In our 44th Insolvency by the Numbers, we look at the July 2024 data set and we review how the month has tracked compared to prior months and years.

Unsurprisingly the Reserve Banks made no change to the OCR at their July 2024 announcement. Banks and independent economists now expect the first drop may come in November 2024.

June quarter inflation figures came in at 0.4, bringing the annual inflation rate to 3.3. This was driven largely by tradable inflation coming down, non-tradeable (“domestic”) inflation appears to be a bit stickier however. No doubt the next quarter inflation figures may not show as much of a drop with the recent rates rises pushing through and the adjustment to tax bands giving taxpayers a little more disposable income.

Real Estate agents are now pushing the narrative that now is the best time to get in and buy as it remains a buyers’ market. No doubt we will be looking back in the years to come thinking 2024 was perhaps the missed opportunity for some who wished they had brought then rather than waiting for the bottom, which we can often only spot in hindsight.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

July 2024 while above the last few years has dropped under 2018 levels. This drop appears to have been primarily driven by decreases in shareholder insolvent liquidation appointments and court liquidation appointments. At this stage I would expect it was perhaps just a slow month as the economy is quite clearly still tough for business owners and there is a steady pipeline of winding up applications, as you will see below, pushing appointments through the court. Something to keep an eye on for the next few months to see if it bounces back.

Anyone with an eye on job listings will note that there has been increased demand from employers operating in the insolvency space as job ads have jumped from 1-2 every couple of days over the last few years to multiple instances of 15+ new jobs per day listed in a week. This is across the whole sector from credit control, collections, insolvency practitioners, IRD and legal job listings.

Overall total insolvencies for the year remain high, and continue down the 2015/2016 track. Month on month July had 200 total appointments, 46 appointments above the longterm average of 154 and well above past July’s with the exception of 2018 (2023: 182, 2022: 174, 2021: 150, 2020: 144). With 1448 appointments in the year to date we are only slightly behind the 2021 full year figures of 1488 which we will surpass next month, the next closest full year figures are 2020 and 2022 in the 1600’s. As outlined in past issues we expect these higher insolvency appointment levels will continue into 2025 at least.

For July shareholder resolution insolvent liquidations while above the long-term average have continued to drop from the past 2 months while solvent liquidations (18) climbed closer to the longterm average of 22 appointments.

The spike in Voluntary Administrations and Receiverships has returned as secured creditors continue appointments over assets and practitioners continue to sell the “benefits” of a Voluntary Administration over other insolvency options. I would speculate that in a number of the 61 Voluntary Administrations seen in the year to date that a liquidation would have been a more cost efficient option and seen a better return to creditors given there has only been one Deed of Company Arrangement entered into to date. The rise in personal receiverships by 3rd and 4th tier lenders continues with multiple appointments in the month.

We expect increases across all types of appointments to continue throughout 2024 and into 2025.

Winding Up Applications

Applications have bounced back after last months drop off as July beats out the last 4 years figures. This return was driven by continued strong application numbers from the IRD and a bounce back from commercial creditors making 44 of the 100 applications compared to the 26 made in June.

The year to date applications is well clear of the last 4 years figures with 604 total applications. To show this increase in 2024, we are above to total year winding up applications seen in 2020 (239), 2021 (562) and will exceed 2022 (623) in August.

As you can see below IRD’s dominance over all other commercial creditors continues bringing their streak to 16 months in a row where they have advertised more applications than all other creditors combined each month.

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

The increases seen in April and May personal insolvency figures have dropped away. The drop off was in both bankruptcy (debtor and creditor petitions) and No Asset Procedures. While this drop is in line with corporate appointments detailed above at this early stage I wouldn’t go as far as to say they are related.

Where to from here?

Like the last few months, the signs continue to point to the NZ economy being in for continued pain for the foreseeable future, it is likely to get worse before it gets better. We foresee continued rising appointments when compared to prior years. When the OCR is dropped this will not be the silver bullet for the economy some people hold it out to be. There is a 12 – 18-month lead time before these drops are felt in the economy. Regardless inflation continues to be above the target of 1-3% and may be for some time with non-tradable inflation refusing to come under control.

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's the difference between bankruptcy and liquidation? This is one of the most common questions that we field from directors and individuals we don’t fully understand how the different types of insolvency may apply to their current situation and how it will affect them.

Given the current climate we are in with company insolvencies on the rise it pays to understand the difference.

While there are a number of detailed differences in simple terms bankruptcy is personal, and liquidation is for commercial entities (companies, trusts, incorporated societies etc.) The confusion often arises because of the use of the bankruptcy term in relation to companies in the USA which we often see in the media and on TV shows -XYZ company has entered Chapter 11 (or another number) Bankruptcy under the Bankruptcy Code.

Bankruptcy:

For an individual bankruptcy is not the end of the road, it just draws a line in the sand for their financial position at a certain date, their adjudication date. From this date their affairs are handed over to the Official Assignee (a government entity) to sell assets and pay creditors. A bankrupt is able to retain limited personal assets such as a vehicle up to a certain amount and some tools of trade.
During the term of their bankruptcy it are also a number of rules and restrictions in place that the bankrupt individual will have to abide by or apply for permission from the Official Assignee if they wish to work outside these rules (travel restrictions, self employment etc.). The bankruptcy term is around 3 years, provided the bankrupt completes their statement off affairs and does not breach restrictions that are placed upon them. The individual is then discharged at the end of the term to hopefully have a fresh start and continue contributing to the economy.

https://www.insolvency.govt.nz/personal-debt/personal-insolvency-options/bankruptcy

The above link is from the Insolvency and Trustee Service who administer all bankruptcies in NZ and details the basics on bankruptcy, for additional reading and more detailed informaiton.

Liquidation:

While a liquidation on the other hand will bring an end to a company. A liquidator will be appointed to deal with the affairs of the company and wind it up. Liquidators are generally Licensed Insolvency Practitioners who work for commercial entities, though the Official Assignee does take appointments if no one else is appointed by the court or the shareholders are bankrupt.

The liquidator is able to trade the business as a going concern to realise the assets, if a sale occurs it is to a new entity, otherwise the liquidator will close down the business and realise its assets, through auction or otherwise, and distribute the proceeds to creditors. The liquidators will also investigate the affairs of the company and review its books and records. Once the assets are realised and the investigation complete the company is then struck off the Companies Register.

For directors the rules and regulations placed on bankrupts do not apply during a liquidation, this is where people often get confused. While directors have duties to assist the liquidator they are still able to go out and start new companies, incur debt, travel and their personal assets are not on the line to satisfy creditor claims (unless there are personal guarantees, breaches of directors' duties or a debt to the company etc.)

https://www.mvp.co.nz/mcdonald-vague/liquidations

The above link is from our website and goes into further detail on liquidations, you are also able to request the guide to liquidation from it for further reading.

Essentially in NZ bankruptcy is for individuals and liquidation for commercial entities.

Be sure to contact our excellent team if you have further questions, we are here to help 0800 30 30 34.