareholders’ voluntary liquidation) can offer a pathway for resolution by:

• Allowing one party to exit while the other(s) acquire the business assets through an agreed buyout during the liquidation process
• Providing a fair and independent valuation of assets, reducing conflict over price and process
• Ensuring all creditors are paid before distributions to shareholders
• Facilitating a clean break, with all liabilities resolved and obligations finalised

An important strategic consideration is whether to resolve the dispute through a share transfer (where one party sells their shares in the existing company) or through the sale of assets into a new company structure.

Why a New Company Structure May Be Preferable:

• Clear separation from legacy liabilities, especially where trust between parties has broken down
• Allows the remaining party to start fresh, with updated governance, shareholding arrangements, and commercial direction
• The exiting party receives fair value through the liquidation process, rather than prolonged negotiations
• Removes risk of future disputes or issues arising from historical company actions
• This approach can be more straightforward and transparent than negotiating a share transfer—particularly when disputes are acrimonious or financial records are in dispute.

When a Major Shareholder-Director Dies
The death of a founding or major shareholder-director can throw a company into uncertainty, particularly where:

• The deceased held significant decision-making power
• There is no buy-sell agreement or succession plan in place
• The surviving shareholder(s) do not wish to continue with the Estate or family members

In this scenario, liquidation can offer an equitable path forward:

• The Estate receives its share of the net proceeds through the liquidation distribution
• The surviving shareholder may have the opportunity to purchase the business or assets, either personally or through a new company
• The business can be wound up in an orderly way, without the complications of dealing with uninterested or inexperienced heirs
• It also reduces emotional conflict and provides a professional, objective process.

When Should Shareholders Consider Liquidation?
Liquidation should not be seen as a failure, but rather as a tool to resolve impasses in a way that protects all parties. It may be appropriate when:

• There is a deadlock at board or shareholder level, and mediation has failed
• One party wants to exit, but no agreement can be reached on price or terms
• A key person has died and there is no desire or mechanism to continue
• The company is solvent but cannot continue effectively due to disputes

When Enough is Enough
It’s important for directors to act before disagreements put the company’s solvency at risk. Continuing to trade while impaired by conflict—or worse, while insolvent—can expose directors to personal liability.

An early conversation with an insolvency practitioner can help clarify:

• Whether the company is solvent
• The best exit mechanism
• Potential for asset sales, new structures, or business continuity
• Legal duties and risks under the Companies Act 1993, including s135 and s136 obligations

Final Word: Resolution Through Structure
While shareholder disputes and succession events can be emotionally and financially taxing, liquidation offers a structured, transparent, and legally compliant way to resolve matters. Whether the goal is to exit, buy out, wind up, or start fresh—liquidation can unlock the next chapter, especially when a clean break via a new company structure is the best path forward.

If your clients are facing a shareholder deadlock or difficult succession situation, early advice is critical. Contact Us for a confidential discussion on how liquidation can offer clarity and control in uncertain times.

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..

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.

What's the difference between bankruptcy and liquidation? This is one of the most common questions that we field from directors and individuals we don’t fully understand how the different types of insolvency may apply to their current situation and how it will affect them.

Given the current climate we are in with company insolvencies on the rise it pays to understand the difference.

While there are a number of detailed differences in simple terms bankruptcy is personal, and liquidation is for commercial entities (companies, trusts, incorporated societies etc.) The confusion often arises because of the use of the bankruptcy term in relation to companies in the USA which we often see in the media and on TV shows -XYZ company has entered Chapter 11 (or another number) Bankruptcy under the Bankruptcy Code.

