We all know it’s frustrating not being paid. What’s worse is that not getting paid affects your cash flow and chasing bad debts takes time that could otherwise be spent doing productive work.

If you decide that your best option for resolving the debt is to liquidate the debtor company, the process generally takes at least three months. There are a number of milestones along the way, which are outlined below.

Provided the debt is not disputed, the first step is to issue a statutory demand. The purpose of the statutory demand is to test the company’s solvency – the presumption being that, if the company is solvent and the debt is not in dispute, the company will pay the amount demanded in the statutory demand.

A company who receives a statutory demand has 10 working days from the date of service to apply to the High Court to set it aside, usually on the basis that the debt is disputed and/or the debtor company is solvent. If no setting aside application is made, the debtor company has 15 working days to pay the amount demanded in the statutory demand.

If the debtor company does not pay the amount demanded within the 15 working day timeframe, there is a legal presumption that the company is insolvent (which can be overcome if the company provides proof of solvency). The creditor can issue liquidation proceedings relying on the presumption of insolvency as the basis for its liquidation application for 30 working days from the date that the statutory demand expires.

When the liquidation proceedings are filed in the High Court, a hearing date is given. While the time between filing the application and the allocated hearing date can differ from Court to Court (if the Court is outside Auckland, Wellington, or Christchurch, the hearing date will need to coincide with the judges’ circuit sittings), the hearing date is usually between two and three months after the date of filing.

Once the processed documents are provided, they must be served on the defendant company. The application for liquidation also needs to be advertised in the paper where the company carries on business and the New Zealand Gazette. The advertising must be run at least five working days after the defendant company is served and at least five working days before the liquidation hearing date.

If the defendant company takes no steps in response to the liquidation application, the defendant company will be placed into liquidation by the High Court on the hearing date and the creditors’ nominated liquidators will be appointed. If the creditor does not produce a consent to act from its nominated liquidators at or before the hearing, the Official Assignee will be appointed as liquidator. If someone appears at the hearing on behalf of the company, the High Court can allow the proceeding to be adjourned (usually to allow time for settlement discussions or for payment of the debt to be made).

Creditors other than the creditor who brought the liquidation proceedings can appear at the liquidation hearing as either a creditor in support or in opposition to the liquidation application. If you are a creditor in support and the creditor who brought the liquidation proceedings decides to discontinue its proceeding (usually because some arrangement as to payment has been made), you can ask to be substituted as plaintiff. A substituted plaintiff can continue with the previous creditor’s liquidation application instead of having to start a new liquidation application and preserves the filing date of the application, which is used for calculating time periods for voidable, undervalue, and related party transactions.

If you are a creditor and want to discuss the liquidation process further, give our Licensed Insolvency Practitioners on 09 303 0506. 

Economic recap

February saw another lift in the Official Cash Rate by 50 basis points, with a further 75 basis points expected to be added this year. The language from the reserve bank indicated that they had not seen the expected signs in inflation pull back and were continuing on their chosen path from 2022 to get inflation under control as quickly as possible.

The extreme weather events experienced in January continued into February with considerable damage to parts of the North Island. While the immediate effects have been considerable in certain areas the long term effects and costs will have wide reaching repercussions as additional spend will be necessary and likely increase demand on limited supplies and pressure on inflation figures.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

February's company insolvency figures are slightly above those of the past two years. The breakdown in the types of appointment is where the real difference can be seen with court liquidation making up 47 of the 134 total appointments. This is above the 2021 and 2022 levels, more in line with 2020’s February court liquidation numbers before Covid and lockdowns became an issue.

Receiverships saw an increase with 8 for the month returning to levels not seen since 2020. What we can take from this along with the court appointments is that while there remain shareholder appointments there has been an increase in creditors (including IRD) taking action against derelict debtors either through winding up applications or secured creditors appointing receivers under their financing documents they hold against company assets.

Winding Up Applications

February has shown growth on the elevated levels displayed in January 2023. The corporate winding up applications portion of total applications have remained above the IRD share of the applications for the second consecutive month. Traditionally IRD may take a few months to warm up following the Christmas break with their winding up applications as staff return to the office. It is normally from March onwards that IRD applications track up to exceed the corporate applications. Of interest the 64 winding up applications seen in February 2023 have exceeded 2/3rds of the monthly totals in 2022 and 5/6th of the 2021 monthly applications.

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

For another month personal insolvency stats continue their downward track to under 50 total in January 2023. While corporate insolvencies continue to move upwards this is not yet reflected in the personal insolvency stats. Over time the corporate stats increasing will likely flow through to personal insolvencies as personal guarantees get called up and collections actions continue. This has not happened yet but may increase as 2023 progresses.

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..

