Common myths about insolvency
Myth 1: A director of a company in liquidation can’t be a director moving forward Right or wrong, it is true that a director can place a company into liquidation and immediately establish a new company. A director can be banned from being a director by MBIE, or if they are made bankrupt, they cannot […]
A brief history of bankruptcy: From debtor’s prison to second chances
The famous novel Robinson Crusoe tells the story of a man who is shipwrecked on a desert island, where he spends 28 years building shelters, hunting goats and passing the time with a dog and cat that he rescued from the shipwreck. But few know the author of Robinson Crusoe, Daniel Defoe, was an entrepreneur […]
Where does the money go, and how do liquidators get paid?
The distribution of funds in a liquidation process depends on where the money came from in the first instance. In a liquidation, a company’s assets are sold to generate funds to pay creditors and settle debts. The sources of revenue in a liquidation include: Assets that are subject to security The most obvious example is […]
Understanding funding creditor agreements in New Zealand
When companies enter liquidation, unsecured creditors often face the prospect of significant losses. However, New Zealand’s Companies Act 1993 provides an innovative mechanism that allows these creditors to take a more active role in the recovery process, potentially improving their chances of repayment. The legal framework Under clause 1(1)(e) of Schedule 7 of the Companies […]
Bankruptcy workflow
How does a person end up in bankruptcy? Perhaps surprisingly the road to bankruptcy is a long one and requires many court filings before adjudication occurs. Firstly, judgment needs to be obtained against the person. This in itself is an entire legal proceeding which can take many years if complex. The judgment obtained is not […]
Cross-border insolvency in New Zealand: an overview
Cross-border insolvency refers to situations where insolvency proceedings implicate multiple jurisdictions. Even though foreign creditors may have a security interest recognised in their jurisdiction, they must ensure that their interest is perfected under New Zealand legislation to retain priority over other creditors. Recognition of proceedings may not be unilateral: New Zealand recognises foreign proceedings, but […]
Receivership, a broad overview
Introduction A receivership is an appointment made by a secured lender (typically a bank or finance company) who have a security in assets of the debtor company. Almost all receiverships are appointed by secured creditors who have a General Security Agreement (GSA) granting the finance company a security interest in all present and after acquired […]
Directors’ duties to insolvent companies, and the risks
Directors of insolvent companies who fail in their duties, may be held personally liable for losses caused by their actions or injurious omissions. Insolvent companies Firstly, when is a company insolvent? The Companies Act 1993 (the Act) defines a solvent company, using two limbs as when: However, some cases indicate that the primary consideration is […]
NZ business incorporation rate slowdown signals looming surge in liquidations
Statistics indicate a slowing growth rate of registered companies in New Zealand, predicting a potential rise in liquidations. Recent economic and business data reveal a complex landscape for New Zealand businesses. Business indexes such as the Performance of Services Index (PSI) and the Performance of Manufacturing Index (PMI) showed significant weaknesses in June 2024 not […]
Employees of a liquidated company
Many employees have concerns about the company they work for going into liquidation, and whether outstanding salaries will ever be paid. Unfortunately, this is a growing worry among New Zealanders because of the increasing number of national liquidations, largely attributable to the grim economic down-turn post covid. You should know your rights and entitlements should […]