Bankruptcy:

For an individual bankruptcy is not the end of the road, it just draws a line in the sand for their financial position at a certain date, their adjudication date. From this date their affairs are handed over to the Official Assignee (a government entity) to sell assets and pay creditors. A bankrupt is able to retain limited personal assets such as a vehicle up to a certain amount and some tools of trade.
During the term of their bankruptcy it are also a number of rules and restrictions in place that the bankrupt individual will have to abide by or apply for permission from the Official Assignee if they wish to work outside these rules (travel restrictions, self employment etc.). The bankruptcy term is around 3 years, provided the bankrupt completes their statement off affairs and does not breach restrictions that are placed upon them. The individual is then discharged at the end of the term to hopefully have a fresh start and continue contributing to the economy.

https://www.insolvency.govt.nz/personal-debt/personal-insolvency-options/bankruptcy

The above link is from the Insolvency and Trustee Service who administer all bankruptcies in NZ and details the basics on bankruptcy, for additional reading and more detailed informaiton.

Liquidation:

While a liquidation on the other hand will bring an end to a company. A liquidator will be appointed to deal with the affairs of the company and wind it up. Liquidators are generally Licensed Insolvency Practitioners who work for commercial entities, though the Official Assignee does take appointments if no one else is appointed by the court or the shareholders are bankrupt.

The liquidator is able to trade the business as a going concern to realise the assets, if a sale occurs it is to a new entity, otherwise the liquidator will close down the business and realise its assets, through auction or otherwise, and distribute the proceeds to creditors. The liquidators will also investigate the affairs of the company and review its books and records. Once the assets are realised and the investigation complete the company is then struck off the Companies Register.

For directors the rules and regulations placed on bankrupts do not apply during a liquidation, this is where people often get confused. While directors have duties to assist the liquidator they are still able to go out and start new companies, incur debt, travel and their personal assets are not on the line to satisfy creditor claims (unless there are personal guarantees, breaches of directors' duties or a debt to the company etc.)

https://www.mvp.co.nz/mcdonald-vague/liquidations

The above link is from our website and goes into further detail on liquidations, you are also able to request the guide to liquidation from it for further reading.

Essentially in NZ bankruptcy is for individuals and liquidation for commercial entities.

Be sure to contact our excellent team if you have further questions, we are here to help 0800 30 30 34.

Companies that have been through a formal liquidation process are difficult to restore to the Companies Register.  This can often make liquidation a more attractive option for company closure than the short form removal.  It provides more certainty that the company has been brought to an end.

Any company restoration requires a formal application and good reason. 

Restoring a company to the Companies Register in New Zealand can be necessary when a company has been struck off for various reasons, such as failure to file annual returns, short form removal under section 318(1)(d) of the Companies Act 1993, or following formal liquidation. The process and requirements for restoration depend on the reason for removal.  

1. Struck Off Due to Failure to File Annual Returns

When It Can Be Restored:
• The company can be restored if it was struck off the register by the Registrar of Companies for failing to file annual returns.

The grounds for restoration are that the company was carrying on business at the time of removal or was party to legal proceedings or was in liquidation or receivership or both.

To apply under S328(1)(a) you need to show and provide sufficient evidence that the grounds under which the company was removed did not exist.

Process for Restoration:
• Apply to the Registrar online: The company must apply directly to the Registrar of Companies. The application should include:
o Payment of outstanding fees and a restoration fee.
o Submission of all overdue annual returns.
o Payment of any penalties.

An application made to the Registrar under section 328 of the Companies Act 1993 (the Act).  This application must be made by a :

• shareholder/director,
• liquidator/receiver, or
• creditor of the company. 

Note | This process can take up to six to eight weeks to complete.

Registrar's Decision:
• The Registrar may restore the company to the register if satisfied that all requirements have been met and there are no other reasons preventing restoration.

2. Short Form Removal Under Section 318(1)(d) of the Companies Act 1993

When It Can Be Restored:
• The company can be restored if it was removed under section 318(1)(d) of the Companies Act 1993, which typically involves short form removal due to inactivity, lack of assets, or a request from the company’s directors.

The grounds for restoration are that the company was carrying on business at the time of removal or was party to legal proceedings or was in liquidation or receivership or both.

Process for Restoration:

• Apply to the Registrar: The company must apply to the Registrar of Companies. The application should include:
o Evidence that the company still has assets or business to conduct or is party to a proceeding.
o Any relevant documents to support the restoration request.

