In our 39th Insolvency by the Numbers, we look at our data set for February 2024. We review at how the month has tracked compared to prior months and years.

Notable economic events for the month include the Reserve Bank keeping the Official Cash Rate level at 5.5 percent with no change to when we may begin seeing a drop in the rate in 2025. Economists are of the opinion that drops will be sooner than this in the later half of 2024.

The coalition government has come to the end of its first 100 days, having enacted the bulk of their 49 points they set out to implement. While the bulk of these were undoing legislation and changes made by the last labour government we expect that the plan they implement moving forward will likely have some impact on the wider economy rather than undoing the past governments policies.

The housing market however appears to be plateauing as we move away from the summer season and into winter, this is likely the result of continuing higher interest rates above the lower rates experienced over the 2020/2021 calendar years as monetary easing was occurring.

Centrix, a credit reporting agency, has reported in their latest figures that there are currently 450,000+ individuals in arrears with their bills. This is 40,000 up on the prior month and the highest numbers since 2017. With a population over the age of 18 around 4 million people, this puts 1 in 8 people over the age of 18 in arrears with their accounts.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

February 2024 insolvency appointments saw a jump on previous February’s coming in at 195 appointments 50% higher than each of the last 3 years on average. It was also 52 appointments above the long term average of 143 monthly appointments.

Compared to the first two months of the last 7 years we can see that the year has started strongly with a reasonable January and strong February putting the two monthly total above the last 3 years and in line with 2020 before covid lockdowns were implemented and appointments dried up. We are expecting this to continue into March as historically March posts 25% - 50% more appointment that seen in February, in large part driven by solvent appointments and stakeholders trying to wind matters up before the end of the financial year so they can have a “fresh start”.

Anecdotally we have seen an increase in enquiries into the new year. Interestingly this has been a combination of traditional formal appointments and informal insolvency advice and work outs.

As a percentage spread compared to the average, we have seen less solvent liquidations than the usual average of 22%, February saw them as low as 8% of the total appointments as seen in the below pie chart. Insolvent shareholder appointment liquidations was right on the 50% average while court appointments came in 11% above the long term average of 25%.

This change in percentage spread is likely the result of an increase in creditor pressure and creditor driven liquidation appointments as seen in the below winding up appointments, coupled with tighter economic conditions reducing the number of companies ending up with the cash to distribute to shareholders through a solvent liquidation. We expect this trend to continue throughout 2024.

Of interest the Official Assignee continues to receive more liquidation appointments when compared to any other insolvency firm/entity, as it has continued to do so most of 2023 when the courts are open. Noticeably in February 2024 the Official Assignee received 46 appointment with 45 of these coming by way of the High Court. Of the 45 appointment 39 were on the application of IRD.

Across NZ Licenced Insolvency Practitioners operate out of 56 insolvency practices. In the 2023 calendar year 42 of those 56 insolvency practices took less than the 46 appointments for the whole year, while the Official Assignee took 46 in only one month.

Winding Up Applications

Exploring the winding up applications data, with a focus on February figures, unveils intriguing insights into the state of insolvency in New Zealand. February 2024 witnessed a significant surge, with a total of 108 winding up applications recorded. Among these, 53 were non IRD creditor winding up applications, while 55 were attributed to the IRD and their continued collections push. Historically IRD has started the year behind non IRD creditors in the total winding up application filed with the High Courts, however with the current level of arrears they are attempting to recover and their tough stance against delinquent debtors this puts the IRD on an 11 month continuous run where they have filed more applications each month than non IRD creditors.

This marks a notable escalation from February 2023, which saw 64 applications in total. While we did have one additional day in February 2024 being a leap year we do not believe that this is the reason for the huge leap in applications greater than anything seen in the last few years. It is more than likely a combination of creditors needing debtor recoveries to assist with cashflow in their own business and losing patience with debtors so escalating matters through winding up proceedings, from the IRD perspective they have a long debtor list that requires collection.

