Economic recap

The OCR continues its march on an upwards trajectory, with the latest Reserve Bank rise of 75 basis points to 4.25 and a supporting narrative outlining future raises in 2023 of up to 125 basis points to bring the OCR to 5.0 and over.

From an economic perspective there continue to be a number of factors affecting businesses. The labour crunch remains with immigration not making up for the continued brain drain as people leave on OE’s or delayed travel plans. Shipping and product delays continue with China’s lockdowns as they struggle to grapple with a continued covid outbreak. On the construction front while councils continue to catch up on the backlog of buildings consents keeping the monthly consent numbers at elevated levels. The vibe from people on the ground however is that 2023 is looking like a slower year moving forward, no doubt a number of the issued consents may lapse incomplete.

ANZ business confidence can be detailed quite simply with their own blurb from their website “Business confidence fell 14 points in November to -57, while expected own activity fell 11 points to -14, only 8 points shy of 2009 lows. Activity indicators fell. Residential construction intentions tanked. Employment intentions were negative for the first time since Oct 2020. Inflation pressures remain intense, though pricing intentions eased.” So generally, the feeling is 2023 is looking rough for businesses.

Of note from our own purely unscientific observations we have seen an increase in the level of enquiries coming into the office over the last few months and an uplift in both solvent and insolvent jobs. What this has been driven by is difficult to say but likely the above factors affecting businesses along with a recent increase in IRD collections action and the cut back in government businesses subsidies seen over the last two years since the commencement of Covid lockdowns.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

The elevated levels of appointments of the 3 prior months continued into October and November 2022.
Of interest November reached over 200 appointments for the first time in three years, Sept 2019 – 206 being the last time.

The breakdown of total appointments saw a constant levels of solvent appointments, court appointments and receiverships, the jump was seen in insolvent shareholder appointments jumping by almost 50% of earlier months from 67 in September, 83 in October to 115 in November.

The media has taken a recent interest in insolvency appointments in particular tiny home builders and Voluntary Administrations appear to be the flavour of the month. Where administrators have been appointed the recent trend of combining the appointment with a receivership to tie up creditors powers continues by a few practitioners.

From a yearly point of view total appointment figures for 2022 after 11 months are above the full 2021 calendar year. At this point it appears likely total appointments will exceed 2020 appointments before the year is out but are unlikely to reach 2019 levels as December is typically a slower month overall with the Christmas break and courts shutting.

Winding Up Applications

The gradual drop often seen over the 2nd half of each year changed in both October and continued on further in November 2022. This was a higher monthly total winding up applications than any other month in the last two years.

While corporate applications have risen, IRD applications continue to do the bulk of the heavy lifting in total applications. IRD will have a back log of derelict debtors from the last two years and are only now beginning to play catchup. How far this continues into 2023 as an election year will be a question yet to be determined.

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

While there has been a jump in corporate appointments this has not been reflected in personal insolvency appointments. The numbers continue to track down to lower levels than prior years.

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.

How confident are you of your business's financial health? More importantly, what is the data that you've used to arrive at this conclusion? If the answer to these questions is that you 'think' your business is in trouble because your gut tells you it is, then you're probably right. 

A gut feeling however, may not tell you how much trouble your business is in, which is important. Measuring financial distress is helpful as the potential solutions available for companies in distress can change depending on the severity of the problems, and it is beneficial for all parties that problems are dealt with before the impact on creditors is made worse.

Instead, what you should be using is a tried and tested system that takes your firm's financial data, crunches the numbers and produces an accurate measure of corporate financial health. Better yet, the results should be presented in such a way that directors can easily compare their firms to others that have become insolvent. Fortunately, there's simple way to work out exactly where you stand. Enter, the Z Score. 

About the Z Score

In a nutshell, the Z Score is a quick and simple way of estimating the likelihood of financial distress at some point in a company's future. The system was developed by Edward I. Altman in 1968, while he was an Assistant Professor of Finance at New York University. At the time, Altman was looking for a way to easily distinguish between financially healthy businesses and others with more risk. He used data from 66 publicly held manufacturing brands - 33 of which had filed for insolvency - and came up with an intricate formula that would combine key financial ratios in order to arrive at a 'score.'