Registrar's Decision:
• The Registrar may agree to restore the company if satisfied that the company has a valid reason for restoration and it is in the public interest.  Where the Registrar of Companies is satisfied that a company should be restored to the register, he gives public notice of that intention.  The intention to restore the company is advertised in the  New Zealand Gazette and on the Public notices.  There then follows an objection period of 20 working days for applications made under s328 of the 1993 Companies Act

3. Formal Liquidation and Striking Off

When It Can Be Restored:
• Restoration is more complex if the company was formally liquidated and struck off the register. This can occur when all assets have been distributed and the company’s affairs have been fully wound up.  This may be required if an asset is discovered after the formal strike off or the company continues to own property that otherwise vests in the Crown if the company is not restored or other legal matters arise.

Process for Restoration:
• Application to the High Court: Restoration after formal liquidation generally requires an application to the High Court  under Section 329. The application must be made by a person with an interest in the company, such as a former director, shareholder, liquidator or creditor.  This is a costly exercise and often a reason it is not advanced.

High Court Consideration:
• The High Court will consider whether it is just and equitable to restore the company. Factors include:

o Whether there are assets or liabilities that were not dealt with during the liquidation.
o If there was any procedural irregularity in the liquidation process.
o The interests of creditors and shareholders.

Court Order:
• If the court is satisfied, it will issue an order to restore the company to the register. The order must then be filed with the Registrar of Companies to effect the restoration.

Once the Registrar is in receipt of a signed and sealed High Court Order to restore the company the Registrar can restore the company immediately without the need to give public notice.

If the Court Order stipulates that outstanding documents and/or fees are required then these will also need to be submitted. 

Cases When the Company Can Be Restored

• Registrar's Agreement: The Registrar will agree to restore a company if the application meets all administrative requirements and there are no legal impediments. This applies mainly to cases of failure to file annual returns and short form removal under section 318(1)(d).

• High Court Application: A High Court application is required in more complex cases, such as after formal liquidation. The court must be convinced that restoration is justified and equitable.

Summary

Restoring a company to the Companies Register in New Zealand varies depending on the reason for its removal. Simple administrative failures, like not filing annual returns, can often be resolved by direct application to the Registrar. However, more complex cases, such as those involving formal liquidation, typically require a High Court application and are expensive and difficult.  The proof for restoration is difficult when a company has followed a formal liquidation process - however more simple if the reason for restoration is to distribute more assets.  

Many companies find themselves facing financial distress and unable to sustain operations. Voluntary liquidation is a viable option for directors and shareholders to wind up the affairs of the company in an orderly manner. It is imperative to understand the process and implications in the legal landscape, governed primarily by the Companies Act 1993 and the Personal Property Securities Act 1999.

Understanding Voluntary Liquidation:
Voluntary liquidation is a process initiated by the directors and shareholders of a company when it is deemed insolvent or unable to meet its financial obligations. This process involves the appointment of a liquidator, whose primary role is to realize the company's assets, distribute proceeds to creditors, and ultimately dissolve the company.

Steps of Voluntary Liquidation:
1. Appointment of Liquidator: The directors convene a meeting of shareholders to pass a special resolution for the appointment of a liquidator. The appointed liquidator must be a licensed insolvency practitioner.
2. Realization of Assets: The liquidator takes control of the company's assets, which are then liquidated to generate funds for the settlement of outstanding debts.
3. Payment of Creditors: Creditors are paid in a specific order of priority as outlined in the Companies Act 1993. Secured creditors with registered security interests under the Personal Property Securities Act 1999, are typically paid first, followed by preferential creditors, such as employees for wages owed. Finally, any remaining funds are distributed among unsecured creditors. Specific Security holders have super priority to their unpaid and traceable stock/equipment and possibly into proceeds thereof.
4. Distribution to Shareholders: If any funds remain after the payment of creditors, they are distributed among shareholders in accordance with their rights and interests.

