Insolvency by the Numbers: NZ Insolvency Statistics October 2023

In our 36th Insolvency by the Numbers, we look at our data set for October 2023 and past years to see how the month has tracked and what may be coming up in the coming months.

With October and the election finally at an end, except for specials, we have an indication of what party will be front footing it into the next 3 years. The consensus that came out over the election campaign however was that getting back on the good footing may take some time, with cuts in government spending appearing to be an interesting topic. Whether this happens only time will tell, but hopefully we will see a bit of stability in the housing market and NZ stock market.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Company insolvency appointments for October 2023 combined across all insolvency types continue to outnumber all years back to 2019. As seen in the trend from prior months the higher level continues rather than peaks and troughs seen over prior years. We did see a slight drop off in appointments across the middle of the month anecdotally the result of the mid-month election, but it did pick back up after. The month does remain slightly down on the last 4 months appointments however.

As a continuation from prior months court appointments remain elevated. As a comparison the drop is seen in solvent appointments for the month. The increase in court appointment liquidations has continued strongly on the back of steady winding up applications driven by the IRD and its recovery efforts though they did see a slight drop on prior months due potentially to the election.

October total corporate insolvency figures for the year to date have at last exceeded 2019 figures. There are now more appointments in the 10 month to date in 2023 that in the entire 2020, 2021 & 2022 total yearly figures.

The below graph shows the continued separation in corporate and personal insolvency figures as personal insolvency remains at its very low levels.

Notable Appointments: October saw the formal insolvency of Supie, the business coming to an end with its 120 employees after struggling to break into the cutthroat food retail industry.,

Winding Up Applications

October saw a continuation on from September but continues to be above past Octobers. As mentioned last month while it is below June and August figures it is likely the result of a continued consistent increase in figures evening out compared to the usual spike we see in June/July and November. So, a longer sustained lift rather than a spike and drop off.

In October, there has been a consistent fluctuation in the total number of winding up applications compared to past Octobers. For example, in October 2021, there were 39 applications, with 14 being company winding up applications and 25 being IRD winding up applications. October 2022 saw a higher total with 69 applications, including 7 company winding up applications and 62 IRD winding up applications. In October 2023, there were 82 applications, consisting of 33 company winding up applications and 49 IRD winding up applications.

When considering the year-to-date figures, we observe a continuous increase in the cumulative total of winding up applications. From January to October, the numbers have consistently grown over the years, reflecting a persistent upward trend.

From the below graph we continue to see that IRD’s October 2023 winding up applications now makes up just over 60% of all creditors and continues at the reduced portion of application seen last month. Whether this is the result of the upcoming election and a wind back in action by IRD or the wind down in the lead up to Christmas will become evident in the coming months.

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

Personal insolvency appointments remain low and continue come in lower that the last 5 years September figures. This is not expected to change until the personal guarantees start to get called up by creditors in liquidations (landlords, trade creditors banks etc), and lending taken out on high interest rate loans to meet increasing cost of living catches up with people, often after the Christmas holidays and the first credit card bills come in over February.

Where to from here?

The signs continue to point to the NZ economy being in for continued pain for the foreseeable future with it likely to get worse before it gets better. The OCR is unlikely to be dropped till mid-2025 and inflation just keeps biting.

If you want to have a chat about any points raised or an issue you may have you can call on 0800 30 30 34 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

What are the reasons that can be given for a debtor not complying with a statutory demand? What are the defences? Can they avoid liquidation at a High Court winding up proceeding?

Section 289 of the Companies Act 1993 enables a creditor to issue a statutory demand to a company for a debt that is both due and payable. Issuing such a demand is a significant step that warrants careful consideration. If the indebted company fails to comply with the statutory demand within 15 working days, it is assumed to be insolvent. Consequently, the creditor may apply to the court to initiate the process of liquidating the company, which entails engaging a lawyer to serve a notice for winding up proceedings.

Before issuing a statutory demand or pursuing any legal action, seeking legal advice is strongly recommended. This ensures that you follow proper procedures and that your claim is indeed valid.

Challenges to a Statutory Demand

A debtor can challenge a statutory demand for various reasons, including:

a) Dispute over the debt: If they contest the amount stated in the statutory demand, they can use this as a reason for non-compliance. A genuine dispute over the debt can serve as a valid defence.

b) Incorrect jurisdiction: Arguing that the matter should be heard in the Disputes Tribunal.

c) Defective demand: If the statutory demand fails to meet legal requirements (e.g., incorrect form, missing information), it may be deemed defective.

d) Procedural errors: If there are procedural missteps in the issuance of the statutory demand, this may be used as a defence.  This can include service at the wrong address.

e) Set-off or counterclaim: If they possess a valid counterclaim, this can be a legitimate defence.

f) Other legal defences: Depending on the specific circumstances, there may be additional legal defences available.

Within 10 working days a notice to set aside can be filed by the debtor detailing why the statutory demand process is not valid.  The Court will consider the argument and if "the Court is satisfied that there is a debt due by the company to the creditor that is not the subject of a substantial dispute, or is not subject to a counterclaim, set-off, or cross-demand, the Court may (a) order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or (b) dismiss the application and forthwith make an order under section 241(4) putting the company into liquidation, on the ground that the company is unable to pay its debts (Section 291(1))".

