The Insolvency Act 2006 was implemented on 3 September 2006, and created a new alternative to bankruptcy called the No Asset Procedure ("NAP").  This involves a one year term, rather than the usual three year term in bankruptcy.   The NAP is simply a once-off reprieve for the consumer type small-time debtor who has got out of their financial depth.  To qualify, the debtor must have no assets (except excluded assets - see below), total debts between $1,000 and $40,000, no means to repay any amount, and a clean financial record (not previously bankrupt and not previously admitted to the NAP).   Once admitted to the NAP, the debtor enjoys a moratorium on their debts; with some exceptions these cannot…

Our first article of the year reviews the significant issues and developments in insolvency from 2012 and looks at their impact on the industry into 2013 and beyond. Insolvency practitioner licensing has not yet been adopted  Legislation has been drafted however the approach and extent to a licensing regime seems to be difficult to agree and has generated much discussion within what is a relatively small industry. In late 2012 INSOL (the NZICA administered insolvency special interest group) proposed a voluntary registration regime, in an effort to provide all parties with more confidence when choosing and dealing with insolvency practitioners ("IPs"). IPs regularly hold significant funds for creditors, with minimal oversight.  The recent conviction of a liquidator for theft of…

Seventh Schedule DISCLAIMERThis article is intended to provide general information and should not be construed as legal advice.  Parties who require clarification on issues raised in this article should take their own legal advice.

A statutory demand is a claim under Section 289 of the Companies Act 1993. If you or a client receive a statutory demand you are required to pay the specified sum, enter into a compromise or give charge over property to secure payment of the debt to the reasonable satisfaction of the creditor within 15 working days of the date of service, or such longer period as the Court may order. Received a Statutory Demand? We can help If you have been served with a statutory demand you need to speak to us immediately. There is a 15 working day window before your options start to close. The earlier you contact us the more options you have. Contact us now…

The earthquakes in Canterbury created a disaster on a scale not previously seen in New Zealand during our lifetime. Christchurch will be rebuilt and when it gets into full swing it will be the biggest building project in New Zealand history. Treasury has forecast that the cost of the rebuild will be circa NZ$40 billion. Fortunes will be made out of the rebuild, but like any boom, history tells us there will be some spectacular failures along the way. In this article we will explore the issues facing construction companies waiting for the Christchurch rebuild, the chances of another large construction company collapse and some advice on how you as a professional advisor or construction industry contractor can help protect…

Our clients sometimes express frustration and disbelief when directors of insolvent companies form new companies, often trading as normal, especially when these new companies then also fail.  A frequent question is along the lines of "surely this can't be legal?". In this short article we seek to clarify the law in this complex area. It is important to understand that there is no general prohibition on directors starting out again, even with an essentially identical business.  Instead the law seeks simply to ensure that suppliers are not misled or confused as to which entity they are dealing with, and are aware of any insolvency, and also any related sale of assets to a new company.  It is then up to…

Record numbers of New Zealanders continue to leave permanently for Australia, almost 54,000 in 2012 alone. While most of those departing leave in search of higher incomes and warmer weather, some leave to escape their financial responsibilities, whether this is child support, a student loan or a liability under a personal guarantee. Correspondingly, often there are no assets left in New Zealand for the creditor to recover. So, is it really as simple as purchasing a plane ticket to Australia to walk away from debts? This common tactic has become such a concern for the Inland Revenue Department, who administers the student loan scheme, that new sanctions allowing the arrest of overseas based defaulters at the border were announced in…

According to the business.govt.nz website, about one in ten small businesses fail in their first year, and 70 percent capsize within the first five years. These are sobering statistics. Most directors that we meet blame the Global Financial Crisis ("GFC") as the number one reason their business failed. Although the GFC was probably one of the causes of the company's downfall it will not have been the main reason. The main reason a company fails is poor management. It is important for directors to be aware of the bumpy road ahead when starting up their company. Many people are very good at what they do technically, however, they lack the knowledge and know how of running a company.  In our…

McDonald Vague has moved offices. Our new address is: Level 10, 52 Swanson St Central Auckland The new offices are located next to the recently refurbished St Patrick's Square. There are a number of parking options available - either on street - pay and display, at Wilson Parking on Swanson Street or at the Farmers Carpark on Hobson Street. Please note our phone numbers and postal address have remained the same. We look forward to seeing you there! 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.

There have been a number of articles in the media lately that have called into question the integrity and honesty of some insolvency practitioners ("IPs"). In one widely reported example, an IP took $80,900 belonging to a liquidated company and deposited it into his own bank account, which he subsequently used for personal and business expenses. Then there are those IPs who have prior convictions for serious fraud or have been disqualified from professional bodies such as the NZ Institute of Chartered Accountants ("NZICA"). For some time now, many stakeholders have been calling for increased regulation of the insolvency profession to ensure that the interests of creditors are given the highest priority. Misconduct by a small number of IPs only…

This month we conclude our discussion of the rights of unsecured creditors in various insolvency proceedings, by looking at the position in a liquidation. IntroductionA liquidator is normally appointed either by the shareholders or the High Court. The shareholders choose their own liquidator. The High Court appoints a liquidator chosen by the applicant creditor. More unusually, a liquidator can also be appointed by creditors at the 'watershed meeting' in a voluntary administration - seePart 1of this article. A liquidator has a duty to take possession of, protect, realise, and distribute the proceeds of realisation of the company's assets to its creditors. He or she looks after the interests of all creditors. The plight of the unsecured creditorUnsecured creditors do not…