There can be a lot of variation between Z Scores, but in general the most important consideration is whether the number is greater or lower than three. If a company's Z Score is 2.99 or below, the chances of financial distress in the next two years are pretty high, while anything below 1.80 indicates that the company is already in significant financial distress.

It's not the most precise system in the world, but that's because Z Scores aren't actually supposed to reveal when or why a company is going to become insolvent. Instead, the Z Score simply shows how similar a company's situation is to other businesses who have filed for insolvency. 

Workout out your company's Z Score can be quick and easy - just use our calculator.

Accurately calculating your company's Z Score

A Z Score can provide you with an instant indication of how stable your company is, but how accurate are the results really? Well, in Altman's initial tests, the Z Score was discovered to be 72 per cent accurate in terms of predicting company bankruptcy (insolvency) two years early. By the year 2000, after some refinement, that number had risen to between 80 and 90 per cent. 

For an example of Z Scores at work, Business Insider points out the work of Morgan Stanley, strategy analyst Graham Secker, who used the system to rank various European companies, finding "that a company with an Altman Z Score of less than 1 tended to underperform the wider market by more than 4 per cent."

If you're at all worried about your business, finding out its Z Score is an absolute necessity, but surely that requires all sorts of complex spreadsheets and powerful computer software, right? Not at all! Calculating a Z Score is quick and easy when you use the McDonald Vague Z Score Calculator. All you'll need are a few key bits of financial information. These are:

• Total assets
• All current and long-term liabilities 
• Retained earnings
• Earnings before interest and taxes (EBIT)
• Market value
• Net worth (total assets minus total liabilities) 
• Sales

Of course, working out a Z Score is just the start of things. If the results aren't good, you'll need the right help to either turn your business around or provide alternatives. McDonald Vague can assist, so get in touch with our team to find out more.  

Economic recap

With the third quarter of 2022 inflation results coming in at 7.2 well above a number of economists and banks predictions of 6.5 we will likely be seeing jumps in the OCR at a steeper rate than expected with the next rate rise projected to be 75 – 100 basis points up from the prior estimation of 50 points. This will keep the pressure on homeowners with mortgages and businesses with lending as consumers role off fixed rates. With inflation well above the target levels of 1%-3% business continue to struggle on with constrained capacity and labour issues.

Leading into the Christmas period we will no doubt see the seasonal jump in retail sales followed by regional growth as holiday makers vacate the city centres for the traditional January break away. How this will affect insolvency figures will no doubt follow the usual course as businesses wind down as they head into Christmas and courts close for the break we will see the usual lower Dec and Jan figures. The question will be in the lead up months of Oct and Nov will the heightened levels seen in the last 3 months carry on, time will tell.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Corporate insolvency appointments in September saw the usual drop for this time of year but appointments for the month remain above the past two years, likely a result of elevated winding up applications from the past two months beginning to flow through with a chance to remain elevated to the end of the year.

What we did see during the month was the continued elevation in Receivership appointments at 9 however total appointments remain below the 2021 levels at this stage.

Winding Up Applications

September saw a continuation in the gradual drop-in total appointments, but the levels remain in the higher end of appointment in the 2022 year when compared with earlier months. From the above graph you can see the drop was directly attributable to the IRD drop in winding up applications. This is likely in part due to the end of year wind down as IRD collection slow in the lead up to Christmas and won’t kick off again till February.

The above figures are however difficult to compare to August/September 2021 due to the lock down that took place at that time.

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

Personal insolvencies have seen a lift on past months numbers largely related to Debt Repayment Orders and No Asset Procedures. While September 2022 is above the 2021 figures these are not an accurate comparison as we were in lockdown at this time last year.

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..

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 you doing it? Are you risking or spending your personal equity in a business that is out of fashion or no longer sustainable?

When was the last time you asked yourself these questions? If the answer to the first is no, and there is no realistic prospect of a change in your circumstances, then you should get advice. Your personal equity may be at risk.