How can liquidation be Avoided when a Statutory Demand has Expired and Proceedings have Advanced?

To avoid liquidation in a High Court winding-up proceeding, there are steps a debtor can take even after a statutory demand has expired (post 15 working days from service). These include:

a. Negotiating to establish an alternative arrangement, such as a repayment plan, to potentially halt the proceeding.  

b. Seeking professional advice from insolvency experts or specialized lawyers for guidance on settlement options, creditors compromises, voluntary liquidation, and other potential defences.

c. Presenting evidence to the court demonstrating solvency and the capacity to meet financial obligations.

d. Proposing a Company Compromise to creditors as an alternative to liquidation (Part IV Companies Act 1993).

The above are options when the 10 working days period from service has expired and an application to set aside the statutory demand within that timeframe has not been filed.

When can an Application to put a company into liquidation be rejected by the High Court?

There are several valid reasons an application may be rejected by the Court:

a. Lack of jurisdiction: If the court lacks the authority to hear the case, the application may be rejected.

b. Procedural errors: If there are mistakes in filing the application, the court may reject it.  This may include service to the wrong address.

c. Insufficient evidence: If the evidence provided is insufficient to support the application, it may be rejected.

d. Matters already resolved: If the issue has been previously settled through legal proceedings, the court may reject a new application.

Failing to promptly address a statutory demand can lead to liquidation. 

In receipt of a statutory demand? Contact our team promptly to discuss your company's available options.
 

Accepting an informal instalment arrangement for a debt that is owing to you instead of being paid on trade terms is not obligatory, giving you the discretion to evaluate the situation before making a decision. However, it's crucial to assess both the potential advantages and the associated risks.

If a debt is owing and not being paid there are common courses of action such as negotiating an agreeable solution and instalment plan, issuing a statutory demand, enforcing a judgment, engaging a debt collection agent, mediation, caveats (where there is a caveatable interest), lodging a report with credit agencies etc.

There are benefits and risks to most options. We discuss the informal arrangements here.

Risks of Accepting an informal Instalment Arrangement:

1. Delayed Payment: Opting for an instalment plan may result in a prolonged period before you receive the full amount owed, potentially affecting your own financial commitments. However if presented under a Companies Compromise this may provide a greater return than otherwise available.

2. Default Risk and Clawback Concerns: There is a risk of the debtor defaulting on the instalment plan. Additionally, in cases of insolvency and subsequent liquidation, there could be a risk of voidable transactions and clawback of payments made, potentially leading to partial or complete loss of the debt repayment.

3. Risk of Insolvent Transactions and Clawback: In cases where an insolvent company enters into an informal repayment arrangement, there is a significant risk of such an arrangement being deemed an insolvent transaction unless there are clear defences. This could lead to a legal challenge and potential clawback of payments already made to you. In such instances, you may face the prospect of having to return these funds, leaving you with a reduced or nullified debt repayment.

4. Interest and Penalties: Depending on the agreed-upon terms, interest or penalties may be associated with late payments.

5. Potential Financial Struggles: If the debtor's financial situation deteriorates further, they may face difficulties in adhering to the agreed-upon payment schedule.

Mitigating the Risks:

1. Clear and Comprehensive Agreement:  Ensure that the terms of the instalment plan are thoroughly detailed, covering the total amount owed, payment frequency, and any applicable interest or penalties.

2. Document Everything:  Maintain meticulous records of all correspondence, agreements, and payments related to the instalment plan. This documentation will be crucial in case of any disputes.

3. Collateral or Security:  Whenever possible, request collateral or some form of security to secure the debt. This provides an additional layer of protection in case of default or a potential clawback following insolvency.

4. Vigilant Payment Monitoring:  Keep a close watch on the debtor's payments to verify that they are meeting their obligations as agreed.

5. Legal Counsel:  Seek legal advice or the advice of a Licensed Insolvency Practitioner to review and assist in drafting the instalment agreement. Legal guidance can help safeguard your interests.

6. Contingency Plans: Consider the steps you would take if the debtor defaults on the instalment plan. This could involve legal action or exploring alternative collection methods.

Instalment Plan Binding Following Insolvency Proceedings:

If the debtor has undergone an approved voluntary administration or entered into a company compromise under the Companies Act 1993, the terms of any instalment plan may be legally binding. This is subject to the specific terms and conditions outlined in the approved arrangement.

A company compromise should be seriously considered when offered by a company facing the risk of insolvency where that business is viable. The compromise may provide some relief but it ensures continued trade, employment for staff and a better outcome than an immediate liquidation.

It's crucial to consult with a legal professional who specializes in insolvency matters or a Licensed Insolvency Practitioner to ensure that any instalment plan complies with the legal framework and is enforceable.

If you are convinced the company that is not paying is insolvent then consult our team for advice on how to advance proceedings for putting the company into liquidation.

Remember, every situation is unique, and professional advice tailored to your specific circumstances is essential for making informed decisions regarding debt repayment arrangements.