It has been widely predicted that the effect of Covid-19 on businesses, and the individuals involved with those businesses as owners and employees, is going to be widespread. Despite the Government support rolled out to date, many are worried about possible redundancies and the predicted failure of many businesses. In this article we look at what can be done to survive the lockdown, what effect the lockdown could have on new insolvency appointments during the lockdown period, and what the flow on effects could be, once the lockdown ends. We will also consider the opportunities available to businesses so that they survive the lockdown. Surviving the Lockdown: The Government and banks have provided avenues of financial support for individuals and…

The rush to closedown our offices and shift to working from home is now over for most of us. We hope that everyone was able to do what they needed to. Business goes on but in a different way to what we are used to. Perhaps there is an opportunity to take stock of the situation?Many of our clients have faced complete shutdowns of their businesses and we are now looking forwards to assisting them with cashflow planning for the next month or so, and then how to restart their businesses once the lockdown is over.There is a base level of government support available at the moment for employees, contractors etc, and likely bank support to work through for solvent…

We are all responding to the various impacts of Covid-19 containment measures over the past days. The Government has ordered wide ranging travel and event restrictions although it is important to note the restrictions apply to people and not goods and services. NZ is in the early stages of the coronavirus outbreak but many small and medium-sized businesses are already feeling its effects on cashflow to which will be added impending cost increases such as the 1 April increase in the minimum wage. From the commentary we have seen it is possible that our summer has insulated us from the worst of the virus to date, however that could change as we move into colder temperatures. It is also likely…

New Zealand's construction sector, has a string of serious issues that bedevil the industry. These problems are not just confined to the major construction companies themselves. They are having a seriously detrimental impact on the fabric of trade suppliers and sub-contractors that bind the industry together. Underpinned by Auckland and Canterbury’s buoyant growth builders should be comfortable. So, why are increasing numbers of construction companies collapsing and going into receivership, declaring insolvency or being faced with the prospect of liquidation? A Grim Roll Call While some firms continue to struggle dealing with leaky building and council compliance regimes, much of this problem can also be sheeted home to New Zealand construction firm’s apparent willingness to take on too much risk…

Benjamin Franklin said, “There are only two certainties in life – death and taxes”. Whilst failure to pay the second shouldn’t lead to the first, it can cause significant problems for individuals, as outlined in a recent Court decision. Nicola Joy Dargie was sentenced to two years six months imprisonment for failing to pay PAYE deducted from employees’ salary to the IRD. Ms Dargie’s explanation for the non-payment of $740,000, which occurred over a period of 10 years, was that she had withheld the tax payments from the IRD to keep her employees in a job. It is a practice that we encounter on a reasonably regular basis in liquidations - directors using the amounts they have deducted from their…

A statutory demand is a claim under Section 289 of the Companies Act 1993. Failing to comply with a statutory demand or applying to set it aside within the specified timeframes will result in your company being deemed to be insolvent and liquidation may follow. A company is insolvent if it is unable to pay its debts when they fall due. Non-compliance with a statutory demand served on your company allows the creditor that served the statutory demand to apply to the High Court to appoint a liquidator. The most common basis for a company in New Zealand to be placed into liquidation by the High Court is from failure to comply with a statutory demand. If you receive a…

A question that will often arise in discussions with the directors and shareholders of companies facing financial difficulties is what their personal liabilities are. The initial response to the question is, if the company is a limited liability company, you are not personally liable for the debts of the company BUT… and it is a reasonably big “BUT” because there are a number of ways in which an individual can become personally liable in relation to an insolvent company. The purpose of this article is to identify some of the ways in which you can become personally liable and the steps you can take to avoid or mitigate that liability. Personal Guarantees: It is common for trade suppliers to require…

In our previous article, Internal Fraud – The Threat from Within (April 2017), we gave a broad outline of the basic steps that can be taken to help reduce the chances of internal fraud and increase the chances of fraud being identified if it is happening. This article sets out in a bit more detail some of the policies and procedures you should consider implementing in your business, if they are not already in place. The size of your business, and the number of employees involved, will have a bearing on what can be done. EMPLOYING STAFF: The employees of a company can be its greatest asset or its greatest liability. Employing the wrong person can have a devastating effect…

As a landlord of commercial property it is important for you to understand your rights and responsibilities to ensure you don’t inadvertently breach legislation and obligations. If you do, you may face significant liability. A Deed of Lease details the relationship and terms/conditions between a commercial landlord and tenant. The Property Law Act 2007 (“PLA”) defines rights and obligations of landlords and tenants. The Unit Titles Act 2010 can also apply if the property is a unit title. A commercial landlord has obligations to comply with the Building Act 2004 and Building Code and to complete a building warrant of fitness for Council. A commercial landlord also has obligations to maintain the building, comply with health and safety standards. A…

With Auckland’s housing shortage and home renovation activity, you would be excused for thinking building companies should be surfing a building boom and reaping the rewards.However, many continue to fall over despite promising industry conditions, leaving customers, contractors, suppliers and even the taxman in the red. Building is a complex task Building involves multiple parties from designers and architects to surveyors and councils, to suppliers and to customers. There are few companies that have the ability to perform the entire build process. There are external specialist suppliers. Whether it’s the architect or the excavator and/or foundation company or the window supplier or the plumbers/sparkies and tilers and painters these trades (and many more) are usually separate from the builder. There…

Effective cashflow management is critical to any businesses survival and growth. Understanding your businesses underlying cashflows will help identify potential changes to your business processes that will improve cashflow, profitability and business value A firm's ability to reliably spin-off positive cashflows from the firm's routine business operations is one of the key factors business owners and potential investors look for. Cashflow Defined Cashflow is typically defined as the net change in your firm’s cash position from one accounting period to the next. If you generate more cash than you consume, you have a positive cashflow. If you have greater cash outflows than inflow, you have a negative cashflow. Thus, your cashflow is a key indicator of a firm’s financial health.…

There are a number of reasons for poor business cashflow. We have highlighted the top seven as follows: One: Accounts receivable process A poor accounts receivable process will result in debtor days (the time between billing and banking) being too high. This will stifle your cashflow. There are many strategies to minimise debtor days including tightening your Terms of Trade, offering prompt payment discounts and streamlining your billing process. Two: Accounts payable process A review of all suppliers’ terms may identify ways to improve cashflow and potentially achieve better Terms of Trade. Implementing budgets, streamlining your payments process to maximise prompt payment discounts and avoid late payment penalties is just the start. Three: Inventory process Carrying stock for too long means full shelves but…