SIGN 2: THE IRD IS ASKING QUESTIONS

The IRD will only investigate a business if they see activity that is in some way out of the ordinary or you are in arrears. If the IRD is requesting an investigation, then it’s a sure sign you’re not compliant and need to clean up your accounting in terms of your tax obligations. Speak to your accountant immediately about how you might be in breach of your obligations.

If you are in arrears contact the IRD and arrange a repayment plan. If you are suffering from hardship you may qualify for a debt reduction or some form of relief.

SIGN 3: YOU’RE STRUGGLING TO PAY DEBTS

- Are you juggling money from one account to another in order to find the cash available to pay your debts?
- Are you finding it difficult to restock shelves?
- Is your overdraft exceeding its limit regularly?
- Have you lost key customers?
- Are you missing forecasts and budgets?
Answering yes to any of these questions suggests a poor cash flow strategy, and it can sink a business if caught unawares. You could also be in breach of your Director’s Duties if you do not have enough funds to pay your debts as they become due.

Speak to your accountant or an insolvency specialist about your debt situation. A simple solution might be to tweak your terms of trade, use invoice factoring, or to seek a creditor compromise to pay down debt over time. You may be able to give yourself more of a cash flow buffer to create a successful business turnaround.

SIGN 4: YOUR BEST STAFF ARE LEAVING

If they sense the ship is sinking, are your staff going to brave those stormy waters instead of staying on the boat? Oceanic metaphors aside, if you’re seeing a huge exodus of staff, this could be a clue that your company is in trouble.

Luckily, you have an opportunity here to hire some great minds who can help you turn things around. By hiring some clever people with great problem-solving abilities, you may be able to rescue much of what has been lost.

SIGN 5: YOUR ACCOUNTS ARE A SHAMBLES

Do you have a balance sheet that you’re regularly reviewing? When was the last time you reviewed a profit and loss statement? Do you know at any given time what your liabilities are or if your business passes the “Solvency Test”?

This is where a business turnaround specialist – like McDonald Vague – can help. We can spot issues in your business and help you repair them … before they result in insolvency or liquidation. Contact us now This email address is being protected from spambots. You need JavaScript enabled to view it. 

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 affecting commodity prices.

The Xero SME index saw a drop back by 6 points from June 22 highs that were still well above the index average. Businesses found that their days to be paid remained consistent at 23.5 days while sales fell 1.5%, the first decline in sales since Sept 2021.

Unsurprisingly the August 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.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Company insolvencies saw a jump in July 2022 to levels not seen since pre pandemic, of the 172 total appointments court appointments made up 44 of these, a doubling in court appointments compared to June 2022. We also saw the solvent appointments double from June 2022 figures back to the levels seen earlier in the year.

Of note in the year-to-date receiverships have been very low but did see a jump in July to double digits. The year to date however is well below past years figures. 2021 saw total receiverships of 88 whereas up to June 2022 total receivership were only 18. Add to this the 13 in July 2022 (largely work taken by Australian based practitioners) brings to total to 31 but still well below 2021 and prior year levels.

Winding Up Applications

July saw the IRD put in some heavy lifting around their winding up applications. Having pulled back following the August 2021 lockdowns July 2022 was the first time IRD have reverted back to putting serious pressure on debtors with a tripling in their winding up applications. Other non IRD creditors kept their pressure consistent. It was only a matter of time for this to occur given the doubling in IRD debt levels since the beginning of 2020. They could not “be kind” indefinitely.

We expect to see his increased level of IRD activity into the early months of 2023 where it will likely drop off. The reason behind this is that 2023 will be an election year and the IRD typically pull back on their enforcement action in election years.

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

Personal insolvencies were one of the few insolvency stats that saw a slow decline in July, this is not unsurprising however as it is normally a month or two behind corporate insolvency figures. The breakdown between Bankruptcy, No Asset Procedures and Debt Repayment Orders was consistent with earlier months.

As we see corporate insolvencies rise, we will likely see a rise in personal insolvency rates as personal guarantees get called up and director/shareholders begin to feel the pressure.

 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..

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 that vein inflation figures for the June Quarter saw inflation continue to increase bringing yearly inflation up to 7.3% slightly ahead of the economics and media prediction of 7%

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

June 2022 saw drop-in appointments in line with prior years. It remains the lowest June to date but starting off a lower base of total insolvencies for the year it is not unexpected.

