Have greater flexibility and pay your income tax how and when it suits you Tax Management NZ (TMNZ) provides an IRD-approved service that gives businesses greater flexibility to do tax on their terms by letting them choose how and when they make their income tax payments. Upcoming provisional tax paymentsTMNZ has several payment options to help you manage upcoming income tax payments. This provides greater flexibility, wipes any late payment penalties, and reduces interest costs. The burden provisional tax payments can have on your cashflow can be eased by paying off what you owe in flexible instalments, where you pay what you can, when you can. If paying an upcoming provisional tax payment in instalments does not suit, you can…

The Solvency Test The Companies Act 1993 requires directors to focus on the financial state of the company and to consider whether the company meets the solvency test before permitting distributions and certain other actions by the company. The statutory Solvency Test is set out at section 4 of the Companies Act 1993. The Solvency Test requires that both the liquidity limb and the balance sheet limb of the test are satisfied immediately after a distribution or other action. Distributions are widely defined and include the direct or indirect transfer of money or property and incurring a debt for the benefit of shareholders. In making a distribution, directors who vote in favour of the distribution must sign a solvency certificate…

If you're a typical small business owner, your business lending is likely secured against your family property (or your family trust’s property). If your business is going well and the market is booming, securing your business lending against your property gives you the benefit of a good interest rate and the increasing equity in your property can give you the opportunity to borrow more so you can smooth out any bumps in the road.  The question is: What happens if you hit a bump in the road and the property market is on its way down? Over the last few years, the property market has been on an upward cycle but, like all market cycles, at some point the market…

In the words of Fredrick Nael: “It takes both sides to build a bridge.” An Alternative to Bankruptcy – Part 5 Subpart 2 Proposals Insolvent individuals are often unaware that there are alternatives to bankruptcy and what the impact of those alternative options will be, so they are ill equipped to make informed decisions. This article focuses on Part 5 Subpart 2 Proposals. There are other bankruptcy alternatives such as Debt repayment orders (DRO) formally known as the summary instalment orders (SIO) and no asset procedures (for debts less than $50,000) as well as informal settlements, none of which are discussed here. Resolving personal insolvency issues using a Part 5 proposal requires the insolvent to put his/her best foot forward…

Due to both a lack of sufficient legislative regulation and in order to bring New Zealand Insolvency Practitioners further in line with Australia and other jurisdictions, the Restructuring Insolvency and Turnaround Association of New Zealand (RITANZ) working alongside Chartered Accountants Australia New Zealand (CAANZ) has developed a framework of self-regulation. Under the various acts Insolvency Practitioners are charged with administering, there are only negative licensing regimes in effect. These regimes only exclude individuals from acting as Insolvency Practitioners if they fail to meet a specific set of criteria. These include the Insolvency Practitioner being: over the age of 18; of sound mind; not currently an undischarged bankrupt; and having no continuing business relationship with the insolvent company.   This new framework requires…

An increasing number of building firms "went bust" in 2014 despite the building boom in Christchurch and Auckland, leaving homeowners, contractors, and the taxman out of pocket.  As the construction boom in Auckland gathers pace the situation is going to get worse. Nearly 100 rebuild-related companies have gone into liquidation or receivership in Christchurch alone since the February 2011 earthquake. We see the same trend occurring in Auckland. People often ask us why so many building firms are going under as they should be making a fortune.  The simple answer is that the good ones are, but there are many that have been caught out by over trading (transacting more business than the firm's working capital can normally sustain), thus…

Creditors of companies that fail are often shocked and angered by the ability of directors of the failed company to start up a new business and carry on as though nothing happened. They cannot accept that they are suffering because of the losses they are facing whilst the people they see as being responsible for the losses appear to suffer no ill effects. Who is at fault? It is important to note that the debt owed to the creditor is owed by the company, not the directors personally.  A limited liability company has its own separate legal identity and it is generally only when the directors have given personal guarantees in favour of particular creditors that they become personally liable…

Workplace investigations can detect the source of lost funds, identify employee misconduct and possible culprits, as well as help recover losses.  They are usually undertaken when there is alleged employee misconduct, or a rumor of something amiss comes to the attention of the employer which requires action. Investigations must be undertaken in a fair and reasonable manner without bias. Investigations into employee misconduct can cause significant problems.  They can also be expensive, time-consuming and disruptive to organisational morale.  Investigations which are not conducted in an ethical and transparent manner, with the utmost care and confidentiality, can lead to a number of legal issues and other unexpected complications.  Well-done workplace investigations can provide a solid defence to legal challenges raised by…

Last week's Supreme Court judgement on Jennings Roadfreight Limited (In Liquidation) has overruled an earlier Court of Appeal ruling and provided clarification on a legal grey area. The Supreme Court has decided in a unanimous decision that amounts due to the IRD rank behind liquidators, employees and Kiwisaver entitlements' to funds in a bank account at the commencement of a company liquidation. The history and details of the case are as follows.  JENNINGS ROADFREIGHT LIMITED (IN LIQUIDATION) and BORIS VAN DELDEN and PERI MICAELA FINNIGAN AS LIQUIDATORS OF JENNINGS ROADFREIGHT LIMITED (IN LIQUIDATION) v COMMISSIONER OF INLAND REVENUE Jennings Roadfreight Limited (Jennings) was placed into liquidation on 24 March 2011. Its liquidators are Boris van Delden and Peri Finnigan of…

It is an unfortunate fact that many companies experience financial difficulties at times. Often the directors/shareholders do not realise that there are a number of options available to them. This article provides an overview of the various options for distressed companies. Creditors compromise A compromise is an agreement between a company and its creditors. The purpose is to enable a company to trade out of its financial difficulties and thus avoid administration, receivership or liquidation. In this way the company can survive into the future and provide continuing business to creditors. There are two basic features of most compromises: Creditors will be repaid in full or in part over a period. If creditors are paid in part they write off…

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…