As it is in all areas of business, when you are seeking advice or input on insolvency matters it is important to go to the right source.

There are lawyers and accountants that specialise in insolvency but, depending of the circumstances, and what you are looking to achieve, who you choose is important.

Under the current legislation, the Companies Act 1993, anyone, without conflict of interest, and with a few other exceptions, can take an appointment as an Insolvency Practitioner and be appointed as liquidator or receiver of a company. They do not have to have any formal qualification and do not have to be registered or subject to any particular code of conduct. This situation is likely to change with current law changes being considered but for the time being the current provisions of the Companies Act apply.

So both lawyers and accountants can be appointed as liquidators or receivers and can be referred to as Insolvency Practitioners.

There are also Insolvency Practitioners who may be neither a lawyer or an accountant, who can also be appointed as liquidators or receivers.

Generally speaking, there are two ways that a business could be involved with an insolvency matter – either as a creditor seeking to recover a debt, or as the business owners deciding on a course of action because of the financial situation the business is in. The information or advice you would need from a lawyer and / or an accountant is different in each case.

Insolvency Lawyer:

If you are a creditor of a business that has failed to pay its debts as they fall due, you may decide to take action to have the debtor company liquidated.

To do this, we recommend you consult a lawyer experienced in the insolvency field to prepare statutory demands for service on the debtor company and, in due course, to prepare and file the application in the High Court to have the debtor company liquidated.

The lawyer will, prior to the matter being heard in Court, obtain the written consent of  Insolvency Practitioner(s), to be appointed,

If you are a director/shareholder of a debtor company that has been served with a statutory demand or liquidation proceedings, you may want to consult with an insolvency practitioner to gain an understanding of your rights and obligations and the options that are available to you.

Insolvency Accountant:

Many of the insolvency practitioners practicing in New Zealand have formal accounting qualifications or accounting backgrounds. This is understandable given that a lot of the work carried out by insolvency practitioners involves the review and analysis of accounting information.

IP's often then engage lawyers. Some of the larger accounting firms will have an insolvency practice as part of their firm’s structure. McDonald Vague, are Chartered Accountants specialising in business recovery and insolvency

If you are the shareholders or director of an insolvent company, your business accountants, who prepare your annual financial reports etc, may identify the fact that you are technically insolvent but, under those circumstances, they cannot be appointed as liquidator of your company. You would need to appoint an independent insolvency practitioner.

Accreditation Protection:

Accreditation for insolvency practitioners acknowledges IPs with appropriate experience. The main benefit is, accredited IPs are subject to the code of ethics, CAANZ rules and standards, CPD, practice review and a disciplinary body. If the practitioner is a CA and accredited, the designation is CAANZ accredited IP, whereas a non-CA but member of RITANZ is RITANZ IP Accredited by CAANZ. Dealing with an accredited practitioner provides more assurance to the appointor that the appropriate actions will be taken.

You can check the accreditation status of a particular IP or look for an accredited IP by following the links to the RITANZ or CAANZ websites 

Conclusion:

Getting the right advice at the right time and from the right person can make a big difference to the final outcome in any given situation.

If you need legal advice in relation to an insolvency issue, then see a lawyer with expertise in that area of law.

If you need practical advice in relation to insolvency options and processes and the related accounting issues, then speak to an experienced insolvency practitioner.

The team at McDonald Vague are experienced and independent insolvency practitioners with the formal qualifications and experience to be able to provide good practical advice on your situation.

McDonald Vague is one of New Zealand's leading turnaround, insolvency and business recovery firms, with 20 years in the industry and a variety of different services that can slow, minimise or reverse the impacts of financial trouble. Our team is well-versed in the legal and practical complexities of business turnaround, and can help you and your company negotiate the situation and arrive at the best possible outcome.

Discovering that your business, or one that you represent, is in financial trouble can be a stressful situation. However, it's important to remember that there are solutions available, and that can turnaround your business to either trade out of loss or restructure for a sale. The key to achieving these outcomes and avoiding liquidation is to seek out the right advice from experts who have seen these situations before, and who have the experience to find an appropriate solution. 

Download our free guide for NZ companies in Financial Difficulty

What is business turnaround?

Business turnaround is all about taking a proactive approach - recognising the symptoms of a financially unhealthy company and taking the appropriate steps in response. Regardless of whether or not you've had prior experience in recognising and combating the warning signs of insolvency, it's worth seeking an expert opinion if you have any doubts about the financial health of your business.

Is your business profitable? Are you achieving your key goals and objectives? How sustainable are your current structure and operations? If any of these questions are setting off alarm bells, the chances are pretty high that a company is in financial distress. If this is the case, then business turnaround should be your first priority. The longer you wait, the harder it will be to reverse the damage, and the greater the likelihood of insolvency occurring

Here at McDonald Vague, we focus exclusively on business recovery, business turnaround and insolvency services. This focus on a few key areas allows us to operate independently and free from the conflicts of interest that arise with larger firms. Within business turnaround, there are several different services that our team can provide.

Our business turnaround services

1. Forensic Reviews: Our forensic accounting reviews find anomalies in a business and compile discrepancies in your accounts. McDonald Vague's team of investigators have the ability to identify insolvent set-offs, uninvoiced transactions and fraud with discretion and confidentiality.

2. Financial Due Diligence: Before signing an unconditional contract, our team will conduct a comprehensive check that includes general company data, environmental matters and litigation history.

3. PPSR Advice:The Personal Property Securities Register (PPSR) is a crucial tool for business owners looking to minimise their financial risk. Registering on the PPSR gives owners a much higher chance of recovering debts and provides a defence against insolvent transactions claims. McDonald Vague can assist with registering for the PPSR, ensuring the process is completed as quickly as possible to minimise business risk.

4. Terms of trade: In the event of insolvency, the clauses in a business's terms of trade take on critical importance. If these don't provide security over your goods, the insolvency process can become far more costly. Our team works closely with lawyers to ensure that your terms of trade provide priority over other creditors in the event of liquidation or receivership.

5. Defending Voidable Transactions: Sometimes referred to as insolvent transactions, these are situations where a liquidator reclaims a payment made by a company prior to insolvency. These claims are becoming more and more common, and our team are increasingly seeing voidable transaction challenges from liquidators. McDonald Vague can assist by providing a potential defence strategy, or by negotiating on your behalf during settlement.

6. Pre-lending Reviews: Borrowing is a complex business, but before approaching a financier it's well-worth getting some expert advice. The dynamics of finance change from situation to situation, and our team can provide a comprehensive pre-lending review that focuses on structure, management, market trends and business plans, as well as the raw numbers.

7. Business Valuations: Valuing a business involves a variety of different methodologies, encompassing not just performance, but forecasts and the market as well. With extensive experience in business valuations, our team has the expertise necessary to ensure an accurate and fair figure is reached.

McDonald Vague is a member of, and is regulated by, Chartered Accountants Australia & New Zealand. We are also a member firm of NZCA, and have offices throughout New Zealand, so are always nearby no matter your location. Situations of financial distress are always challenging, and come with a lot of emotional complexity as well as practical and legal issues. A clear head is essential, and with our team having seen it all before, we can provide a solution that ensures the best possible outcomes for business owners, members of staff and creditors.

For more information, get in touch with us today.