In our 39th Insolvency by the Numbers, we look at our data set for February 2024. We review at how the month has tracked compared to prior months and years.
Notable economic events for the month include the Reserve Bank keeping the Official Cash Rate level at 5.5 percent with no change to when we may begin seeing a drop in the rate in 2025. Economists are of the opinion that drops will be sooner than this in the later half of 2024.
The coalition government has come to the end of its first 100 days, having enacted the bulk of their 49 points they set out to implement. While the bulk of these were undoing legislation and changes made by the last labour government we expect that the plan they implement moving forward will likely have some impact on the wider economy rather than undoing the past governments policies.
The housing market however appears to be plateauing as we move away from the summer season and into winter, this is likely the result of continuing higher interest rates above the lower rates experienced over the 2020/2021 calendar years as monetary easing was occurring.
Centrix, a credit reporting agency, has reported in their latest figures that there are currently 450,000+ individuals in arrears with their bills. This is 40,000 up on the prior month and the highest numbers since 2017. With a population over the age of 18 around 4 million people, this puts 1 in 8 people over the age of 18 in arrears with their accounts.
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations
February 2024 insolvency appointments saw a jump on previous February’s coming in at 195 appointments 50% higher than each of the last 3 years on average. It was also 52 appointments above the long term average of 143 monthly appointments.
Compared to the first two months of the last 7 years we can see that the year has started strongly with a reasonable January and strong February putting the two monthly total above the last 3 years and in line with 2020 before covid lockdowns were implemented and appointments dried up. We are expecting this to continue into March as historically March posts 25% - 50% more appointment that seen in February, in large part driven by solvent appointments and stakeholders trying to wind matters up before the end of the financial year so they can have a “fresh start”.
Anecdotally we have seen an increase in enquiries into the new year. Interestingly this has been a combination of traditional formal appointments and informal insolvency advice and work outs.
As a percentage spread compared to the average, we have seen less solvent liquidations than the usual average of 22%, February saw them as low as 8% of the total appointments as seen in the below pie chart. Insolvent shareholder appointment liquidations was right on the 50% average while court appointments came in 11% above the long term average of 25%.
This change in percentage spread is likely the result of an increase in creditor pressure and creditor driven liquidation appointments as seen in the below winding up appointments, coupled with tighter economic conditions reducing the number of companies ending up with the cash to distribute to shareholders through a solvent liquidation. We expect this trend to continue throughout 2024.
Of interest the Official Assignee continues to receive more liquidation appointments when compared to any other insolvency firm/entity, as it has continued to do so most of 2023 when the courts are open. Noticeably in February 2024 the Official Assignee received 46 appointment with 45 of these coming by way of the High Court. Of the 45 appointment 39 were on the application of IRD.
Across NZ Licenced Insolvency Practitioners operate out of 56 insolvency practices. In the 2023 calendar year 42 of those 56 insolvency practices took less than the 46 appointments for the whole year, while the Official Assignee took 46 in only one month.
Winding Up Applications
Exploring the winding up applications data, with a focus on February figures, unveils intriguing insights into the state of insolvency in New Zealand. February 2024 witnessed a significant surge, with a total of 108 winding up applications recorded. Among these, 53 were non IRD creditor winding up applications, while 55 were attributed to the IRD and their continued collections push. Historically IRD has started the year behind non IRD creditors in the total winding up application filed with the High Courts, however with the current level of arrears they are attempting to recover and their tough stance against delinquent debtors this puts the IRD on an 11 month continuous run where they have filed more applications each month than non IRD creditors.
This marks a notable escalation from February 2023, which saw 64 applications in total. While we did have one additional day in February 2024 being a leap year we do not believe that this is the reason for the huge leap in applications greater than anything seen in the last few years. It is more than likely a combination of creditors needing debtor recoveries to assist with cashflow in their own business and losing patience with debtors so escalating matters through winding up proceedings, from the IRD perspective they have a long debtor list that requires collection.
Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.
In January 2024, there were 25 bankruptcy filings, 21 no asset procedures, and 9 debt repayment orders, totalling 55. January has traditionally been one of the lower months for personal insolvency following the Christmas break and people still being on holiday and ignoring their financial issues. January 2024 has continued the low personal insolvency figures shown throughout 2023 and 2022.
As outlined above while there are 450,000+ individuals with accounts in arrears whether this translates to personal insolvency appointment only time will tell. We expect that we will not see a significant rise till into the 2nd half of 2024.
Where to from here?
The signs continue to point to the NZ economy being in for continued pain for the foreseeable future with it likely to get worse before it gets better, we foresee continued rising appointments as the year progresses. The OCR is unlikely to be dropped in the next 6 months potentially 1 year and inflation continues to be above the target of 2% and may be for some years 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..