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

In January 2024, there were 25 bankruptcy filings, 21 no asset procedures, and 9 debt repayment orders, totalling 55. January has traditionally been one of the lower months for personal insolvency following the Christmas break and people still being on holiday and ignoring their financial issues. January 2024 has continued the low personal insolvency figures shown throughout 2023 and 2022.

As outlined above while there are 450,000+ individuals with accounts in arrears whether this translates to personal insolvency appointment only time will tell. We expect that we will not see a significant rise till into the 2nd half of 2024.

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, we foresee continued rising appointments as the year progresses. The OCR is unlikely to be dropped in the next 6 months potentially 1 year and inflation continues to be above the target of 2% and may be for some years 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..

In our 38th Insolvency by the Numbers, we look at our data set for the year end 2023 in review along with January 2024. We look at how the year has tracked compared to prior years and what to we can expect in 2024, followed by a look at how January 2024 has compared to the last few years.

The latest data release shows that inflation has fallen however the portion of it generated by non-tradeable inflation figures remains high. Economists are predicting that it is unlikely that we will see an official cash rate drop till the later part of the year with come commentators still expecting the first drop in 2025. The property market however has now stabilised in a lot of regions and in some regions begun a slow climb in prices.

Globally during January, we have seen both the S&P500 & Dow Jones hitting new highs, we have also seen the release of a number of Bitcoin ETF’s in January that have taken in large amounts of investor capital.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

While December 2023 took a slight dive from the figures posted throughout the year January has started slightly above its historic levels back to 2019. As seen below however 2024’s January is still behind 2017 & 2018.

As expected with the courts closed there were no creditor appointments in Jan 2024. It did not however slow the number of winding up applications as detailed below. Of interest solvent liquidations were below the numbers seen in past January’s while receiverships were up on past years, the bulk of the appointments were insolvent shareholder appointments as shareholders began to ffel the increasing pressures and have decided to pull the pin.

Anecdotally we have seen an increase in enquiries into the new year. Interestingly this has been a combination of traditional formal appointments and informal insolvency advice and work outs.

As predicted in our November insolvency articles, 2023 beat out all years back to 2018 for total appointments. So for the first time following the Covid lockdowns and Government support payments insolvency figures have finally grown year on year.

Winding Up Applications

In January, there has been a noticeable variation in the total number of winding up applications compared to past Januarys. In January 2021, there were 28 creditor winding up applications and 22 being IRD winding up applications. January 2022 showed a decrease, with 18 total applications, including 13 company winding up applications and 5 IRD winding up applications. However, January 2023 experienced an increase, with 56 applications, consisting of 34 company winding up applications and 22 IRD winding up applications.

The big take away here being that for the first time in the last 4 years IRD has made more creditor winding up applications in January than all other creditors combined for the first time. A definite sign that they are continuing to keep the pressure on delinquent debtors.

When considering the total data for 2023 compared to previous years, the cumulative number of winding up applications has shown a continuous increase. This upward trend underscores the ongoing financial challenges faced by companies over time, leading to a rise in the number of winding up procedures initiated.

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

In December 2023, there were 45 bankruptcy filings, 32 no asset procedures, and 17 debt repayment orders, totalling 94. This continues the low personal insolvency figures shown throughout 2023. Whether this will turn around in 2024 won’t show in the figures till February onwards. My expectation however is that the figures will continue to be low compared to past years.

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, we foresee continued rising appointments as the year progresses. The OCR is unlikely to be dropped in the next 6 months and inflation continues to be above the target of 2%.

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..

Many NZ companies are currently affected by cash flow issues 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 ("CIR") will take debt recovery action where debts are in arrears. 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 to pay their tax in full and on time. Failure to do so leads to late payment penalties and interest. These charges compensate the Commissioner for the loss of use of the money and act as a deterrent to encourage taxpayers to pay the correct amount of tax on time.

If your company receives an IRD formal demand, doing nothing really isn’t an option. Inaction will limit your options and virtually guarantees insolvency. You can also be held personally liable for failing to pay PAYE.

In certain situations the Commissioner may be able to provide assistance to taxpayers if they are not able to pay on time, or if the imposition of penalties and/or interest is not appropriate. Depending on the circumstances the Commissioner may also agree to write off or remit amounts owing (so they do not need to be paid), or agree that the taxpayer enters into an instalment arrangement (so the amount is paid over time rather than immediately).

