Following another OCR drop (50 points) we are now heading into the Christmas break with no new announcements till February, 3 months does seem a long time to wait for any further changes. Once again this will take some time to flow through to the rest of the economy, but it will have an earlier benefit for those borrowers rolling 6 monthly mortgage periods or on the floating rate. There continue to be a number of interesting insolvent businesses covered by the media, particularly the regional publications from pie makers to solar providers. The expectation continues that there will still be further larger businesses to fail as the recovery continues and the IRD keeps pressure on businesses with arrears to…

The festive season is a time for joy and giving, but for many businesses, it also presents challenges with cash flow as customers struggle to settle their accounts. Managing overdue debts effectively during and after the Christmas period is critical for maintaining financial stability. What are the best practices for handling overdue debts, responding to excuses, and escalating action when necessary under New Zealand law? 1. Proactive Debt Management: The Pre-Holiday Checklist Communication Is Key: Pre-emptive Reminders: Send reminders about due invoices early in December, emphasizing the importance of payment before the holiday break. Flexible Arrangements: Offer payment plans or early settlement discounts to encourage compliance. Assess Your Accounts Receivable: Prioritize high-value debts and long-overdue accounts for immediate follow-up. Conduct…

The end of one year and the start of the next year can be a challenging time for many business owners, especially with extended breaks over the Christmas and New Year period taken by staff. The pressure is compounded by the need to settle various financial obligations, from employee holiday pay to tax payments. Many businesses face the strain from having to pay employees holiday pay entitlements, a period where income is not being generated due to closure and then to face IRD obligations such as November GST due 15 January, Paye due on 20 January, Oct to Dec FBT due on 20 January, provisional tax due on 15 January and for the larger employers more PAYE due on 5th…

Winding Up Applications Another big month with the 3rd month in a row posting new highs in winding up applications. This high was in large part driven by the IRD pushing through application before the Christmas closedown making up 87 of the 125 applications. All other creditor applications has remained constant when compared to the last three months in the high 30’s. We expect this drive from IRD to continue into November in a race to collect funds and apply pressure to derelict debtors before the courts close. It is important to keep in mind however that while this is a high when compared to the last five years it is off a very low base. The year-to-date applications (972)…

Running a business is a rewarding venture, but it also comes with its fair share of challenges. One of the most critical challenges a business can face is the threat of insolvency. Insolvency refers to a situation where a company is unable to meet its financial obligations and pay off its debts when they become due. If left unaddressed, insolvency can lead to the collapse of the business, affecting not only the company's owners and employees but also suppliers, creditors, and other stakeholders. We discuss some key warning signs that indicate when a business is in serious danger of insolvency and what actions can be taken to address the situation. Key Warning Signs indicating a serious danger of Insolvency 1.…

We are due for the October OCR announcement to come out this week with pundits predicting that we may see a 50pt drop given the current state of the economy. However, we won’t have the CPI and inflation figures available for public release for another few weeks/months so at this stage the OCR decision could conceivable go either way (hold or drop) In insolvency news, I understand we saw the first Licenced Insolvency Practitioner lose their license following a CAANZ disciplinary tribunal hearing for a number of breaches including misconduct, conduct unbecoming, Rules and Code breaches in insolvency engagements and non-response to NZICA. The full decision can be found here. Winding Up Applications September came in just behind the August…

For our 45th Insolvency by the Numbers, we once again visit our 2024 data set and review how August has tracked compared to earlier months and years. It has been a long time coming and surprised a number of pundits given the earlier language used by the Reserve Bank in its prior announcements, but they have dropped the OCR 0.25 basis points at their August 2024 announcement. As mentioned in out last issue this was expected for November 2024 but was brought forward perhaps yielding to the pressure, they were under from commentators and the media. No doubt they will be holding their breath in the hope that inflation continues to track down to their 1% – 3 % target.…

When you pay a deposit for a service or product and the company fails to communicate, it's a frustrating and concerning situation. This article explores how/when to use a statutory demand to recover your funds if you suspect the company may be insolvent. We also discuss steps for smaller disputed debts within the Disputes tribunal, recovery of larger deposits, and specific considerations for building agreements in New Zealand. Additionally, we will cover the possible costs and time involved in pursuing legal action, and why such cases are often not pursued due to economic reasons. Scenario: Unresponsive Company Holding Your Deposit Imagine you paid a significant deposit to a company for a building project. The company has since ceased all communication,…

When a business encounters cash flow difficulties and an excessive debt burden, it is important to navigate these challenges carefully. Trading while insolvent not only jeopardises the future of your business but also exposes you to legal exposure. Here are several actions to avoid and some proactive solutions to consider. What Not to Do: 1. Preferential Treatment of Suppliers with Personal Guarantees: o Avoid prioritizing payments to unsecured creditors and suppliers who have personal guarantees. This practice can be deemed as giving unfair preference, which can deemed voidable and can be reversed by a liquidator and/or court if the company enters liquidation. It is essential to treat all suppliers fairly and equally to avoid legal repercussions. 2. Increasing Exposure to…

In our 44th Insolvency by the Numbers, we look at the July 2024 data set and we review how the month has tracked compared to prior months and years. Unsurprisingly the Reserve Banks made no change to the OCR at their July 2024 announcement. Banks and independent economists now expect the first drop may come in November 2024. June quarter inflation figures came in at 0.4, bringing the annual inflation rate to 3.3. This was driven largely by tradable inflation coming down, non-tradeable (“domestic”) inflation appears to be a bit stickier however. No doubt the next quarter inflation figures may not show as much of a drop with the recent rates rises pushing through and the adjustment to tax bands…

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…

Most of us go into business because we want to make a decent living doing something we enjoy. We want to be able to provide for our families and enjoy the fruits from our efforts. One of the biggest mistakes business owners – particularly new business owners – make is confusing profit with revenue. Don’t assume just because the money is in your bank account, it’s available for you to use. As a business, you need to put your liabilities – debts, paying suppliers, payroll, tax obligations, etc – first. Remember that the money you take out of the business can’t be used for growth, and growing the business is what will allow you to continue to increase your personal…