Liquidation usually occurs when a company becomes insolvent, which means it is unable to pay its debts when they are due or if its debts exceed its assets. A liquidator is then appointed to take the appropriate steps to either re-organise the affairs of the company or wind it down effectively and in accordance with NZ insolvency law.
Process
There are multiple ways that a company can be placed into liquidation. In most cases, the shareholders will elect to voluntarily appoint a liquidator if the company is in distress and is unable to meet its obligations.
A resolution that appoints a liquidator is normally a special shareholder resolution requiring 75% of the shareholders to sign, depending on the company constitution (if it has one).
In most cases, a board resolution is not enough to place a company into liquidation, unless the company’s constitution allows the board to do this.
Another way a company can be placed into liquidation is by the Court following service of a statutory demand and application to liquidate made by a creditor.
Once appointed, the liquidator will:
- Make a rapid assessment of the company if it is still trading
- Investigate the affairs of the company
- Secure the company records and information
- Take charge of the company assets
- Realise the assets of the company
- Distribute the assets in a priority according to law
- Report any serious problems to MBIE
- Report on progress 6 monthly to the creditors and shareholders
To find out more about liquidation options and how we can help you, get in touch with our team so we can advise you on the appropriate way forward.