The IRD seek open communication and are more willing to consider instalment arrangements when directors have been upfront from the start. Company directors that bury their heads in the sand and have no plans in place may face less leniency and liquidation proceedings.

The IRD can find directors liable for their company’s tax under general insolvency law. The law also says if a company agreement purposefully leaves it unable to pay a foreseeable tax liability, a director can be personally liable.

In the first instance the IRD will try for a settlement. This is your chance to negotiate terms and arrive at a compromise that allows you to stay in business while the IRD claims their tax. If you can reach a repayment agreement, the IRD won’t take the matter further.

If you’re unable to reach a compromise, the IRD will issue a formal demand, followed by a statutory demand and then issue an application for putting the company into liquidation (winding up proceeding) if you don’t settle the demand. If you do nothing the company will be placed into liquidation by the High Court.

The first step is to make contact, complete a 12 month forecast (IR591) recording what you can afford to pay and discuss the options.

Relief Options

The IRD offer relief options for companies with viable businesses.  

Financial relief can be granted when a taxpayer cannot meet their payment obligations. The process to apply for financial relief or an instalment option is here.

The Commissioner is open to instalment arrangements towards tax arrears. Splitting up what you owe over weekly or fortnightly payments can make it easier to repay your tax debt.

The CIR may agree to collect the amounts owing over a period of time through an instalment arrangement, or to not collect the amount owing (that is, write off the amount), or a combination of the two options (that is, write off some of the debt and enter into an instalment arrangement for the remainder). An amount may be written off if collecting it would place the taxpayer in “serious hardship”.

Where an amount is considered irrecoverable, the Commissioner has the discretion to write it off. The Commissioner may write off amounts if collecting the amounts owing is considered to be an inefficient use of Inland Revenue’s resources.

Certain penalties may be remitted when an event or circumstance has occurred which is beyond the taxpayer’s control.

Interest or certain penalties may be remitted if to do so is consistent with the Commissioner’s duty to collect the highest net revenue over time.

Voluntary Liquidation

One possibility for meeting the IRD formal demand is voluntary liquidation. This gives the director and shareholders a small element of control over liquidation proceedings. If liquidation is inevitable then the opportunity to voluntarily appoint a liquidator is usually required within 10 working days of the winding up proceeding being served so acting promptly following the statutory demand (or earlier) is advised.  Waiting until the service of the winding up proceeding is not a good idea and limits your options.

If you do nothing or you can’t reach a settlement, the IRD can apply for their preferred liquidator or Official Assignee and manage your affairs and liquidate your company. In this instance the Court will appoint the IRD’s liquidator. As company director you have less control over the process and must cooperate with the Court appointed liquidator or Official Assignee at all times.

Deciding between involuntary and voluntary liquidation may not seem like much of a choice. Appointing a licensed insolvency practitioner that you believe understands you, your business and your industry, and who can consider your interests while satisfying the IRD’s demands provides more certainty of the likely outcomes. For example, with the liquidators approval, you may be able to be involved to help achieve better outcomes for your creditors and in doing so, you may reduce your own personal exposure from personal guarantees.  Your liquidator can apply specialist skills to remove some of the sting from this traumatic process.  Acting cooperatively with the liquidator is good advice.  If you would like more advice from experienced insolvency practitioners contact our team.

Statutory and formal IRD demands are outside threats to your business. There are just as many risks that can come from within, so how do you protect your business from those?

If your company is experiencing financial difficulty, download our free guide for NZ Companies to discover your different options.

WHAT SHOULD YOU BE CONSIDERING NOW?

1. Consider the risks of trading insolvently and how directors can be held personally liable.
2. Negotiate an instalment plan with IRD for historic arrears and have a plan in place. The Inland Revenue have pressure to maximise the recovery for the Commissioner under the Tax Administration Act. They are willing to work with companies that communicate early on and this can save further interest/penalties.
3. Assess the viability of the business and its future. Prepare a cashflow forecast.
4. Where cashflow is an issue, consider compromises with creditors leading to some debt forgiveness and time payment arrangements or voluntary administration.

