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 highs, given the closeness between the two the drop is negligible. This total was driven by continued strong application numbers from the IRD making up 77 of the 116 applications slightly down on the 87 the advertised last month. We expect this drive from IRD and all other creditors to continue into the last quarter of the year in a race to collect funds before the courts close.
The year-to-date applications (845) is only just behind the 2023 full year figures (864). 2020, 2021 and 2022 are specks in the rearview mirror compared to 2024 (total year winding up applications 2020 (239), 2021 (562) and 2022 (623).
While there has been a small drop in IRD application in September as at the date of writing (03/10/2024) they have already advertised 12 appointments for October, on that basis I wouldn’t read to much into the drop, it is likely just a case of how they numbers fell either side of month end. We are expecting them to continue chasing debtors hard into the Christmas closedown and new year.
Personal Receiverships
September saw 5 more personal receiverships, a total of 43 for the past 12 months. Lenders who have taken personal general security agreements from borrowers continue to make appointments when borrowers and their companies default.
Why have we seen this increase in personal receiverships that historically was not the case, one of the reasons is likely the difficulty and time it takes to enforce personal guarantees while a personal general security agreement allows the lender almost immediate access on default to the borrowers assets.
The bulk of the receivership appointments continue to be driven by a small number of business lenders using these practises and exercising the enforcement rights the borrower granted them on signing up for the loan.
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations
Both August and September 2024 have now surpassed the previous 7-year high seen earlier this year in March. While August highs were driven by a large government led Du Val Group appointment of 65 entities, September has exceeded expectations with minimal large group appointments.
Of interest for the month as at the time of writing (03/10/24) the Official Assignee had taken 68 of the 297 appointments (to 27/09/2024) there will likely be a few more that get included in the figures as late appointments get advertised in the next few weeks and will be reflected in the October article.
What is noticeable is that 65 of the 68 appointments came from the IRD. The next few points are perhaps something that only those in the industry can appreciate and fully understand, I will try set them out as best I can:
1. Almost none of the 68 appointments would have been groups of companies so there would be minimal duplication of correspondence and the usual shortcuts available with group appointments (similar directors/services etc). This is 68 individual companies that need to be administered and investigated.
2. In a court appointment you start with almost no information other than what the applicant creditors can provide you (the IRD is very strict with what they can provide due to personal privacy reasons). You are effectively starting blind.
3. Because you start with no/minimal information the appointment takes a huge amount of resources upfront to:
a. locate the director/shareholders (phone, email, social media, post)
b. find other creditors
c. identify and realise assets
d. conduct an investigation where the books and records are not easily accessible
e. conduct site visits
f. chase up dead ends
g. establish if the company was trading
h. establish what the company did, why it closed down and what happened to its assets
4. there is a large downstream burden on information providers getting inundated with requests for information where the OA has to do a wide sweep for information as they don’t know where services are held and who the professional advisors are (i.e. Xero, MYOB, Banks, Customs, ACC, NZTA requesting potential access details)
5. there is no upfront fee and in a lot of cases if there are no easily realisable assets the OA may exercise their powers under section 254 of the Companies Act 1993 to take no further action.
There may be other points I have missed; these are just the ones that come immediately to mind while writing.
Total insolvency appointments for the year continue to track up in line with 2015/2016 figures. The year to date is 33%+ up on 2024. Month on month September had 297 total appointments, 136 appointments above the long-term average of 161 and past September’s (2023: 169, 2022: 139, 2021: 118, 2020: 108, 2019: 206, 2018: 183, 2017: 185)). With 2065 appointments in the year to date we are above full year figures back to 2018. We expect the higher insolvency appointment levels will continue into 2025 at least due to a large backlog at IRD and a struggling economy in most sectors.
Solvent liquidations are almost half their long-term average, this loss has been picked up as a percentage equally by insolvent shareholder appointments and insolvent court appointments which in the below graph make up 86% of appointments. The long-term average for the two sectors has traditionally been around 75%.
Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.
As at the date of writing the August personal insolvency figures had not been released by the Insolvency and Trustee Service, no doubt everyone in the OA’s office is too busy keeping up with the huge workload they are now experiencing. As such, I have not updated these graphs and have kept last months paragraph as it remains correct and relevant.
In simple terms personal insolvency appointment figures for Bankruptcy, NAP and DRO remain low for the year to date in line with the very low levels seen over the last two years.
As bankruptcy is lagging indicator for the economy, we won’t see the lift in figures till after the fact, however the economy remains in a bit of a tough spot. From inflation, increasing costs of living (food, power, transport etc.), higher interest rates and other expenses, at some point individuals will run out of options and ways out. The latest drop in the OCR is unlikely to make a huge difference as it will take 12 – 18 months to take effect and will only drop certain costs, the price of goods we need day to day won’t go back down to pre-2020 levels.
While we are expecting to see corporate insolvencies continuing to grow into next year, I don’t believe we will see a lift in personal insolvencies till early 2025. There is traditionally a slow down over Christmas and January, then as people return to work and have to deal with the Christmas overspend, this may be when we see a lift in personal insolvency figures.
Where to from here?
The signs continue to point to the NZ economy being in for continued pain for the foreseeable future, it is likely to get worse before it gets better regardless of the potential OCR decrease. We foresee continued rising appointments when compared to prior years. Inflation continues to be above the target of 1-3% and may be for some time with non-tradable inflation refusing to come under control.
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.