Background
ABC Building Contractors Ltd (ABC) specialized in interior finishes on building contracts. They were hit by a relatively large debt when a company that owed them a considerable sum went into liquidation. ABC had engaged a sub-contractor for that job and because they were not paid, they, in turn, refused to pay the sub-contractor.
The director of ABC, a recent immigrant to New Zealand whose English was clearly a second language, had the simple view that as his company had not been paid, the sub-contractor that he had engaged on that job, was not entitled to be paid. Naturally, this did not suit the sub-contractor who issued proceedings which eventually resulted in a Court ordered for the liquidation of ABC.
Our appointment
We were appointed on a Friday afternoon, froze the company’s bank account, and met with the director early Monday morning. It transpired that the director had been unaware of the ramifications of the liquidation order. It was swiftly ascertained that the company had a substantial credit balance in the bank account as well as other assets. Assets exceeded liabilities (including liquidation costs) by some $100,000.
Further proceedings
The director was referred to an insolvency lawyer to advise on a potential s250 application to discharge the company from liquidation. We then proceeded to confirm the financial position of the company and worked with the insolvency lawyer to assist the director in having the company returned to him. This resulted in all known creditors being paid in full, a modest liquidation fee and a return of funds to the company when discharged from liquidation two weeks after the liquidation order.
Note
Although this is an example of a company being saved (something that Waterstone tries to achieve where possible) and creditors being paid, the situation could have been avoided had the director, in the first instance, seeking the appropriate professional advice on receipt of the statutory demand from the sub-contractor. An expensive lesson.
*Name changed