If the company has lost too much and the prospects are that the company has minimal ability to repay creditors nor has a financial source to fall back on to offer a better position than what liquidation holds, then liquidation sooner may be the better option. Continuing to trade with knowledge of insolvency is a risk for the directors.

WE ARE HERE TO HELP
Our team are happy to discuss the options available for struggling companies and how to manage personal guarantees and personal exposure. Contact This email address is being protected from spambots. You need JavaScript enabled to view it.

If your company needs some advice on the restructuring options or is likely facing the prospect of liquidation, we are happy to advise on the process and consequences.

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

Many businesses are facing the strain from having paid employees holiday pay entitlements, a period where income has not been generated due to closure and then obligations such as November GST due 15 January, Paye due on 22 January, Oct to Dec FBT due on 22 January, provisional tax due on 15 January and for the larger employers more PAYE due on 5th of February. Some are now struggling with the reality that these obligations are overdue.

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 post-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 continues to worsen, and you 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.

Starting the 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 post-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.

The impacts of global unrest and overseas bank failures can have various implications for businesses in New Zealand:

1. Financial Instability:
• Market Volatility: Global unrest can lead to financial market volatility, impacting investment portfolios and affecting businesses relying on international trade.
• Credit Availability: Overseas bank failures or financial crises may tighten credit availability, affecting businesses seeking loans or lines of credit from international financial institutions.
• Exchange Rate Fluctuations: Currency fluctuations due to global instability can impact import/export businesses, affecting profit margins and pricing strategies.

2. Supply Chain Disruptions:
• Dependency on Imports: New Zealand businesses reliant on imports may face challenges due to disruptions in global supply chains, leading to delays in raw materials or finished goods.
• Export Market Instability: Instability in international markets could reduce demand for New Zealand exports, affecting sales and revenue streams.

3. Economic Impact:
• Decreased Consumer Confidence: Global uncertainties can lead to reduced consumer confidence, impacting spending habits and local businesses' sales.
• Investment Climate: Uncertainty may lead to a cautious investment climate, affecting local businesses seeking foreign investments or partnerships.

4. Financial Security and Risk Management:
• Risk Mitigation: Businesses need to review their risk management strategies, diversify suppliers, and explore hedging options to mitigate currency and market risks.
• Reviewing Banking Relationships: Assessing banking relationships and considering local banking options for stability and security in case of global banking uncertainties.

5. Regulatory Changes:
• Impact on Regulations: International financial crises may prompt changes in global financial regulations, which could indirectly impact New Zealand businesses, especially those operating internationally.

6. Government Interventions:
• Policy Changes: Government interventions or policy adjustments may occur to counteract the effects of global instability, affecting businesses through changes in taxation, trade policies, or economic stimulus packages.

In summary, global unrest and overseas bank failures can create ripple effects on New Zealand businesses through financial instability, supply chain disruptions, economic impacts, and changes in regulations. To mitigate these effects, businesses should focus on diversification, risk management, reviewing financial strategies, and staying informed about global developments impacting their operations. Additionally, maintaining flexibility and agility in responding to changing market conditions is crucial for business resilience in uncertain times.

If your company has been significantly impacted and is struggling contact one of the MVP team to discuss the options.

Personal guarantees (PGs) are regularly sought to secure trade terms for company debt. Understanding the implications of PGs in the event of a company's failure is critical for both business owners and stakeholders.

1. Personal Guarantees Defined:

Personal guarantees represent a commitment by an individual, often a company director or shareholder, to take responsibility for a company's debts or obligations in case of default. These guarantees provide lenders with an added layer of security when extending credit to businesses.

2. Impact of a Failed Company and Personal Guarantees:

When a company fails, and it's unable to meet its financial obligations, the presence of personal guarantees ties the guarantor (often the director) to the debt. In such instances, the guarantor becomes personally liable for the outstanding debt (the balance the company does not pay), which could have significant financial and legal consequences.

