Articles

In our 41st Insolvency by the Numbers, we look at our data set for April 2024. We review how the month has tracked compared to prior months and years. In the last month we have seen the latest release of unemployment data showing a rise to 4.3% for the March 2024 quarter, with expectation that it may continue to increase. We have seen a decrease in inflation driven largely by tradeable inflation, meanwhile the non-tradeable inflation continues to remain high, showing we still have some work to do to get over inflation in NZ. The Reserve Bank has continued with no change to the OCR during the month with the next announcement due in May 2024 hoping to shed some…
Company liquidation can have significant ramifications not only for the business itself but also for its directors, particularly concerning their credit ratings and overall financial standing. When a company faces insolvency and enters into liquidation, directors may find themselves confronted with various challenges and consequences that extend beyond the dissolution of the company. In this article, we explore the impact of company liquidation on directors' credit ratings, the broader implications of association with an insolvent company, and strategies directors can employ to mitigate the effects. Impact on Directors' Credit Ratings: One of the immediate concerns for directors following company liquidation is the potential impact on their personal credit ratings. While company liquidation itself does not directly affect directors' credit scores…
Many companies find themselves facing financial distress and unable to sustain operations. Voluntary liquidation is a viable option for directors and shareholders to wind up the affairs of the company in an orderly manner. It is imperative to understand the process and implications in the legal landscape, governed primarily by the Companies Act 1993 and the Personal Property Securities Act 1999. Understanding Voluntary Liquidation:Voluntary liquidation is a process initiated by the directors and shareholders of a company when it is deemed insolvent or unable to meet its financial obligations. This process involves the appointment of a liquidator, whose primary role is to realize the company's assets, distribute proceeds to creditors, and ultimately dissolve the company.Steps of Voluntary Liquidation:1. Appointment of…
In our 40th Insolvency by the Numbers, we look at our data set for March 2024. We review at how the month has tracked compared to prior months and years. Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations March 2024 insolvency appointments continue the trend seen last month being notably up in March 2023. Total appointments for the month were 291, this is 26% higher than 2023 and almost double each of the years back to 2019. March 2024 is 144 appointments above the long-term average of 147 monthly appointments. 2024 continues showing strong appointment figures exceeding the last 7 years for the cumulative total of the 3 months to date. As predicted March figures were up and we expect…
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…
Understanding the options available for struggling companies is important for all company directors in businesses facing financial challenges. The choice between receivership, voluntary administration, a company compromise or liquidation depends on the specific circumstances and the desired outcome for the company's stakeholders. Legal and professional advice is recommended to navigate these processes effectively.What are the options? Please refer to our other articles for more detailed explanation of each option.1. Receivership:• Definition: Receivership is initiated when a secured creditor appoints a receiver to manage the secured assets of a company. It's important to note that a company can simultaneously be in receivership and undergo liquidation or voluntary administration.• Process: The appointed receiver takes control of and deals with the assets that…
What is a Statutory Demand and When is it Used for Debt Collection? A Statutory Demand serves as a formal court notice compelling a debtor company to settle an outstanding debt owed to a creditor, marking the initial step in the legal process of initiating the "winding up" of an insolvent company in accordance with Section 289 of the Companies Act 1993. Essentially, a Statutory Demand functions as a litmus test for a Debtor Company, evaluating its financial viability by determining its ability to meet its obligations and settle debts promptly. It should however only be used as a debt collection tool if there is no dispute. A disputed debt has a different process to follow. A statutory demand should…
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…
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…
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…
In our 37th Insolvency by the Numbers, we look at our data set for November 2023 and past years to see how the month has tracked and what may be coming up in the coming months. We now have a coalition sorted giving people an idea of what is in store for the next 3 years, the Reserve Bank has kept the OCR stable and has said that rates will not be coming down till 2025 as expected. With Christmas fast approaching businesses are rushing around trying to complete work for customers before the year end when the customer has had all year to get it sorted but left it to the last minute, so business as normal for this…
Managing cash flow during the Christmas close-down period is crucial for businesses, as it often involves reduced operations and potential disruptions. Implementing proactive measures can help mitigate cash flow challenges during this time: 1. Forecast Cash Flow:• Prepare in Advance: Anticipate the impact of reduced sales or operations during the holiday period. Review historical data to estimate income and expenses accurately.• Create a Cash Flow Forecast: Develop a detailed cash flow forecast covering the close-down period. This forecast should include expected revenues, expenses, and any planned payments. 2. Adjust Payment Schedules:• Invoice and Payment Timing: Expedite invoicing before the close-down period to ensure prompt receipt of payments. Request early payments from clients or customers to improve cash flow before the…
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