Following another OCR drop (50 points) we are now heading into the Christmas break with no new announcements till February, 3 months does seem a long time to wait for any further changes. Once again this will take some time to flow through to the rest of the economy, but it will have an earlier benefit for those borrowers rolling 6 monthly mortgage periods or on the floating rate.

There continue to be a number of interesting insolvent businesses covered by the media, particularly the regional publications from pie makers to solar providers. The expectation continues that there will still be further larger businesses to fail as the recovery continues and the IRD keeps pressure on businesses with arrears to be recovered. The industry focus seeing high levels of insolvency continues to be led by construction, though anecdotally we have seen numerous appointments in retail, logging and commercial property ownership in the last few months.

Christmas/New Year Hours
The team are closing on Friday 20 December and officially returning on Monday 13 January however emails will be monitored during the closedown period and staff will be available should the need arise. If the matter is urgent we will have a skeleton staff over the break.

Winding Up Applications

November saw a drop in total applications from the rising levels seen the last 4 months. While above 2023 the figures for the month were under 2022.

The year-to-date applications (1061) is towering above all prior year full year figures 2020 (239), 2021 (562), 2022 (623) and 2023 (864).

Breaking down the winding up applications by creditor we can pinpoint the drop in application coming from IRD for November, the reason behind it may just have been how the month shook out or perhaps they are winding up early for Christmas. Of note however as at 6 December 2024 and the IRD have already advertised 12 applications for the month. On that basis it does not appear they are slowing down, when compared to prior Decembers unless they don’t advertise any other applications for the month.

The above graph does highlight the “be kind” mentality taken by IRD over Covid with numerous zero appointment months in 2020.

Personal Receiverships

November had 3 personal receiverships, a total of 46 for the past 12 months. Lenders who have taken personal general security agreements from borrowers continue to make appointments when borrowers and their companies default appointing receivers over both entities simultaneously.

The bulk of the personal receivership appointments continue to be driven by a small number of business lenders using these practises and exercising the enforcement rights the borrower granted them on signing up for the loan. From a practitioner perspective there are 3 firms showing up repeatedly for personal receivership working exclusively for certain creditors.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

November 2024 has dropped back down to past years Novembers. The drop was across the board in all appointment types, the reasons behind this may have been driven by the end of year winding up or potentially the changes in business confidence as decision makers try to hold out to see how they do over the Christmas period.

Total insolvency appointments for the year continue to increase in line with 2015/2016 figures. Month on month November had 207 total appointments, still above the long-term average of 164. With 2538 appointments in the year to date we are above full year figures back to 2016. We expect the higher insolvency appointment levels will continue into 2025 at least due to a large backlog at IRD and a struggling economy in most sectors.

Solvent liquidations picked up on last month’s 3% but remain almost half their long-term average, this loss has been picked up as a percentage equally by insolvent shareholder appointments and insolvent court appointments which in the below graph make up 88% of appointments. The long-term average for the two sectors has traditionally been around 75%.

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

Personal insolvency appointment figures for Bankruptcy, NAP and DRO remain low for the year to date in line with the very low levels seen back to mid 2021.

As outlined in the introduction the latest drop in the OCR is unlikely to make a huge difference to business with the flow through projected to take 12 – 18 months till it takes effect and will only drop certain costs, the price of goods we need day to day won’t go back down to pre-2020 levels.

While we are expecting to see corporate insolvencies continuing to grow into next year, I don’t believe we will see a lift in personal insolvencies till early 2025. There is traditionally a slow down over Christmas and January, then as people return to work and have to deal with the Christmas overspend, this may be when we see a lift in personal insolvency figures.

Where to from here?

There looks to me more pain for the NZ economy in the next 12 months as we begin the slow recovery. We foresee continued rising appointments when compared to prior years and continued busy times for insolvency practitioners for the next 2-3 years as we deal with the tail from the latest recession.

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..

The festive season is a time for joy and giving, but for many businesses, it also presents challenges with cash flow as customers struggle to settle their accounts. Managing overdue debts effectively during and after the Christmas period is critical for maintaining financial stability. What are the best practices for handling overdue debts, responding to excuses, and escalating action when necessary under New Zealand law?

1. Proactive Debt Management: The Pre-Holiday Checklist

Communication Is Key:

Pre-emptive Reminders: Send reminders about due invoices early in December, emphasizing the importance of payment before the holiday break.

Flexible Arrangements: Offer payment plans or early settlement discounts to encourage compliance.

Assess Your Accounts Receivable:

Prioritize high-value debts and long-overdue accounts for immediate follow-up.

Conduct credit checks on customers with large outstanding balances to gauge the risk of non-payment.

2. Handling Overdue Debts: Strategies and Excuses

Common Excuses and Responses:

“We’re waiting on payments ourselves.”  - Suggest a part-payment option to reduce the balance and demonstrate goodwill.

“Our accounts team is on holiday.” - Request payment before their break or arrange for automated transfers.

“Cash flow is tight after Christmas.” - Propose a manageable payment schedule to ease the strain.