3. Bankruptcy in New Zealand and Personal Guarantees:

In New Zealand, personal bankruptcy entails a legal process where an individual unable to pay debts is declared insolvent. Personal guarantees can exacerbate the situation for guarantors. In such cases, creditors can pursue the guarantor's personal assets (following a Court judgment) to recover the outstanding debt and failing payment, can opt to issue a bankruptcy notice and following that bankruptcy proceedings.

4. Legal Ramifications:

The consequences of personal guarantees in bankruptcy can include:
• Credit Rating Impact: Bankruptcy resulting from personal guarantees can significantly impact the guarantor's credit score, affecting their ability to secure credit in the future.

• Legal Proceedings: Guarantors may face legal actions to enforce the personal guarantee, leading to additional costs and stress.

• Bankruptcy: Guarantors may face a bankruptcy notice and then a legal proceeding and potential adjudication as bankrupt if the debt is not settled or paid

5. Mitigating the Risks and Seeking Advice:

Given the weighty implications of personal guarantees in case of company failure, individuals considering signing such agreements should proceed cautiously. Seeking legal advice before committing to personal guarantees is crucial to understanding the extent of liability and potential risks involved.

6. Alternative Risk Mitigation Strategies:

Exploring alternative risk mitigation strategies, such as limited liability structures, insurance options, or negotiating for limited or conditional guarantees, can help minimize personal exposure in case of company insolvency.

In conclusion, personal guarantees in the context of company failures carry substantial ramifications for guarantors. Directors and individuals should carefully evaluate the potential risks before committing to personal guarantees, seeking legal advice to fully comprehend the extent of liability and exploring alternative risk management strategies to safeguard personal assets. Being well-informed and proactive can significantly mitigate the financial and legal impacts of personal guarantees in times of business distress.

If you are facing pursuit of many company debts that you have personally guaranteed, an option is to reach informal settlements but care needs to be taken to not give preference.  An option is to consider a Part 5 Subpart 2 proposal under the Insolvency Act 2006. To discuss your options contact MVP team.

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..

In our 35th Insolvency by the Numbers, we look at our data set for September 2023 and past years to see how the month has tracked and what may be coming up in the coming months.

With September coming to an end, we are in the last two weeks of NZ’s latest election campaign. As predicted it has been a month of promises and debates from all parties. Unsurprisingly like with a lot of our past elections there is a level of uncertainty across all markets from housing, the economy and the stock market.

The September OCR announcement once again saw no change to the rate, however heavy emphasis was given to the idea that we may be in line for further raises, potentially in November of this year before the Reserve Bank breaks for three months over Christmas.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Company insolvency appointments for September 2023 combined across all insolvency types continue to outnumber all years back to 2019. Compared to the 2022 figures, 2023 is up on prior Septembers sitting at 165 for the month. You will note that the gap in August 2023 figures has also grown with late advertised appointments that ended the month at 195.

Across the board with the exception of court appointment liquidations the numbers have been right on the average. Court appointment liquidations were twice the long term average at 63 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.

September total corporate insolvency figures for the year to date remain within a stones throw of 2019 figures. The 2023 year to date fell short by 1 appointment when compared to 2021 year-end figures.

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

Winding Up Applications

September saw a slight drop from August but remains above past Septembers. 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. So, a longer sustained lift rather than a June/July spike and drop off.

In September, there has been a consistent rise in the total number of winding up applications compared to past Septembers. For instance, in September 2021, there were 27 applications, with 10 being company winding up applications and 17 being IRD winding up applications. September 2022 saw an increase, with 49 total applications, including 14 company winding up applications and 35 IRD winding up applications. September 2023 continued this upward trend, with 82 applications, consisting of 38 company winding up applications and 44 IRD winding up applications.

From the below graph we continue to see that IRD’s September 2023 winding up applications now makes up just over 50% of all creditors and is a rather sudden drop when looking at the last 3 months. 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 looking very similar to 2022 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 when the first credit card bills come in over February.

Election Graphs

While there is a lot of focus on the economy and cost of living from all parties and their respective policy’s focusing on it accordingly, the numbers show that total insolvency appointments remain behind the last two elections. This is largely the result of very low personal insolvency appointments and insolvency figures being a lagging indicator for the economy as a whole.