Of note compared to prior months solvent liquidations have begun to tail off baking up only 18$ of total appointments while court appointments remain low at only 26% of total appointments. We will likely not see this rise until the winding up applications begin to peak, court appointments will follow in the coming months following this event.

Notable Mentions:

NZ Medical Association Placed into liquidation in July following an urgent liquidation recommendation from its board.

Insolvency by Industry

“Construction & Property Development” remain the largest chunk of the pie followed by “Accommodation & Food Services” makeing up over 60% of the total insolvency appointments in the month of June 2022.

Winding Up Applications

June 2022 saw a drop in winding up applications as non IRD creditors dropped off. IRD’s numbers have remained consistent, however.

We expect in the coming months IRD will likely be applying pressure to debtors to collect outstanding revenues. The reasoning behind this is IRD has 6 months remaining before we are into 2023 and an election year. Historically IRD have slowed their formal recovery proceedings in election years.

Given the large outstanding debt IRD currently has for PAYE, GST and income tax they will be wanting to get a wiggle on and bring those recoveries in.

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

The breakdown of personal insolvency figures continues to fluctuate with the only consistent one being No Asset Procedures making up 41 of the 102 appointments. Bankruptcies see a drop from 60 last month down to 39 this month with Debt Repayment Orders rounding out the last 22 personal insolvency appointments.

Of the 39 bankruptcies only 10 were the result of court appointments. We expect this will increase over the coming months if we see more corporate insolvencies, this leads to personal guarantees being called up after the business defaults.

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..

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 directors and shareholders of companies facing financial difficulties are tempted to simply abandon the company and fail to file an annual return and following the expiry of one year, the company is struck off. Failing to file an annual return is actually an offence under the Companies Act 1993. The shortcut approach comes with risks and the prospect of company restoration. The effect of strike off on a company that has not dealt with all assets and liabilities in the proper process can include:

• for a solvent company, share capital and capital gains are not distributed tax free, shareholders could be liable for tax on distribution and this can create overdrawn current account issues.
(To distribute capital gains tax free, they must be distributed after the liquidation process has started. The process is started by completing a resolution to liquidate a company)

• the forfeiture of tax credits held at IRD – which can only be refunded if the company is restored;

• the loss of losses carried forward and imputation credits (unless company restored);

• assets not distributed prior to strike off become crown property unless the company is restored;

• land and property held in the company name cannot be transferred;

• A strike off is not a means to avoid a contingent liability claim;

• A strike off is also not a means to avoid a s 385 prohibition notice;

• reinstatement by the Registrar is straightforward if the company is a party to legal proceedings and those proceedings commenced prior to removal;

• reinstatement by the Registrar is able to be advanced if the company was in liquidation or receivership or both at the time

• The court has a wide general discretion to restore a company to the register if it is satisfied for any other reason, it is just and equitable that the company be restored to the register (s 329(1)(b));

• there is no statutory time limit for restoration to occur;

• there exists the potential review by the Registrar that proper books and records have been kept under Sections 189 and 194 of the Act, records to include documents, minutes of meetings, resolutions of shareholders and directors, copies of written communications to shareholders, copies of financial statements and accounting records. (Failure to keep accounting documents at the Company’s registered office is an offence punishable by a fine of up to $10,000 for both the company and directors).

A company that has been restored to the register is deemed to have continued in existence as if had never been removed from the register: s 330(2). This means any interest/penalties that have been incurred in the period from strike off to reinstatement are due. It also means company records must be brought up to date.

The short form liquidation or formal liquidation process may be a more costly exercise but avoids the headache that can be faced with the consequences of a company restoration. The short-form removal process is best suited to a company that has little trading history and/or has held minimal assets, is subject to low commercial risk, and no contingent liabilities.  A solvent liquidation costs more than a short-form removal but minimises the risk of the company being reinstated through a creditor application.

An insolvent liquidation involves an independent licensed insolvency practitioner managing the winding down of the company and the appropriate dealing of assets and distributions.