If you're running a struggling business, you may feel overwhelmed and unsure of what steps to take next. It's a tough situation, but it's not uncommon, and there are options available to help you get out of it.

The first step is to assess the situation and identify the root causes of your business's struggles. This may involve reviewing your financial statements, identifying your cash flow issues, and analyzing your operations to pinpoint areas of inefficiency or waste. Once you have a clear understanding of the problems, you can begin to develop a plan to address them.

One option for getting out of a struggling business is to consider restructuring. This may involve renegotiating your debts with creditors, selling assets, or downsizing your operations. A restructuring plan can help you get back on track by reducing costs and improving cash flow.

Another option is to consider a business sale. If you're unable to turn your business around on your own, selling your business to a buyer who has the resources and expertise to take it to the next level may be a good option. This can also help you avoid the stress and financial burden of continuing to operate a business that is struggling.

If restructuring or selling your business are not viable options, you may consider a formal insolvency process. This may involve liquidation or voluntary administration. A liquidation involves winding up the affairs of the business and selling its assets to pay off creditors. A voluntary administration involves appointing an administrator to manage the affairs of the business while a plan is developed to address the financial difficulties.

At McDonald Vague, we understand the challenges that come with running a struggling business. Our team of insolvency practitioners can help you navigate the process and develop a plan to get out of the situation. We can provide guidance on restructuring options, assist with the sale of your business, and provide support throughout the insolvency process.

Don't let a struggling business drag you down. Contact us today to discuss your options and find a way forward. With the right plan in place, you can get out of a struggling business and move on to better opportunities.

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..

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 NZ economy managed to dodge a formal recession (2 consecutive drops in GDP) in the 2nd quarter of 2022 with a lift in GDP following negative GDP in the 1st quarter. While the economy may not be in a formal recession there remain a number of challenges affecting NZ businesses from issues sourcing product to increasing inflation, interest rates and decreasing domestic spending as New Zealanders look to travel for the first time in 2 years. Businesses continue to have trouble to find the necessary staff with low unemployment levels continuing.

Of note is the speedily decreasing value of the NZD when compared with other currencies. This will make importing goods and services more expensive for businesses and squeeze margins.

The Xero SME index saw a drop back by 8 points in August 2022, however the index remains above the long term average. Businesses found that their days to be paid increased by.4 days to 23.9 days.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Company Insolvency figures have remained elevated in August 2022 and slightly exceeded the July figures (from 174 to 177 total appointments). Shareholder appointments made up 119 of the appointments with 20 of the 119 being solvent liquidations.

Court appointments remained high but were slightly down from July 2022 (45 to 42) but still well above earlier months in 2022. Other appointments were made up largely of receiverships however total receiverships for the year remain low at 41 compared to 2021 with 88 total receiverships.

As shown below in the Winding Up Applications graphs the current pressure from IRD increasing collections will likely result in continued increasing court and shareholder appointments in the months leading up to Christmas.

Appointments by Industry

“Construction & Property Development” holds onto the top spot as #1 industry for total appointments in August 2022 with “Accommodation and Food Services” making up the 2nd spot, between the 2 sectors making up close to 50% of total appointments.

“Accommodation and Food Services” is largely made up of food service businesses no doubt struggling through the quieter winter and higher inflation putting a squeeze on people spending.

Winding Up Applications

Winding up applications have continued to remain above the first half of 2022’s monthly levels but we have seen a slight drop from July. IRD made up 56 of the 70 total appointments continuing to lead the way from the uplift seen in July 2022 where IRD made up 70 of the total 94 applications.

Other non IRD creditor applications have tailed off in August down from 24 to 14 applications for the month.

With the uptick in winding up applications in July and August 22 we have seen a slight decrease in the percentage of total winding up application that have gone into liquidation from 60%+ in the first 6 months of the year we are now sitting round 57% of the total applications ending up in liquidation.

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

Bankruptcy stats remain at a consistently low level seen throughout 2022, the make up of personal insolvency options remains consistent with 50% Bankruptcy, 40% No Asset Procedures and 10% Debt Repayment Orders.

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 normal circumstances there is no need for a party to go to Court to seek the liquidation of an apparently solvent company – but it is not “normal circumstances” when the relationship of the shareholders and directors of a company has broken down to the point that they cannot all agree on anything.

This puts the individuals involved under a lot of stress and puts the viability of the company at risk.

Section 246 of the Companies Act 1993 provides for an interim liquidator to be appointed by the Court, if it is satisfied, on an application being made, that it is necessary and expedient for the purposes of maintaining the value of assets owned or managed by the company, to take control of and preserve those at-risk assets.

The rights and powers of an interim liquidator can be limited by the Court in the manner that it thinks fit.

