On 15 September 2014, insolvency and business recovery specialists McDonald Vague advised 288 former employees and unsecured creditors totalling $13.112 million that a total dividend pay-out of 100 cents in the dollar had been made to most of them. Given that this was a large corporate failure with initial unsecured claims in excess of $25 million this is a significant pay-out. Early on in the liquidation it looked like creditors would face a nil dividend.  The steps taken to achieve this result include: Engaging in, and winning, a significant arbitration award relating to DML's mining operations at Waihi. Establishing the unsecured creditors' position by disputing and settling several significant unsecured claims for amounts primarily owed by other companies related to…

There are approximately 500,000 small to medium-sized enterprises (SMEs) in New Zealand, most operating without a formal board.  Often there is no separation between family, management and governance. An increasing amount of our work at McDonald Vague is involved in providing independent reviews focusing on restructuring and governance with the aim of helping companies lay the foundations to grow in to larger, more profitable businesses and avoid the mistakes we see time and time again.  Why an independent review? Typically, the need for an independent review is initiated when a particular issue or concern is identified.  This can provide an opportunity to introduce a sound corporate governance process that can not only solve the issue or concern itself, but set…

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,…

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…

SMEs make up a large part of the insolvency work that we at McDonald Vague handle and the reasons for those insolvencies range from events beyond the control of the company directors to a complete lack of knowledge and understanding as to what is required of them.   In this article we will look at some of the causes, symptoms and actions that can be taken to recover companies facing financial difficulties.   Causes of company failure The causes of company failures, as reported to us by directors, are many and varied and the real reason is not always identified correctly by the directors. There are, however, common themes that come through which include:   1. Having all their eggs…

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…

Seventh Schedule DISCLAIMERThis article is intended to provide general information and should not be construed as legal advice.  Parties who require clarification on issues raised in this article should take their own legal advice.

A statutory demand is a claim under Section 289 of the Companies Act 1993. If you or a client receive a statutory demand you are required to pay the specified sum, enter into a compromise or give charge over property to secure payment of the debt to the reasonable satisfaction of the creditor within 15 working days of the date of service, or such longer period as the Court may order. Received a Statutory Demand? We can help If you have been served with a statutory demand you need to speak to us immediately. There is a 15 working day window before your options start to close. The earlier you contact us the more options you have. Contact us now…

The earthquakes in Canterbury created a disaster on a scale not previously seen in New Zealand during our lifetime. Christchurch will be rebuilt and when it gets into full swing it will be the biggest building project in New Zealand history. Treasury has forecast that the cost of the rebuild will be circa NZ$40 billion. Fortunes will be made out of the rebuild, but like any boom, history tells us there will be some spectacular failures along the way. In this article we will explore the issues facing construction companies waiting for the Christchurch rebuild, the chances of another large construction company collapse and some advice on how you as a professional advisor or construction industry contractor can help protect…