Liquidator's Remuneration:
Liquidators are entitled to remuneration for their services typically determined based on the time spent on the liquidation process and vary depending on the complexity of the case. Chargeout rates vary depending on the practitioner engaged and how work is allocated amongst team members. The remuneration may be limited to the unencumbered company assets and/or an agreed advance from the shareholders. Not all companies have assets available to fund the liquidation.

Recovery of Overdrawn Current Accounts:
Directors often have current accounts with the company, which may become overdrawn due to loans or advances taken (drawings) and sometimes arising from the failure to declare a salary at the end of the financial year where tax is paid personally. In the event of liquidation, these overdrawn amounts are generally treated as loans to the directors and are recoverable by the liquidator. These are often negotiated and sometimes can lead to bankruptcy proceedings when a director makes no attempt to cooperate or repay funds.

Pursuit of Personal Guarantees and Other Avenues of Recovery:
Often directors have provided personal guarantees for company debts. In this case the guarantee and shortfall may be pursued directly by the supplier/creditor.
Liquidators investigate other forms of recovery for the benefit of creditors such as transactions conducted prior to liquidation, including insolvent transactions and transactions at undervalue. Directors duties are also considered.

Limitation Periods and Sanctions:
Liquidators are subject to limitation periods for initiating actions to recover assets or challenge transactions. These limitation periods vary depending on the nature of the claim and are outlined in relevant legislation. If a liquidator is successful in a claim, sanctions may be imposed on the responsible parties, including directors and third parties involved in transactions that are deemed improper or fraudulent.

Directors obligations:
Directors have an obligation to assist the liquidators and to provide books and records and information on the affairs of the company. Directors have been found liable for breaching their duties by failing to assist the liquidator in the collection of outstanding debts, highlighting the importance of proactive cooperation with the liquidation process.
By adhering to these duties, directors can mitigate risks and contribute to a smooth and orderly wind-up process, ultimately maximizing the outcomes for creditors and stakeholders and reducing personal guarantee exposure (the greater return in the liquidation reduces the shortfall on the guarantee).

In conclusion, voluntary liquidation is a significant step for directors and shareholders of financially distressed companies in New Zealand. Understanding the legal framework, responsibilities, and potential outcomes is crucial for navigating this process effectively and ensuring compliance with regulatory requirements. By seeking professional advice and guidance from licensed insolvency practitioners, directors and shareholders can navigate the complexities of voluntary liquidation with confidence and integrity.

Contact us a This email address is being protected from spambots. You need JavaScript enabled to view it. for advice.

Directors and Liquidators both have rights and duties following a formal liquidation appointment.  We address the rights and duties of directors in this article.

Rights of Directors following a Liquidation:

1. Right to Information: Directors have the right to access information and records about the liquidation process and the company's financial affairs. This includes access to the liquidator's reports, financial statements, and other relevant documents.

2. Right to Participate: Directors may participate in meetings of creditors and have the right to raise questions or concerns about the liquidation process.

3. Legal Advice: Directors have the right to seek legal advice and representation to protect their interests and understand their obligations during the liquidation process.

Duties of Directors to the Liquidator:

Directors have certain duties to cooperate with the liquidator during the company's liquidation. These duties are designed to ensure transparency, accuracy, and efficiency in the winding-up process:

1. Duty to Deliver Company Records: Directors are required to provide the liquidator with access to all company records, books, and documents. This duty aims to ensure that the liquidator has accurate information about the company's financial position and affairs.

2. Duty to Assist Liquidator: Directors are obligated to assist the liquidator in their investigations and inquiries. This duty includes providing information about the company's transactions, assets, liabilities, and financial history.

3. Duty to Attend Examinations: Directors may be required to attend public examinations if ordered by the court. Public examinations are sessions during which directors and officers of the company are questioned under oath about the company's affairs.

4. Duty to Disclose Information: Directors must disclose any property or assets that were transferred or disposed of with the intention of defrauding creditors within a certain period before the liquidation commenced.

5. Duty Not to Impede Liquidation: Directors are prohibited from taking actions that would hinder or obstruct the liquidation process, such as transferring assets out of the company or dissipating company funds.