CASE STUDY:

Licensed Insolvency Practitioners (LIPs) from McDonald Vague were recently appointed by the Court as interim liquidators of two related companies involved in the construction industry. The companies each have the same 2 director / shareholders and 2 shareholders with each shareholder having 25% of the company shares.

Two of the shareholders are a husband and wife. The other two were a couple but are no longer together.

One company is a trading company, the other is a holding company, owning a property.

The business of the trading company is profitable and there was a good amount of work coming in, but issues arose, primarily between the two directors.

There were claims and counterclaims made by the two, against each other, of mismanagement of the business, and dishonest or unauthorised actions relating to the handling of individual clients, such as incorrect ordering of stock and transferring of clients from the company to other entities individually owned by the parties.

There were also claims of the unauthorised taking of funds from the company bank accounts, leading to one director blocking the access of the other director to the accounts.

One of the directors made application to the Court for the appointment of interim liquidators. They were supported (or, at least, not opposed) by one of the shareholders. The other director and shareholder opposed the application.

The Court, in its judgment, appointed the interim liquidators for the following reasons –

• The total breakdown in the relationship of trust and confidence between the shareholders leaving the companies unable to operate.

• The remote chance that there could be a commercial settlement between the parties.

• The financial position and ongoing solvency of the companies was uncertain and therefore it was unclear whether creditors were being safeguarded or were at risk because of the continued operation of the trading company.

The Court gave the Interim Liquidators the power to interview directors and shareholders, undertake an accounting of all trading and financial activity to determine solvency and to dispose of property if not profitable to maintain.

It also placed a requirement on the interim liquidators to report back to the Court within 21 days of appointment as to progress.

The Interim liquidation is on-going with the matter not back before the Court until early November 2022. They are continuing with certain existing projects, where that is justified and able to be funded by the clients involved.

They are also working on preparation of a settlement proposal to put before the shareholders, which if agreed to by all parties, would lead to the termination of the interim liquidation.

CONCLUSION:

In circumstances where a dispute between parties involved in a company has reached the stage where there is no common ground between them and the dispute is putting the viability of company at risk, having a licensed insolvency practitioner appointed is an option.

This allows for an independent person to review the position whilst ensuring that the assets of the company are not put at risk.

If you would like more information on the appointment of interim liquidators, or on any other insolvency issues, please contact one of the team at McDonald Vague.

Colin Sanderson

When it comes to due dates and business tax debt, the IRD don’t mess around. Business owners who shirk their tax obligations can quickly find themselves in trouble.  

If you know your tax bill is going to be bigger than you can handle, it’s important to deal with that as soon as possible – ideally long before it’s due. If you can’t pay your tax bill, you should look at the following steps:

CONTACT THE IRD AS SOON AS POSSIBLE

The IRD want to help you meet your tax obligations, so if you contact them as soon as you know there’s a problem, they can help you find a solution. It’s best to contact the IRD before the due date, if at all possible, as it increases your chances of being able to get favourable terms.

You should also file your tax returns on time, even if you’re unable to pay the tax owing. If you’re tax compliant or seeking to be, the IRD will most likely be happy to negotiate a payment arrangement for you to pay your debt off in instalments over time. This can help you with cash flow management while you try to turnaround the business.

If you are suffering from serious ill health then you may qualify for relief under the hardship provisions.

If your business has been adversely affected by Covid-19 then IRD will consider financial relief and instalment arrangements.  IRD can remit penalties and UOMI in these circumstances.   You may be asked to provide a 12 month cash flow forecast (IR591) in support, bank statements, credit card statements and accounting information including debtors and creditors.  To apply for financial relief you will be asked to complete an application.  You will need to provide the current value of the company's assets, liabilities and the position of your shareholder current account.  The current account will record your net drawings from the company.

Call the IRD on 0800 377 771, fill out an instalment arrangement form online, or see their website page on instalment arrangements for more details.

IF YOU'RE EXPERIENCING SERIOUS FINANCIAL HARDSHIP

In some circumstances, the IRD will write off an agreed amount of your debt if they determine – based on their criteria – you are in serious financial hardship. They will take into account your payment history, your current situation, and your ability to meet future obligations. You’ll need to fill in the Disclosure of financial position IR590 form and a 12 month cash flow forecast IR591 form.

Bear in mind the IRD will look carefully into your company expenditure and your shareholder current account and the viability of the business.  If it is determined the company is not viable, it may be recommended that the company is placed into liquidation or the IRD may initiate steps for that to occur.

WILL YOU BE PERSONALLY LIABLE FOR BUSINESS TAX DEBT?

In theory, your company structure is designed to protect your personal assets in the event of company insolvency or other financial difficulties. However, there are legal means to ensure you’re held liable.