For advice on the options and the best way to wind up a solvent or insolvent company contact our team at This email address is being protected from spambots. You need JavaScript enabled to view it. 

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 open from 31 July 2022, this will be something the ski fields, tourist operators and Queenstown are looking forward to. How this will affect business is to be seen if the hoped-for inflow of tourists eventuates. At present net migration for the year is negligible as New Zealanders take long delayed OE’s and trips out of the country in our long winter months. The brain continues, putting further squeeze on businesses trying to find the right employees.

The 25 May 2022 OCR announcement saw the Official Cash Rate bumped up 50 basis points to battle inflation, it was made clear that the intention is to raise it further between now and this time next year to try rein in inflation. Most of this has already been priced into mortgage and lending rates, however.

On the other hand, recently released GDP figures for the March Quarter show a drop of 0.2. We will require a further drop in the June quarter to be in a “recession”. This will have a negative effect on business confidence. Why does it take so long to work out a quarter's GDP figures in this digital age? The stats were released on 16 June 2022, a full 77 days after the quarter had ended. Timely information is useful information.

The NZ media has a new focus on insolvency especially the construction appointments and writing a story around it. Leading to uncertainty in various sectors.

Looking at the Xero SME index graph, May 2022 comes back down 6 points after Aprils jump up. The other factors measured in the Xero SME insights show sales tracking down, time to be paid tracking up and wages tracking upwards. All these factors will be making business harder.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

Solvent liquidations are beginning to return to normal levels in the month of May making up 34 of the 138 appointments. Court appointments however continue to remain low with only 25 appointments for the month, while shareholder-appointed insolvent liquidations make up 71 of the total appointments.

Comparatively with past year May’s this sets a new low, but this is typically the spot where appointments level off for the year and slowly decline into the Christmas months. As mentioned in numerous past articles on insolvency stats IRD still has a lot of work to do in taking enforcement steps against delinquent debtors, to emphasise the point only 7 of the 25 court appointments were the result of IRD applications to wind up in the month of May.

Notable Mentions:

The Tasting Shed Covid 19 and associated lockdowns brought an end to the TV chef Ganesh Raj’s West Auckland establishment.  DDL Homes Ormiston Receivers were appointed, and the company entered Voluntary Administration by the developments financer when concerns were raised about the construction progress
Jonesy Construction Another casualty in the construction sector of increased cost of goods and locked in pricing.  NZ Medical Association Budget and cashflow projection show that the financial situation was dire, and received an urgent liquidation recommendation from its board.

Insolvency by Industry

“Construction & Property Development” once again run away with the largest chunk of the pie. This is unsurprising for anyone with an eye one the media and constraints that have been affecting the sector in the last year and a half. “Accommodation & Food Services” help make up just under 60% between the two industry sectors, but this is to be expected given the continued closed borders and slowdown due to winter trading.

Winding Up Applications

May winding up numbers have managed to match 2021 levels. The difference in applicant creditors is quite noticeable, however. May 2021 saw IRD making up 77% of the applications while May 2022 sees IRD only making up 44% of the total applications. This remains the highest it has been as a percentage since October 2021 so shows IRD is beginning to pursue its extensive debtors list but still well below the level it should be at.

Notable Applications:

Property investment firm Propellor Property Investments and related entities have had winding up applications filed against them by IRD for unpaid taxes. The director has advised the applications have been dealt with and are strong arm tactics from IRD.

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

Personal insolvency figures remain below past years May levels. While the numbers have ticked up since April 2022 the lift saw a doubling in bankruptcy figures from 28 to 60 while No Asset Procedures were up 33% to 40 for the month. Debt repayment order figures dropped to single digits for the month.

Of note, court application bankruptcy proceedings have finally begun to catch up to debtor applications and were just under 50% of the total bankruptcy appointments. Previous months had seen court appointments making up only 1/3rd of the bankruptcies.

Notable Appointments:

Ex-All Black Rodney So'oialo and his wife Marilyn So'oialo (bankrupt) continue to be chased by debt collectors in relation to debts incurred in 2019 that remain unpaid. Debt collectors have had difficulty serving documents on Rodney So'oialo due to him working as a rugby coach in Sri Lanka and Malaysia.

