Picture yourself at the beach. It’s a beautiful day, and you decide to go for a swim. You’re so busy enjoying the sunshine and the refreshing water, you don’t realise you’re drifting further and further from the shore. Little do you know you’re heading right into shark-infested waters. Being in business can be the same. Sometimes, you are focused on the day-to-day tasks and you miss the bigger picture. It can be difficult to see when you’re heading for trouble. But it’s important to know there are five huge warning signs pointing you to change before it’s too late. SIGN 1: YOUR BUSINESS CANNOT PAY YOU A WAGE If your business is not generating a return to you, why are…

Economic recap We make our way through another winter month where we finally saw the NZ boarder fully re-open for the first time since 2020, this has helped our net migration, but levels remain lower that pre pandemic. We also saw our first cruise ship landed back in the Auckland CBD since 2020 making news stories across the country. There remain a number of adverse factors affecting businesses starting with a weakening NZ dollar, staff shortages continuing, the seasonal downturn in industries during the winter months coupled with the sports related downturn resulting from the All Blacks continued losing and patch performances. Coupled with overseas influences of China’s covid policies affecting supply chains along with the ongoing war in Ukraine…

Economic recap International and domestic market factors continue to affect the economy and have and effect on businesses in New Zealand. Supply shortages, increasing costs of living and inflation continue to put pressure on businesses margins, this coupled with an inability to find staff to fill empty rolls is causing a number of issues for businesses trying to retain staff or grow. Unsurprisingly the July 2022 OCR announcement saw the Reserve Bank lift the Official Cash Rate a further 50 basis points as indicated in their earlier announcements. The OCR lifts are expected to continue for the remainder of the year and into next year as they use what tools they have available to try and tackle rising inflation. In…

Statutory demands (or Section 289 notices) pose a big threat to New Zealand businesses. These are written requests from a creditor for a debtor to pay overdue debt, with a payment term of 15 working days. A creditor can serve a statutory demand on a company if formal demands for payment or debt collection services have not proven effective and the debt is not disputed. It will contain details such as: How much is owed.The repayment time frame.Contact details for the creditor.Potential consequences.Details for a right of dispute within 10 working days. When a debtor is properly served with a statutory demand, the risk of winding up proceedings or even legal action becomes very real. There are six main courses…

When it comes to due dates and business tax debt, the IRD don’t mess around. Business owners who shirk their tax obligations can quickly find themselves in trouble. If you know your tax bill is going to be bigger than you can handle, it’s important to deal with that as soon as possible – ideally long before it’s due. If you can’t pay your tax bill, you should look at the following steps: CONTACT THE IRD AS SOON AS POSSIBLE The IRD want to help you meet your tax obligations, so if you contact them as soon as you know there’s a problem, they can help you find a solution. It’s best to contact the IRD before the due date,…

Company strike off or dissolution is the process where a Limited Company is removed from the Companies Office register. Following removal, the company ceases to exist. There are essentially three options to end a New Zealand company. These are:• A short-form removal from the companies register (solvent companies)• long-form removal – a solvent liquidation or insolvent liquidation, or• doing nothing, failing to file an annual return with the Companies Office (“the short cut method”). The third option is not recommended. The short and long form methods minimise risk. Failure to file an annual return does not put an end to debt in an insolvent company. It also does not provide any certainty that the company is at an end. Many…

Economic recap Businesses continue to be affected by overseas economic factors, from supply line shortages to rising costs. Rather than focus on factors covered in earlier articles we will look at what’s coming up in this month’s article. Discussions without GRIP partners in Australia and the UK suggest that NZ may be 1 year away from seeing a notable shift in insolvency appointments. As a comparison we appear to be six months behind Australia who have seen the Inland Revenue ramp up collections and pressure and have begun to see insolvency workflow. Australia confirm they are roughly 6 months behind the UK who have seen themselves get a lot busier in recent months. The NZ borders are set to fully…

Economic recap Another month with insolvency appointment figures on a downward trend while economic factors begin to squeeze businesses. Those factors affecting the economy are little changed from prior month updates including; InflationIncreasing Costs of Living (now called a crisis) Increasing Financing Costs Falling House Prices and Sales Volumes across NZ Supply Chain Issues (now increasing due to China zero Covid policies) Increasing Wages Low Unemployment Making Finding Staff Difficult Tightening Margins Looking at the Xero SME index graph, it shows April 2022 up by 20 points on previous months and on an upswing. However, it does not appear to be reflected in business confidence which has been falling as several of the economic factors, if not all, continue to…

Economic recap The March 2022 insolvency figures continue to be below past years. For the wider economy we saw inflation figures for the year to date at 6.9%. Slightly under what was expected from economists as a group but still well above the levels where they should be. The high inflation figures have led to an expected response from the Reserve Bank lifting Official Cash Rate (OCR) by 50 basis points in an effort to head off rising inflation. From discussions with business owner on the coal face the cost of rising inflation, OCR raises, the rise in the minimum wage, increased sick days and introduction of new public holidays (Matariki) are a perfect storm of expenses that are unable…

Debt collection actions are gaining momentum. Winding up proceedings are on the rise. There is a climb in IRD initiated winding up proceedings. Many NZ companies have been impacted by Covid-19 and are facing insolvency. To be insolvent means one of two things: Debts can’t be paid when they’re due. Total debt is more than the value of all assets. The Commissioner of Inland Revenue has increased debt recovery actions. The CIR is able to issue a statutory demand as a step necessary to advance a proceeding against a company. Ignorance Isn't Bliss It is recommended for any business struggling to meet tax arrears that negotiations are entered into promptly to avoid a potential winding up proceeding. Taxpayers are required…

Problems in a business generally arise slowly. Problems can become disasters if not recognised and managed. Directors have some latitude in choosing to trade out of a temporary liquidity problem or to advance an insolvency procedure. Directors must carefully consider the responsibility they have to creditors and their duties under the Companies Act 1993 and if they can turn the business around. Steps towards Solvency for a Viable Business Insolvency is the inability to pay debts when they become due. Steps can be taken to avoid insolvency. The following are steps that can be considered for a viable business: Start with a review of overheads. When considering cutting expenditure take steps to analyse the costs involved. The restructure and reduction…

Economic recap Recent lockdown measures in China are once again causing delays at their ports, just as the shipping and freight delays looked to be easing. This will continue to keep freight prices high and flow through to the end consumer and businesses. With a cooling Housing sector delays and cost increases will continue to keep the pressure on developers in the building industry, where building materials for the large number of building consents issued continues to constrain supply. How these shortages and labour shortages are managed by developers and building companies will continue to be of interest; they can do little but watch on as their margins continue to whittle away on their ongoing projects. If you have been…