Under a HD 15 of the Income Tax Act 2007, the Commissioner is able to go after personally-held assets of company directors and shareholders in order to recover tax debt. However, this only applies when director and stakeholders have entered into an agreement to purposefully deplete a company of its assets (an asset-stripping arrangement). Such an arrangement is also a breach of Director’s Duties. This clause is rarely utilised to recover debts.

Another Act, the Tax Administration Act 1994, makes provisions for non-compliance with tax laws. Under this Act penalties for a company’s non-compliance can be placed upon an officer of the company. A conviction under this Act could see a company director facing both a significant fine and time in prison. This same Act allows the commissioner to pursue a director personally for unpaid PAYE. The IRD has successfully brought many of these cases against company directors – in these cases the directors have been complicit in breaching their tax obligations.

Usually when a licensed insolvency practitioner is appointed to liquidate the company and following the liquidation process and payment of the realisations to creditors, any shortfalls including to IRD are written off.  Directors may face pursuit from company creditors who held personal guarantees and on the occasion by IRD for unpaid PAYE.   

ARE YOU IN TROUBLE WITH THE IRD?

If you’re having problems meeting your company tax obligations, or you are trying to make arrangements with the IRD to pay arrears, it's best to be proactive, before you find yourself in even deeper trouble.

If you think your business is in financial trouble contact us to see how we can help.  If you have received a statutory demand from IRD, do not delay or next your company will be served with a winding up proceeding to place your company into liquidation.  If you want to understand your options you need to make enquiry promptly.

Company strike off or dissolution is the process where a Limited Company is removed from the Companies Office register. Following removal, the company ceases to exist.

There are essentially three options to end a New Zealand company. These are:
• A short-form removal from the companies register (solvent companies)
• long-form removal – a solvent liquidation or insolvent liquidation, or
• doing nothing, failing to file an annual return with the Companies Office (“the short cut method”).

The third option is not recommended. The short and long form methods minimise risk. Failure to file an annual return does not put an end to debt in an insolvent company. It also does not provide any certainty that the company is at an end.

Many directors and shareholders of companies facing financial difficulties are tempted to simply abandon the company and fail to file an annual return and following the expiry of one year, the company is struck off. Failing to file an annual return is actually an offence under the Companies Act 1993. The shortcut approach comes with risks and the prospect of company restoration. The effect of strike off on a company that has not dealt with all assets and liabilities in the proper process can include:

• for a solvent company, share capital and capital gains are not distributed tax free, shareholders could be liable for tax on distribution and this can create overdrawn current account issues.
(To distribute capital gains tax free, they must be distributed after the liquidation process has started. The process is started by completing a resolution to liquidate a company)

• the forfeiture of tax credits held at IRD – which can only be refunded if the company is restored;

• the loss of losses carried forward and imputation credits (unless company restored);

• assets not distributed prior to strike off become crown property unless the company is restored;

• land and property held in the company name cannot be transferred;

• A strike off is not a means to avoid a contingent liability claim;

• A strike off is also not a means to avoid a s 385 prohibition notice;

• reinstatement by the Registrar is straightforward if the company is a party to legal proceedings and those proceedings commenced prior to removal;

• reinstatement by the Registrar is able to be advanced if the company was in liquidation or receivership or both at the time

• The court has a wide general discretion to restore a company to the register if it is satisfied for any other reason, it is just and equitable that the company be restored to the register (s 329(1)(b));

• there is no statutory time limit for restoration to occur;

• there exists the potential review by the Registrar that proper books and records have been kept under Sections 189 and 194 of the Act, records to include documents, minutes of meetings, resolutions of shareholders and directors, copies of written communications to shareholders, copies of financial statements and accounting records. (Failure to keep accounting documents at the Company’s registered office is an offence punishable by a fine of up to $10,000 for both the company and directors).

A company that has been restored to the register is deemed to have continued in existence as if had never been removed from the register: s 330(2). This means any interest/penalties that have been incurred in the period from strike off to reinstatement are due. It also means company records must be brought up to date.

The short form liquidation or formal liquidation process may be a more costly exercise but avoids the headache that can be faced with the consequences of a company restoration. The short-form removal process is best suited to a company that has little trading history and/or has held minimal assets, is subject to low commercial risk, and no contingent liabilities.  A solvent liquidation costs more than a short-form removal but minimises the risk of the company being reinstated through a creditor application.

An insolvent liquidation involves an independent licensed insolvency practitioner managing the winding down of the company and the appropriate dealing of assets and distributions.

For advice on the options and the best way to wind up a solvent or insolvent company contact our team at This email address is being protected from spambots. You need JavaScript enabled to view it.