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..

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;

Inflation
Increasing 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 affect their businesses.

Speaking to businesses and a reflection of the insolvency appointments we continue to see coming in, IRD remain restrained in their pursuit of delinquent debtors, shareholder disputes are making up a reasonable portion of appointments and staffing issues are what it causing concern rather than an inability to meet debts.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

April 2022 appointment figures have successfully met the April 2020 appointment levels. This was previously our lowest April as it was immediately after and during the first set of lockdowns.

Solvent liquidations made up 37 of the 95 appointments, which is rather high and in line with the level of solvent liquidations seen at the end of the financial year. Shareholder liquidation appointments made up only 36 appointments for the month well below the 2021 monthly average of 61 shareholder appointments and the March figure of 90 shareholder liquidation appointments.

Notable Appointments:

Armstrong Downes Construction The first of the larger wellington construction outfits to hit financial trouble, the fallout from this may take a number of months the be felt by other businesses in the construction space.

Insolvency by Industry

“Construction & Property Development” hold on to their largest sector award for April 2022 with the remainder of the pie graph being a bit more shared out than past months. “Professional, Scientific and Technical Services made up a 13% share on the back of a number of solvent appointments in the month and were closely followed by “Food and Accommodation Services”, who frequent the top 3 industries.

Winding Up Applications

Winding up applications while not quite reaching 2021 April figures are a positive upwards track from the beginning of the year. As seen in the below graph IRD has begun processing applications. They remain below their average of 54% of total applications with making up only 40% in April it is still a move in the right direction to recover the large amounts owed to them from companies.

Of the winding up applications in 2021 that turned into liquidations and were not settled IRD saw 56% of their winding up applications go to liquidation. For the 2022c year to date only 42% of IRD’s winding up applications have ended up in liquidation. Both percentages remain below their 2021 levels and show room for improvement before IRD is back on top of the collections they are responsible for.

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

While January 2022 was one of the lowest ever level for personal insolvencies April 2022 certainly gave it a good nudge trying to come in lower. The month saw only 28 Bankruptcies, 28 No Asset Procedures and 20 Debt Repayment Orders.

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.

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 to be absorbed by businesses. The owners are left with the option of price increases where possible or adjusting their business strategy and approach to deal with increasing costs.

Comparatively Xero has recently released their figures for SME’s with the SME index tracking up for the month of March 2022 and the debtor days dropping for collection all pointing to good signs for business. How this has been affected by the end of financial year tidy ups will be reflected in the upcoming April 2022 data.

As a country however we are heading into winter months after a 2nd lost summer of tourism, this will no doubt be tougher times for several industries. Along with China lockdowns causing further delays to shipping and supply lines. It is not yet clear sailing ahead for businesses in NZ. How reopened borders will play into this only time will tell.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

March is one of the higher months for insolvency appointments being the end of the financial year, March 2022 unfortunately came in lower than all prior years. Not only were solvent appointments down but this was also reflected in IRD court liquidations with the full pressure seen prior to March 2020 yet to return to the vigour in which IRD has chased overdue debtors in the past.

Notable Appointments:

Auckland’s Poke Bars x3 Liquidated due to lockdowns and increasing cost of produce squeezing margins.

Insolvency by Industry

“Construction and Property Development” businesses continue to dominate their sector of appointments with “Financial and Insurance Services” (largely solvent appointments) and “Accommodation and Food Service” businesses making up 62% of total appointments for the month.

Winding Up Applications

By comparison winding up appointments for March 2022 were lower than the 2021 figures. Of note is that the drop is seen in the number of IRD winding up applications with non IRD applications only slightly down in the same period from 2021.

For the lower IRD applications is it likely that businesses are no longer racking up unpaid IRD debts? Have all the bad or dodgy operators suddenly changed their stripes and reformed their ways? This seems unlikely and it is more likely that the IRD is now sitting there with a growing list of delinquent debtors that they will have to do something about………eventually.

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

While the total amount of personal insolvency appointment grows, they remain well below all prior March figures. The telling point for the year will be April where we see a dip in numbers or continued growth as we saw in 2019.

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