Economic recap April saw the latest inflation figures released for the year to March 2023 showing a drop from the highs seen in the last two periods. The bulk of this drop in inflation however was from international factors while domestic figures remained elevated. Because of this and a number of other reasons the Reserve Bank has continued on their track whacking on a further 50 basis point rise to the OCR. We expect to see a final 25 basis points at the next meeting. Comparatively Australia has seen their OCR drop, it is expected we will not see this for some time in NZ. The percentage of mortgage lending that remains at fixed rates is considerably higher in NZ,…

In New Zealand, the liquidator of an insolvent company may have the power to claw back funds received by creditors or other parties in certain circumstances. This is known as a voidable transaction, and it can occur if: The transaction occurred within the two-year period before the company entered into liquidation, and The transaction involved the transfer of property or payment of money, and The transaction gave the creditor or party an unfair advantage over other creditors of the company. If a transaction is deemed voidable, the liquidator may be able to claw back the funds received by the creditor or party. This is intended to ensure that all creditors are treated equally and that assets are distributed fairly. Some…

The risk of not paying your company taxes to the Inland Revenue Department (IRD) in New Zealand can be significant and may include the following: Penalties and interest: If you do not pay your taxes on time, you may be subject to penalties and interest charges. These charges can quickly add up and significantly increase the amount owed. Legal action: The IRD has the power to take legal action to recover unpaid taxes. This can include issuing a statutory demand, taking court action, or placing a lien on your assets. Business closure: If a business fails to pay its taxes, the IRD may take steps to wind up the business. This can result in the forced sale of assets and…

Running a business successfully is a complex and challenging task that requires careful planning, strategic thinking, and effective management. Sometimes it can feel like you're barely keeping your head above water. One of the key challenges that business owners and managers face is ensuring that the company remains financially stable and solvent over the long term. Unfortunately, many businesses fail to recognize the warning signs of financial trouble until it's too late. One common mistake that many businesses make is overlooking warning signs or failing to address them in a timely and effective manner. For example, a company may continue to invest in an unprofitable product line or market, or delay making necessary cost-cutting measures until it's too late. In…

Economic recap Figures released in March saw the New Zealand economy gross domestic product (GDP) fall 0.6% in the last three months of 2022, after a 1.7% rise in the September 2022 quarter. The drop at the close of the year was larger than predicted by many of New Zealand banks and a number of economists. Annually, GDP is up 2.4% year on year, unemployment remains low, at 3.3%. Two large banks in the United States with significant exposure to the technology sector failed, while another entered liquidation under financial distress. These banks were Silvergate Bank, Silicon Valley Bank, and Signature Bank. Outside the United States, Credit Suisse joined the above 3 banks finding themselves in difficulty, the difference here…

Legitimate business risk is the potential risk that a business faces in pursuing its legitimate objectives. When trading a company that has cash flow problems in New Zealand, there are several legitimate business risks that investors or directors need to consider. These risks include: 1. Credit Risk: If a company is experiencing cash flow problems, it may be at risk of defaulting on its debt obligations, which could harm its credit rating and affect its ability to obtain financing in the future. 2. Operational Risk: Cash flow problems can also affect a company's ability to operate effectively, leading to disruptions in production, delivery, or customer service. This can harm the company's reputation and lead to loss of market share. 3.…

Under New Zealand law, a director can be held liable for trading recklessly or insolvently if they allow the company to continue trading while it is insolvent or likely to become insolvent, and their actions cause a loss to the company's creditors. The determinants for finding a director liable for trading recklessly or insolvently include: Awareness of Insolvency: A director may be held liable if they continue to trade while the company is insolvent or if they become aware or should have been aware of the company's insolvency and failed to take appropriate action to address it. Breach of Directors' Duties: Directors have a duty to act in the best interests of the company, exercise due care and diligence, and…

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…

If you have sold your business or business assets and ceased trading and you are considering liquidating your solvent company, there are a number of benefits to completing the process before the end of the financial year. A solvent liquidation, is a process by which a company is wound up and its assets are distributed to its shareholders because it is no longer needed or wanted. The benefits of doing so include: Tax advantagesBy completing your solvent liquidation before the end of the financial year, you can take advantage of tax benefits that are only available to companies that are wound up before the end of the financial year. In particular, you may be able to claim a tax deduction…

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,…

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…

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…