The regulation of insolvency practitioners has been welcomed by most, if not all, reputable insolvency practitioners and most of the matters covered in the Insolvency Practitioners Regulation Act 2019 relate directly to the practitioners. The Insolvency Practitioners Regulation (Amendments) Act 2019 made amendments to various related legislation, including the Companies Act 1993 (“the Act”). In this article we look at one particular amendment to the Act, which came into force on 1 September 2020 and has a direct impact on the ability of company shareholders to appoint a liquidator in specific circumstances. Old Position: Generally speaking, there are two sets of circumstances in which the shareholders appoint liquidators of an insolvent company – • The company is insolvent, and the…

There are many very small companies in New Zealand, where the sole director and shareholder is also the sole employee, or a couple are the directors and shareholders and one is the sole employee. These companies don’t have some of the issues faced by bigger companies in the normal course of business, such as dealing with employees and paying wages, but do have to deal with suppliers and clients and maintain workflow and profitability. In this article, we look at a couple of the issues facing very small companies and how the Covid-19 lockdown period could provide a chance for review. Objective Assessment: One of the problems for the directors of these very small companies is that they can get…

The Government is introducing legislation to change the Companies Act to help businesses facing insolvency due to COVID-19 to remain viable, with the aim of keeping New Zealanders in jobs. The temporary changes are outlined here A safe harbour is granted to directors of solvent companies, who in good faith consider they will more than likely be able to pay its debts that fall due within 18 months. This would rely on trading conditions improving and/or an agreed compromise with creditors. It essentially provides certainty to third parties of an exemption from the Insolvent transaction regime. The changes allow directors to retain control and encourage directors to talk to their creditors and will if needed enable businesses which satisfy some…

It has been widely predicted that the effect of Covid-19 on businesses, and the individuals involved with those businesses as owners and employees, is going to be widespread. Despite the Government support rolled out to date, many are worried about possible redundancies and the predicted failure of many businesses. In this article we look at what can be done to survive the lockdown, what effect the lockdown could have on new insolvency appointments during the lockdown period, and what the flow on effects could be, once the lockdown ends. We will also consider the opportunities available to businesses so that they survive the lockdown. Surviving the Lockdown: The Government and banks have provided avenues of financial support for individuals and…

NOTICE TO CREDITORS – UNCLAIMED MONIES - FOURTH AND FIFTH DISTRIBUTION DML Resources Limited (In Liquidation) was placed into liquidation by order of the High Court at Auckland on 7 May 1998, pursuant to Section 241(2)(c)] of the Companies Act 1993. The liquidation is in the final stages of being completed. The funds received over the period of liquidation funded distributions to unsecured creditors. Most unsecured creditors received 100 cents in the dollar. Of the five distributions, the liquidators have unclaimed monies from the fourth distribution in June 2013 and the fifth distribution in September 2014. The Liquidators invite those creditors/employees who believe that they have a claim to these distributions to make contact with us, on 0800 30 30…

The rush to closedown our offices and shift to working from home is now over for most of us. We hope that everyone was able to do what they needed to. Business goes on but in a different way to what we are used to. Perhaps there is an opportunity to take stock of the situation?Many of our clients have faced complete shutdowns of their businesses and we are now looking forwards to assisting them with cashflow planning for the next month or so, and then how to restart their businesses once the lockdown is over.There is a base level of government support available at the moment for employees, contractors etc, and likely bank support to work through for solvent…

We are all responding to the various impacts of Covid-19 containment measures over the past days. The Government has ordered wide ranging travel and event restrictions although it is important to note the restrictions apply to people and not goods and services. NZ is in the early stages of the coronavirus outbreak but many small and medium-sized businesses are already feeling its effects on cashflow to which will be added impending cost increases such as the 1 April increase in the minimum wage. From the commentary we have seen it is possible that our summer has insulated us from the worst of the virus to date, however that could change as we move into colder temperatures. It is also likely…

Many businesses are facing hard times in the current market with cashflow stretched and delayed creditor payments. Your business might be one of them. Early action is critical in determining whether your business can be rescued or not. Taking steps to ensure your company remains financially sound will minimise the risk of an insolvent trading action and facing personal liability. It may also improve your company's performance. There are serious penalties and consequences of insolvent trading including civil penalties and criminal charges. Insolvency can be established by either of the Cashflow test or Balance Sheet tests. Note, importantly, that only one of these tests needs to be met to establish insolvency. The Cashflow Test is simply whether your company can…

Whether or not a business decides to transact all or part of its business by way of barter, rather than by cash payment, is a decision for the directors but, in making that decision, directors need to remember the old business adage – “Cash is King”. There can be advantages in using the barter system to settle transactions between your business and your clients, but you will still need to have sufficient cashflow. There are still wages and taxes, including GST on the barter transactions, which you will have to pay using money and there will be other goods and services that you require that you cannot make payment for using barter credits. If you cannot find enough business expenses…

It is an unfortunate truth that, generally speaking, business owners only approach an Insolvency Practitioner about the financial plight of their company when the problem is terminal, and the only viable option is liquidation. The approach often happens when the pressure on the directors of the company gets unbearable and it starts to effect their health. With a large number of New Zealand companies having directors and shareholders who have personally guaranteed the company’s debts to financial institutions and suppliers, the pressure that comes with running a struggling company is intensified by the fact their personal assets could also be at risk. It isn’t unusual, when first meeting with directors and shareholders in this position, for them to tell us…

The much-delayed City Rail Link (CRL) is having an enormous impact on businesses affected by its mammoth construction works. A cluster of financially devastated Albert St businesses are struggling for their financial future due to a blow-out in the completion of the CRL construction works. City Rail Link Limited was set up in June 2017 and is a joint venture between the Government and Auckland Council. Initial excavation work on Albert St commenced in July 2017. The CRL is New Zealand’s biggest ever transport-related infrastructure project. It is designed to double Auckland’s rail capacity. It comprises a 3.45-kilometre dual-tunnel underground rail link sunk up to 42 metres beneath the centre of Auckland’s CBD. Businesses Under Stress Debt levels are rising…

In many cases, the director of a company will also be a shareholder – but the roles are separate and have different powers and responsibilities. There can also be different levels of control within those roles. In this article we will look at the differences and discuss how those can be managed to lessen the chances of an impasse on any issue. SHAREHOLDERS: The Shareholders of a company have the rights and obligations set out in Part 7 of the Companies Act 1993 (the Act). For the most part, those powers can be exercised by an ordinary resolution passed by a simple majority of those shareholders entitled to vote and voting on the question. There are, however, certain powers which…