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It’s often easiest to come in and chat about what you need and the first meeting is free, with no obligation.
If you’re involved in a business facing insolvency issues, then Brenton is here to help. Brenton can assist in rescuing the company or if that’s not possible, work hard to ensure the insolvency process is completed quickly, efficiently and smoothly.
Brenton is Licenced Insolvency Practitioner (IP84), member of Chartered Accountants Australia and New Zealand (CAANZ) and a member of Restructuring Insolvency and Turnaround Association of New Zealand (RITANZ). He has 28 years’ experience working in various industries as an accountant, and 10 years working in insolvency.
Brenton operates from the company Insolvency Matters Limited.
Before working in insolvency, Brenton worked for several organisations which were facing serious cash-flow constraints, so he’s been on both sides of the fence and knows the daily headaches that stakeholders often face. Brenton can assist in working through solutions and advising of the various options.
For a free, no obligation meeting, please contact Brenton now.
For more information, contact Brenton at Insolvency Matters.
There are various insolvency tests you can do to check if your company is insolvent or not. These include balance sheet (i.e. more liabilities then assets) or cashflow (debts are not paid when they are due). The main signs are that creditors are falling outside of their payment terms, IRD assessments are falling behind, no credit with suppliers, wages not being paid etc.
The Companies Act 1993 is explicit in that if a company is insolvent and the director continues to trade the director is facing some risk. In effect if the director is trading with creditors money (i.e. amassing creditor debt which the company can’t easily repay) then they can be held personally liable for that debt.
Reckless trading is where a director is consistently trading a company while it is insolvent in effect using the company’s creditor’s money and putting them at risk of not being paid.
Pursuant to the Companies Act 1993 the director can be held personally liable for the debts of the company it they trade it recklessly.
If the company is insolvent and you continue to trade then you run the risk of being personally liable for the debts of the company. Also when the company is insolvent it is often to hard continue to trade as you run out of working capital and can’t get trade supplies etc.
Liquidation means that you hand everything over to the liquidator who then wraps everything up in smooth efficient manner and ensures that all creditors are paid in the correct order.
A receiver is appointed by a General Security Agreement holder with a focus to satisfy their appointer’s debt. A rec`eivership can be turned off once the debt has been repaid to the General Security Agreement Holder in effect handing the company back to the director. Receivers duties and powers are defined by the Receivership Act 1993.
A liquidator is appointed by either the courts or by shareholders and is there to complete the orderly dissolution of the whole company, compared to the receiver who is only realising assets subject to the General Security Agreement security. A liquidator’s duties and powers are defined by the Companies Act 1993.
A current account is like you’re a shareholder’s overdraft with your company, you take drawings and it goes up, you put money into the company it goes down, when your accountant allocates a shareholder salary or a dividend it goes down. At liquidation often a shareholder will have an overdrawn current account which in effect is an asset of the company and the shareholder will be expected to repay this. In particular this happens when a shareholder has been taking drawings rather than wages.
In reality this can be difficult as the shareholder may have poured all of their funds into the company.
After seeking professional advice often, the best course will be to liquidate the company. The liquidator then ensures that the balance of funds are allocated in the correct manner.
If a director has breached s386A Companies Act 1993 then they can be personally liable for the debts in the new company (in effect losing the limited liability status). If the sale of the assets of the business of the old company has been done pursuant to s386D then the director will not be liable for the debts.
If a director has traded a company badly then vested parties, including the liquidator, can make a complaint to the Integrity and Enforcement Team of the New Zealand Companies Office/Ministry of Business Innovation and Employment to have them banned as a director.
If you have personally guaranteed company debts then the creditor will expect you to pay the debts you have guaranteed. Lots of people forget about signing these when the open the trade accounts and are surprised when a liquidation or a receivership commences. In addition, often leases and high purchase agreements include personal guarantees, meaning the director / shareholder could face sizable liability after liquidation.
Liquidation relates to a company, bankruptcy relates to an individual.
Always a difficult question as sometimes it can take some time to resolve matters and the timeframe will vary on each project. Seldom would a liquidation take less than six months and it is often completed within twelve months.
If a director has consistently not paid IRD assessments for PAYE and GST, then the IRD may look to prosecute pursuant to the Tax Administration Act 1994. PAYE deductions from wages are held in trust for the crown and the non-payment of these can be prosecuted by the IRD. This is a serious matter and in some circumstances can involve prison sentences. If you are concerned about this please discuss it with your professional advisor ASAP.
Once a liquidator has realised the assets of the company, and this can often take some time, they will then look to disburse pursuant to Schedule 7 of the Companies Act. In effect this is liquidator’s fees, then preferential staff, IRD core assessments, secured creditors (who have not been satisfied with direct secured assets), then unsecured creditors equally.
Employees have a preferential position for any wages or holiday pay owed at liquidation up to $22,160 (this figure regularly increases) providing the money is not owed from longer than four months before liquidation. As soon as the liquidator has collected enough money they will look to pay staff their preferential debt.
A statutory demand is a demand for payment of an overdue debt. The debtor has 10 days to dispute the debt, or 15 days to settle it. If not settled after the 15 days the creditor can petition the courts to have the company placed into liquidation. The creditor effectively has one month from the expiration of the statutory demand to petition the courts.
A shareholder can place a company in voluntary liquidation during a statutory demand process but once the company has received issued of proceedings for placing the company into liquidation they can’t.
A liquidator prepares an initial report (5 working days for voluntary liquidations, 20 working days for court appointed) and then reports on a six monthly basis during the course of the liquidation. These reports summarise the progress of the liquidation and if any distribution has been made to creditors.
It’s often easiest to come in and chat about what you need and the first meeting is free, with no obligation.