Best Practices for Follow-Up:

Maintain regular contact via phone and email.

Keep all communication professional and documented for future reference.

Consider involving a third-party debt collector if the debtor becomes unresponsive.

3. Taking Action: When to Escalate for Default

Warning Signs for Escalation:

Repeated failure to adhere to agreed payment terms.

Non-responsiveness to communication efforts.

Debtor denies liability without substantiation.

Steps for Debt Collection:

Send a Formal Demand Letter:  Clearly state the overdue amount, due date, and consequences of non-payment.

Engage a Debt Collection Agency:  If the debtor remains unresponsive, a collection agency can add pressure and negotiate on your behalf.

Legal Action Under the Companies Act 1993:  If the debtor is a company, a statutory demand can be issued for debts over $1,000.

Issuing a Statutory Demand:

This formal notice requires payment within 15 working days.

Non-compliance allows you to apply to the High Court to liquidate the company.

Winding Up Proceedings:  If granted, a liquidator is appointed and generally the company’s assets will be sold to pay creditors.

This is a last resort and should be approached with legal advice and/or by consulting an insolvency practitioner to ensure compliance with procedural requirements.

4. Post-Holiday Recovery Plan

Reassess Credit Policies:  Tighten credit terms for new customers or those with a history of late payments.

Monitor Trends:  Track payment patterns over time to identify seasonal risks and adjust your strategies accordingly.

Engage Professional Help Early:  If payment disputes arise, consult legal professionals to mitigate risks and recover debts efficiently.

Final Thoughts

Managing overdue debts around the Christmas period requires a blend of empathy, strategy, and assertiveness. By acting promptly and adhering to best practices, businesses can safeguard cash flow and reduce the impact of defaults.

Remember, the key is to remain proactive, professional, and prepared to escalate when necessary to protect your interests. For complex cases or substantial debts, seek guidance from an insolvency practitioner, a debt recovery expert or lawyer experienced in insolvency law. We are here to help www.mvp.co.nz

The end of one year and the start of the next year can be a challenging time for many business owners, especially with extended breaks over the Christmas and New Year period taken by staff. The pressure is compounded by the need to settle various financial obligations, from employee holiday pay to tax payments.

Many businesses face the strain from having to pay employees holiday pay entitlements, a period where income is not being generated due to closure and then to face IRD obligations such as November GST due 15 January, Paye due on 20 January, Oct to Dec FBT due on 20 January, provisional tax due on 15 January and for the larger employers more PAYE due on 5th of February. Some are now already struggling with the reality that these obligations are upcoming.

Managing cash flow during this period is critical, and proactive steps can make a significant difference. We explore strategies to handle the cash crunch, options for arranging instalment plans with Inland Revenue, and the point at which seeking professional advice from a Licensed Insolvency Practitioner becomes necessary.

1. Assess Your Cash Flow: Begin by conducting a thorough assessment of your cash flow. Understand your current financial position, taking into account outstanding invoices, upcoming expenses, and the various tax obligations due in January and February. This knowledge forms the basis for creating a realistic plan to navigate through the financial challenges.

2. Prioritize Expenses: Identify and prioritize essential expenses. This may involve distinguishing between critical operational costs and discretionary spending. By focusing on what's necessary for day-to-day operations, you can allocate funds strategically and ensure that vital aspects of your business are not compromised.

3. Communicate with Creditors: Open and honest communication with creditors is key. If you foresee difficulties meeting payment deadlines, approach your creditors early to discuss your situation. Some may be willing to negotiate payment terms or provide temporary relief. Establishing transparent communication builds trust and can lead to more favourable arrangements.

4. Explore Inland Revenue Instalment Plans: Inland Revenue understands the challenges businesses face, especially during the holiday period. If you're struggling to meet your tax obligations, consider reaching out to them to discuss instalment plans. Inland Revenue is often open to working with businesses to find a manageable repayment schedule.

5. Seek Professional Financial Advice: For some businesses, the financial strain may become overwhelming, and navigating complex tax obligations may seem daunting. In such cases, seeking professional financial advice is crucial. Engage with a financial advisor who can provide personalized guidance tailored to your business's unique circumstances.

6. When to Contact a Licensed Insolvency Practitioner: If your financial situation is facing the strain and is likely to continue to worsen, and you may find it impossible to meet your obligations, it may be time to consult a Licensed Insolvency Practitioner. Insolvency specialists can assess your business's viability, explore restructuring options, or guide you through the insolvency process if necessary. Early intervention increases the likelihood of finding a viable solution and reduces the prospects of being held liable for trading insolvently.

Ending one year and starting the next year on a financially sound note is essential for the success of any business. By proactively managing cash flow, communicating with creditors, and exploring available options with Inland Revenue, business owners can navigate the holiday cash crunch successfully. When faced with insurmountable challenges, seeking professional advice from a Licensed Insolvency Practitioner is a responsible and strategic decision to protect the long-term interests of your business. Remember, there are resources and professionals available to help you weather the storm and emerge stronger on the other side. Contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.