In our article published in April 2017, Internal Fraud – The Threat from Within, we discussed the issue of fraud committed on an organisation by its own officers and staff, the types of offending and some basic steps that can be undertaken to reduce the risk of internal fraud. These steps included the need to have robust and durable systems and procedures in place to lessen the opportunities for fraud to be committed or, if they are committed, increase the chances that they will be discovered before they can cause irreparable damage to the business. A case that our firm was involved in highlights what fraud can cost a director of a company personally if another member of the business,…

As a business owner, have you been kept awake at night trying to work out why your business is struggling to pay its bills on time when you know that you are doing more work and earning more income. The answer could be that someone within your organisation is taking advantage of their position and is defrauding your business. It is a sad fact of life that some people will abuse the trust placed in them by their business associates or employer and use their position to obtain personal profit.  This can have a devastating impact on a business, putting its ability to continue to operate in jeopardy, and also putting its creditors and directors at risk because of the…

Dealing with non-payers can be like ‘pulling teeth’. Cash, however, is the lifeblood of business and most business owners cannot afford to sit back and not take action. We cover our top tips for taking control of your debtors... The good news is that you can take steps (with Court proceedings often a last resort) to improve your cash flow and disincentivise your clients from treating you like a bank. We all know court can be an expensive and time consuming process and can spell the end of a business relationship. A formal demand can also damage your relationship with your customer and, if you suspect insolvency, potentially place you in a difficult position with the liquidator seeking to ‘claw…

Cloud Software Claimed Users Xero 371,000 plus LinkedIn 260 million plus Dropbox 300 million plus Google – Email 500 million plus Increasingly, we are using the Cloud to create, manage and store documents, such as through Xero, LinkedIn, Dropbox and Google. However, the Cloud is unique in that control of the documents passes outside of your physical possession and onto someone else's computer, which is often overseas.   Consequentially, there are several issues that a business owner needs to be aware of.  - How secure is your data and how much control do you have over it once it is in the Cloud? Often, you will have no idea where the data is stored, you have no idea how the…

Did you know that not using the Personal Property Securities Register (PPSR) could expose your business to unnecessary risk?  Despite the fact that the online register celebrated its 10th anniversary in May this year, a surprising number of small business owners are not aware of the reduced financial risk that comes with registering security interests on the PPSR.  Registering your security interest on the PPSR may give you a better chance of recovering a debt if your debtor defaults. (Note:  Suppliers of stock need to register before delivery and suppliers of equipment need to register within 10 working days of delivery).  What a lot of people don't realise is registering on the PPSR is a valid defence against Insolvent Transaction…

Statutory demands - minimising bad debts is critical for any business  Debt collection is difficult for business owners.  Pursuing bad debts early on improves any chance of receiving payment.  A creditor that puts the most pressure on a debtor will most likely receive their money before others; however, they need to be conscious of the voidable transaction regime when they are dealing with an insolvent company.  If you are owed a debt and that debt is not in dispute and you suspect the company you have been trading with may be insolvent, you can issue a statutory demand against the company.  Depending on your terms of trade, a statutory demand will require the debtor to pay you the outstanding debt,…

Our clients sometimes express frustration and disbelief when directors of insolvent companies form new companies, often trading as normal, especially when these new companies then also fail.  A frequent question is along the lines of "surely this can't be legal?". In this short article we seek to clarify the law in this complex area. It is important to understand that there is no general prohibition on directors starting out again, even with an essentially identical business.  Instead the law seeks simply to ensure that suppliers are not misled or confused as to which entity they are dealing with, and are aware of any insolvency, and also any related sale of assets to a new company.  It is then up to…

According to the business.govt.nz website, about one in ten small businesses fail in their first year, and 70 percent capsize within the first five years. These are sobering statistics. Most directors that we meet blame the Global Financial Crisis ("GFC") as the number one reason their business failed. Although the GFC was probably one of the causes of the company's downfall it will not have been the main reason. The main reason a company fails is poor management. It is important for directors to be aware of the bumpy road ahead when starting up their company. Many people are very good at what they do technically, however, they lack the knowledge and know how of running a company.  In our…

Usain Bolt flashed through the 100 metres at the London Olympics in 9.63 seconds - a new Olympic record. Imagine the uproar there would have been if, at the end of the race, the officials had asked, 'What is the current record?' only to be told, 'I don't know. It's not written down anywhere. From memory it's about ....' Accurate records need to be kept for many different reasons, and in relation to companies the requirements are set out in the Companies Act 1993 and also the Tax Administration Act 1994. Accounting records to be kept - Section 194 Companies Act 1993 The board of a company must cause accounting records to be kept that - Correctly record and explain…

Introduction It is now almost ten years since the Personal Property Securities Act 1999 ("PPSA") was enacted. Despite this, in our insolvency work we still regularly come across suppliers who have not performed the necessary registrations, and as a result lose priority to other creditors. This is highly unfortunate, given that a PPSR registration is simple to do and costs only $3.07. A PPSR registration is a little like income protection insurance - not terribly exciting to think about now, but it can make all the difference if the unexpected happens. We encourage all our clients to check that they, and their own clients, are fully conversant with this vital area. In this short article we attempt to explain the…

Many businesses are facing hard times in the current market. Your business might be one of them. Early action is critical in determining whether your business can be rescued or not. Taking steps to ensure your company remains financially sound will minimise the risk of an insolvent trading action. It may also improve your company's performance. There are serious penalties and consequences of insolvent trading including civil penalties and criminal charges. Insolvency can be established by either of the Cashflow or Balance Sheet tests. Note, importantly, that the company only needs to fail one of these tests to be insolvent. The Cashflow test is simply whether the company can pay its debts when they fall due for payment. If you are paying…

The content of this article may be out of date - please refer to our more recent articles for up-to-date information. THE CHARTERED ACCOUNTANT AS A BUSINESS PARTNERChartered Accountants think of themselves as something quite different from bookkeepers. They regard themselves as business partners who can and do add value to the business of their clients. If they are sincere in this, they need a good working knowledge of company law, commercial law and the law of meetings and need to be in a position to advise their clients accordingly. They need to have the judgment to know when the services of a solicitor are required and need to be able to select the requisite solicitor. A FAILING OF THE…