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..

Running a business is a rewarding venture, but it also comes with its fair share of challenges. One of the most critical challenges a business can face is the threat of insolvency. Insolvency refers to a situation where a company is unable to meet its financial obligations and pay off its debts when they become due. If left unaddressed, insolvency can lead to the collapse of the business, affecting not only the company's owners and employees but also suppliers, creditors, and other stakeholders. We discuss some key warning signs that indicate when a business is in serious danger of insolvency and what actions can be taken to address the situation.

Key Warning Signs indicating a serious danger of Insolvency

1. Unable to Raise Working Capital and on Stop with Key Suppliers: Working capital is the lifeblood of any business, and without adequate funds to cover day-to-day expenses, a company can quickly find itself in trouble. If a business is unable to secure working capital and, as a result, its key suppliers place it on stop, it is a clear indication of financial distress. This can lead to a vicious cycle where the inability to pay suppliers leads to a disruption in the supply chain, affecting production and sales, and further exacerbating the financial problems.

2. Consistently Under Break-Even Point with Turnover: A break-even point is the level of revenue at which a business's total costs equal its total revenue, resulting in neither a profit nor a loss. Consistently operating below the break-even point is a sign that the company is not generating enough revenue to cover its fixed and variable costs. This means that the business is running at a loss, making it difficult to sustain operations in the long run.

3. Not Able to Meet Outgoings with Revenue: Meeting regular outgoings, such as rent, payroll, utilities, and loan repayments, is crucial for maintaining the day-to-day operations of a business. If a company finds itself struggling to meet these obligations using its revenue, it may be an early warning sign of impending insolvency. Borrowing to cover these expenses or deferring payments can provide temporary relief, but it does not address the underlying financial issues.

4. Being Put Under Formal Review by the IRD: When a business faces severe financial problems, it may come to the attention the Inland Revenue Department (IRD) who may initiate a formal review to assess the company's financial position and tax compliance. Being subject to such a review indicates that the business's financial situation has raised concerns and warrants closer scrutiny.

5. Unable to Take a Company Loan Secured Over Company Assets Without a Personal Guarantee: If a business seeks additional financing but is unable to secure a loan solely based on the company's assets and financial standing, it is a sign of limited creditworthiness. Lenders often request personal guarantees from business owners as a way to reduce their risk when the business's financial health is in question. Having to provide a personal guarantee puts the owner's personal assets at risk, and it highlights the lack of confidence lenders may have in the business's ability to repay the loan.

Actions to Address Insolvency:

When a business faces signs of insolvency, swift action is essential to increase the chances of survival. Here are some steps that can be taken:
1. Seek Professional Advice: Engage with licensed insolvency practitioners or financial advisors, accountants, or business consultants who have knowledge of insolvency and restructuring. They can provide an objective assessment of the company's financial situation and recommend appropriate measures.

2. Implement Cost-Cutting Measures: Review all aspects of the business to identify areas where costs can be reduced without compromising core operations. This may involve renegotiating contracts, reducing overheads, or streamlining processes.

3. Negotiate with Creditors: Open communication with creditors is vital. Negotiate new payment terms or repayment plans if possible. Showing a commitment to resolving outstanding debts may lead to more favourable arrangements.

4. Explore Financing Options: Investigate alternative funding sources, such as equity investments or asset-backed financing, to inject much-needed capital into the business.

5. Consider Business Restructuring: If the financial situation is dire, consider restructuring the business to improve efficiency, focus on profitable areas, or even seek a merger or acquisition.

6. Develop a Realistic Turnaround Plan: Create a comprehensive plan to guide the business out of potential insolvency. Set realistic financial targets and milestones to measure progress.

7. Comply with Legal Obligations: Ensure the business is compliant with all tax and legal requirements. Avoid issues with IRD by addressing any outstanding tax matters promptly.