6. Duty to Provide a Statement of Affairs: Directors may be required to provide a statement of affairs to the liquidator. This statement includes details about the company's assets, liabilities, creditors, and debtors.

It's important for directors to be aware of these duties and to cooperate fully with the liquidator to ensure compliance with the law. Failure to fulfill these duties can have legal consequences. Directors who have concerns or questions about their rights and responsibilities in a liquidation or who require advice on appointing liquidators contact our team. 
 

A liquidator in New Zealand is appointed to wind up the affairs of a company that is insolvent or otherwise unable to pay its debts.  Liquidators can also be appointed to solvent companies for formal closure.  The liquidator's role is to realize the company's assets, distribute them to creditors, and ultimately dissolve the company.

There are key rights and powers typically granted to liquidators in New Zealand:

1. Investigation Powers: Liquidators have the authority to investigate the company's affairs, transactions, and financial records to determine the company's financial position, assets, liabilities, and any potential wrongdoing.

2. Recovery and Collection: Liquidators can recover and collect assets that are part of the company's estate, including pursuing legal actions to recover funds owed to the company.

3. Disposition of Assets: Liquidators can sell or otherwise dispose of the company's assets in order to generate funds to pay creditors. This may involve selling assets through auctions, tenders, or private sales. This can include sale of a part of the business as a going concern.

4. Avoidance Transactions: Liquidators have the power to set aside certain transactions that occurred before the liquidation if they are deemed to be "voidable transactions," such as preferences or transactions at undervalue.

5. Summon Witnesses: Liquidators can summon witnesses and require them to give evidence and produce documents relevant to the liquidation process.

6. Public Examination: Liquidators can apply to the court to have certain individuals, including directors and officers of the company, publicly examined regarding the company's affairs.

7. Distribution of Funds: Liquidators have the responsibility to distribute the realized funds to creditors in accordance with the statutory priorities.

8. Reporting: Liquidators are required to provide regular reports to the creditors and to the Official Assignee, including financial statements, investigations, and progress reports.

The rights and powers of a liquidator can vary based on the specific circumstances of the company and the applicable laws and regulations. For a solvent company much of the powers are not called upon.  For an insolvent company, the circumstances will dictate what powers are used. For the most accurate and up-to-date information on the rights and powers of a liquidator in New Zealand, contact one of our team.

In corporate insolvency, two common terms often arise: liquidation and receivership. For businesses facing financial distress in New Zealand, it is helpful to understand the distinctions between these two processes. To gain an understanding we explore the disparities between liquidation and receivership, shedding light on their respective implications and outcomes.

Liquidation: The Dissolution of a Company

Liquidation, also commonly referred to as winding up, is a formal process that leads to the dissolution of a company. It is typically employed when a company is no longer able to pay its debts and is deemed insolvent. It is also used by solvent companies that have made capital gains and seek to distribute the capital gain tax free on liquidation. The objective of liquidation is to realize the company's assets, pay off its debts to the greatest extent possible, and ultimately distribute any remaining funds to the shareholders. In a solvent liquidation this is paying creditors fully and distributing capital gains tax free on liquidation.

Key Aspects of Liquidation:

1. Appointment of a Liquidator: When a company enters liquidation, a liquidator is appointed. The liquidator's primary role is to gather and sell the company's assets, settle its outstanding debts, and distribute any remaining funds to creditors and shareholders in accordance with the priority set by law.
2. Voluntary Liquidation: occurs when shareholders resolve to wind up the company, typically due to financial difficulties. This requires a 75% majority in number/value of shareholders. Court appointed liquidation, on the other hand, is initiated by external parties, such as creditors, through a court order.
3. Court Liquidation, on the other hand is initiated by external parties, such as creditors, through a court order.
4. Ceasing Operations: Upon commencement of the liquidation process, the company ceases to operate. The liquidator takes control of its affairs, sells off assets, and wraps up any outstanding business. Sometimes the company is traded to be sold as a going concern.

