Running a business is a rewarding venture, but it also comes with its fair share of challenges. One of the most critical challenges a business can face is the threat of insolvency. Insolvency refers to a situation where a company is unable to meet its financial obligations and pay off its debts when they become due. If left unaddressed, insolvency can lead to the collapse of the business, affecting not only the company's owners and employees but also suppliers, creditors, and other stakeholders. We discuss some key warning signs that indicate when a business is in serious danger of insolvency and what actions can be taken to address the situation. Key Warning Signs indicating a serious danger of Insolvency 1.…

What's the difference between bankruptcy and liquidation? This is one of the most common questions that we field from directors and individuals we don’t fully understand how the different types of insolvency may apply to their current situation and how it will affect them. Given the current climate we are in with company insolvencies on the rise it pays to understand the difference. While there are a number of detailed differences in simple terms bankruptcy is personal, and liquidation is for commercial entities (companies, trusts, incorporated societies etc.) The confusion often arises because of the use of the bankruptcy term in relation to companies in the USA which we often see in the media and on TV shows -XYZ company…

Many construction companies are facing tough times in the current economic climate. The cost of living and interest rates are creating concern. Managing cashflow and profitability during the uncertainties of long term projects can be an ongoing challenge for many companies. An equally important challenge is knowing when it’s time to get advice on whether your company can survive or not. In April 2024 Centrix reported the highest number of liquidations in nine years with construction companies leading the way. March 2024 liquidations included 56 construction companies. Centrix reported 486 construction company liquidations during the financial year ended 31 March 2024, compared to 415 in March 2023 and 262 in March 2022. Construction companies often fail more than those in…

Many companies find themselves facing financial distress and unable to sustain operations. Voluntary liquidation is a viable option for directors and shareholders to wind up the affairs of the company in an orderly manner. It is imperative to understand the process and implications in the legal landscape, governed primarily by the Companies Act 1993 and the Personal Property Securities Act 1999. Understanding Voluntary Liquidation:Voluntary liquidation is a process initiated by the directors and shareholders of a company when it is deemed insolvent or unable to meet its financial obligations. This process involves the appointment of a liquidator, whose primary role is to realize the company's assets, distribute proceeds to creditors, and ultimately dissolve the company.Steps of Voluntary Liquidation:1. Appointment of…

Directors and Liquidators both have rights and duties following a formal liquidation appointment. We address the rights and duties of directors in this article. Rights of Directors following a Liquidation: 1. Right to Information: Directors have the right to access information and records about the liquidation process and the company's financial affairs. This includes access to the liquidator's reports, financial statements, and other relevant documents. 2. Right to Participate: Directors may participate in meetings of creditors and have the right to raise questions or concerns about the liquidation process. 3. Legal Advice: Directors have the right to seek legal advice and representation to protect their interests and understand their obligations during the liquidation process. Duties of Directors to the Liquidator:…

A liquidator in New Zealand is appointed to wind up the affairs of a company that is insolvent or otherwise unable to pay its debts. Liquidators can also be appointed to solvent companies for formal closure. The liquidator's role is to realize the company's assets, distribute them to creditors, and ultimately dissolve the company. There are key rights and powers typically granted to liquidators in New Zealand: 1. Investigation Powers: Liquidators have the authority to investigate the company's affairs, transactions, and financial records to determine the company's financial position, assets, liabilities, and any potential wrongdoing. 2. Recovery and Collection: Liquidators can recover and collect assets that are part of the company's estate, including pursuing legal actions to recover funds owed…

We all know it’s frustrating not being paid. What’s worse is that not getting paid affects your cash flow and chasing bad debts takes time that could otherwise be spent doing productive work. If you decide that your best option for resolving the debt is to liquidate the debtor company, the process generally takes at least three months. There are a number of milestones along the way, which are outlined below. Provided the debt is not disputed, the first step is to issue a statutory demand. The purpose of the statutory demand is to test the company’s solvency – the presumption being that, if the company is solvent and the debt is not in dispute, the company will pay the…

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 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…

In normal circumstances there is no need for a party to go to Court to seek the liquidation of an apparently solvent company – but it is not “normal circumstances” when the relationship of the shareholders and directors of a company has broken down to the point that they cannot all agree on anything. This puts the individuals involved under a lot of stress and puts the viability of the company at risk. Section 246 of the Companies Act 1993 provides for an interim liquidator to be appointed by the Court, if it is satisfied, on an application being made, that it is necessary and expedient for the purposes of maintaining the value of assets owned or managed by the…

Liquidations advanced through the High Court require Court fee approval in most cases. Shareholder appointments also subject to some form of review and oversight. In some liquidations a committee is appointed. Every insolvency practitioner now needs to be licensed and is subject to a complaints and disciplinary process. A reasonable and competent liquidator should take into account the amount owed to creditors, the prospects of recovery and consider the cost versus benefit of advancing claims and legal actions. It is a liquidator's obligation to maximise the return to creditors and to act in a reasonable and efficient manner. There have been a number of cases now where liquidators have been scrutinised for charging excessive fees. Liquidators facing criticism It was…

Video Link Here There is a belief held by some people that the liquidators of a company are paid by the person (or company) that appoints them and, in some cases, that is what happens – but not always. How the liquidators get paid, and by whom, will depend largely on the situation of the company being liquidated, such as solvent or insolvent, shareholder or High Court appointment, but there are two broad categories – • Payment from the assets of the company; or• Payment from a third party – such as shareholders of the company to be liquidated or the applicant creditor for the High Court proceedings to liquidate the company. The other possibility is that the liquidators will…