Recognizing the early warning signs of insolvency is crucial for business owners to take proactive steps and mitigate potential risks. Seeking professional advice and taking appropriate actions can help a struggling business regain its financial stability and chart a course towards long-term success. Remember, it is essential to act promptly and decisively to give the business the best chance of survival. Taking early action is also protection for a director.

In business, companies often experience fluctuations in performance and face various challenges. However, distinguishing between temporary setbacks and a persistent decline is crucial for business owners and stakeholders. Recognizing the early warning signs of a company in decline allows for timely intervention and strategic decision-making. In this article, we will explore key indicators to identify a company in decline, ranging from business performance and staff morale to reputation, market perception, financial distress, and cash flow crisis.

Key indicators to identify a company in decline

1. Business Performance: One of the most evident signs of a company in decline is a consistent decline in business performance. This decline can manifest through decreasing sales revenue, declining profits, eroding market share, or diminishing customer retention. Key performance indicators (KPIs) such as sales growth, profit margins, and customer satisfaction scores can provide valuable insights into a company's trajectory.

2. Staff Morale: Employee morale is a reflection of the overall health of a company. A decline in staff morale is often linked to several factors, including uncertainty about the company's future, decreased job security, lack of recognition, and poor management. High employee turnover, increased absenteeism, and a general sense of dissatisfaction among the workforce are warning signs that should not be ignored.

3. Reputation: A company's reputation is a vital intangible asset. Decline in reputation can stem from various factors, such as product quality issues, ethical misconduct, poor customer service, or negative media coverage. A tarnished reputation can lead to a loss of trust among customers, suppliers, and partners, resulting in reduced business opportunities.

4. Market Perception: The way the market perceives a company can significantly impact its performance. A decline in market perception may be indicated by negative reviews, declining brand loyalty, or customers expressing dissatisfaction on social media platforms. Market perception directly affects consumer behaviour, and negative sentiments can lead to reduced sales and revenue.

5. Financial Distress: The financial health of a company is a fundamental aspect of its overall well-being. Warning signs of financial distress include increasing debt levels, declining liquidity, deteriorating credit ratings, and difficulties in meeting financial obligations. Companies facing financial distress may resort to cost-cutting measures, layoffs, or asset sales as desperate measures to stabilize their finances. A financial health check is recommended. Try our checklist here.

6. Cash Flow Crisis: A cash flow crisis occurs when a company lacks sufficient cash inflows to cover its operational expenses and debt obligations. It can be a result of slow-paying customers, a decrease in sales, or poor financial management. A company experiencing a cash flow crisis may struggle to pay its suppliers, meet payroll, or settle outstanding debts on time.

Warning Signs and Early Intervention:

Identifying these warning signs is crucial, and early intervention can prevent the decline from worsening. Here are some proactive steps to address a company in decline:
1. Conduct a Comprehensive Business Analysis: Perform a thorough assessment of the company's financial statements, market positioning, customer feedback, and employee engagement surveys to gain insights into the root causes of the decline.

2. Develop a Turnaround Plan: Create a well-defined and realistic turnaround plan, outlining specific actions to address the identified issues and revive the business. The plan should be based on data-driven insights and focus on sustainable growth. Consult professionals if you need help.

3. Strengthen Leadership and Management: Evaluate the effectiveness of the leadership team and make necessary changes to bring in experienced leaders who can guide the company through challenging times.

4. Engage with Employees: Communicate openly with employees to address their concerns, boost morale, and foster a culture of collaboration and innovation.

5. Rebuild Customer Trust: Invest in improving product or service quality, customer service, and addressing any complaints promptly to regain customer trust and loyalty.

6. Seek Professional Advice: Enlist the help of business consultants, financial advisors, and industry experts who can offer objective perspectives and guidance.

Identifying a company in decline is vital for taking timely action to reverse its course and safeguard its future. By being vigilant about business performance, staff morale, reputation, market perception, financial distress, and cash flow, business owners and stakeholders can address the root causes of decline and chart a path towards sustained growth and success. Proactive measures and decisive decision-making are crucial for transforming a company in decline into a thriving and resilient organization. If the warning signs suggest that the company has passed its use by date, then contact licensed insolvency practitioners for advice on the best way to wind down the company.