Implications of Liquidation:

• Loss of Control: In liquidation, the company's management loses control, and the liquidator assumes responsibility for its affairs.
• Dissolution: Liquidation ultimately leads to the dissolution of the company, ceasing its existence as a legal entity.
• Job Losses: Liquidation often results in the termination of employment for company employees, unless the business or certain assets are sold and continue operating under new ownership.
• Creditors in an insolvent liquidation are not paid fully and are faced with bad debts. Some then pursue personal guarantees.

Receivership: Protecting the Interests of Creditors

Receivership is a process designed to safeguard the interests of secured creditors who hold specific charges or security over a company's assets. It is initiated when a company defaults on its obligations to the secured creditor, and the creditor exercises its right to appoint a receiver to recover the debt owed.

Key Aspects of Receivership:

1. Appointment of a Receiver: When a company is placed into receivership, a receiver is appointed by the secured creditor. The receiver's primary role is to take control of the company's assets, manage them, and use the proceeds to repay the debt owed to the secured creditor.
2. Priority of Secured Creditors: In receivership, the secured creditor who appointed the receiver generally has priority over other creditors in terms of repayment. Specific security holders however have a super priority. Preferential creditors such as Inland Revenue and employees are entitled to be paid ahead of general security holders from unencumbered stock / debtor realisations. The receiver's primary duty is to act in the interest of the secured creditor and maximize the recovery of the debt owed to them.
3. Continuation of Operations: In some cases, a receiver may continue operating the business with the objective of maximizing its value and ensuring a higher recovery for the secured creditor. However, if the receiver determines that it is not viable to continue operations, they may opt to sell the company's assets to repay the debt.

Implications of Receivership:

• Limited Scope: Receivership is limited to securing and realizing the assets held as security for the specific creditor's debt. It does not encompass the broader dissolution of the company. Often a company that faces receivership later faces liquidation.
• Focus on Secured Creditor's Interests: The receiver works exclusively in the best interest of the secured creditor who appointed them, aiming to maximize the recovery of the debt owed to that creditor (and also accounting to specific security holders and preferential creditors). Other creditors may have limited or no access to the assets being managed by the receiver.
• Potential for Business Continuity: Unlike liquidation, where the company ceases to operate, receivership may allow for the continuation of business operations, depending on the receiver's assessment of viability and potential for maximizing the recovery of the debt.
• Less Impact on Employees: In receivership, the focus is primarily on the assets and debt owed to the secured creditor. While there may be some impact on employees, such as restructuring or downsizing to improve the company's financial position, the goal is to preserve the value of the assets and maintain ongoing operations.

Understanding the Differences

• While both liquidation and receivership are insolvency processes, they differ in their scope, objectives, and implications:
• Purpose: Liquidation aims to wind up and dissolve the company, settling debts and distributing remaining funds to creditors and shareholders. Receivership, on the other hand, focuses on recovering the debt owed to a secured creditor by managing and maximizing the value of specific assets.
• Appointment: In liquidation, a liquidator is appointed either voluntarily by the shareholders or through a court order and sometimes if the constitution states, by the board of directors. In receivership, a receiver is appointed by a secured creditor exercising their right to recover their debt under their security documentation.
• Control and Continuity: Liquidation results in the loss of control for the company's management, with the liquidator taking charge of the assets. In receivership, the receiver manages the assets, but there may be a possibility of continuing business operations to maximize the recovery for the secured creditor.
• Impact on Employees: Liquidation most often leads to job losses as the company ceases operations. In receivership, the focus is on the assets and debt owed to the secured creditor, although there may be some impact on employees if restructuring is necessary.

Conclusion

• Understanding the differences between liquidation and receivership is crucial for businesses in New Zealand facing financial distress. While liquidation involves winding up the company and distributing funds to creditors and shareholders, receivership is focused on protecting the interests of secured creditors and maximizing the recovery of specific debts.
• By grasping the differences between these two processes, businesses can make informed decisions about the most appropriate course of action for their financial situation. Seeking professional advice from licensed insolvency practitioners is highly recommended.  Contact www.mvp.co.nz  or This email address is being protected from spambots. You need JavaScript enabled to view it.