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Reckless and Insolvent Trading Rules:

Continuing to trade while insolvent may see a director charged with reckless trading resulting in personal liability for the debts incurred by the company.  Under section 135 of the Companies Act 1993, a director of a company must not cause or allow the business of that company to be carried on in a manner that is likely to create a substantial risk of serious loss to the company’s  creditors.      The focus is on whether the manner in which the company’s busine...

September 28, 2020

Covid 19 Special Update

Covid-19 Special The true financial impact on businesses in light of the Covid-19 virus and the subsequent lockdown is about to be felt in the near future. We recommend that if your business or someone you advise is experiencing cashflow and solvency issues to seek advice as soon as possible. Too often as members of the Restructuring, Insolvency &  Turnaround Association of New Zealand (RITANZ) we see directors of insolvent company’s too late and there is no option but to liquidate. Ther...

May 5, 2020

WHAT IS THE ROLE OF A RECEIVER?

What is the Role of a Receiver? A Receiver is appointed either under a general security agreement (GSA) or a deed, or less  frequently, by the High Court. Receivers are most commonly appointed over all present and after-acquired personal property and undertakings of the company but can also (subject to the security agreement) be appointed over specific assets. A Receiver is usually appointed for financial reasons, although receivers can also be appointed as a result...

May 23, 2019

A DIRECTORS’ DUTY TO CREDITORS WHEN INSOLVENCY IS ANTICIPATED

A curious thing happens when a director believes their company is about to be insolvent. Whereas the legal obligation of the director up to this point has been to promote the best interests of the company, (Companies Act 1993 Section 131)  a director’s priority must then change to considering the best interests of creditors. This can be a very difficult decision for a director make. The company might be experiencing severe cash flow difficulties but the director may think there is pe...

August 16, 2018

Qualifying Company and Insolvency

Qualifying Companies (QC) have been around for some time; in fact my well-thumbed guide comes from 2005. Qualifying Companies are almost a thing of the past as no new ones can be created, but there are still some that exist. There are big pluses to being a Qualifying Company, with the capital gains being able to be distributed tax-free without winding up the Company. A Qualifying Company has the commercial benefit of maintaining a Company structure with the taxation benefits of a Partnershi...

May 9, 2017

I’m looking to wind up my business – What should I not do!

The business has been struggling for some time. There are debts to the IRD namely GST and PAYE and you haven't completed a tax return for the last one maybe two years. There is a few trade creditors but not huge. You have made the decision to sell up and pay the creditors off. That way you feel you can stop the bleeding and the stress. You should be able to get enough from the business sale to pay the trade creditors and then you can wind it all up. Does this sound familiar? We have seen this...

November 1, 2016

PAYE Debt is the worst

If you have clients' whose Companies are struggling and have been for some time, it's best to stop the bleeding. If the Company has lost too much money, it may be dead anyway. If a Company continues to trade whilst insolvent the Directors are in breach of the Companies Act 1993 and could be prosecuted. Additionally, a Company cannot issue a "Solvency Certificate" while it remains insolvent, which is a necessary prerequisite to a number of matters such as making a "Distribution" (e.g. paying a...

August 15, 2016

Don’t leave it too late ...

Liquidations are a specialised area that we have undertaken on a small scale in the past. However, through our affiliation with experienced Liquidator, Rod McKenzie, we saw the opportunity to put these skills to good use and have developed the insolvency side of the business. Rod has now retired, and is not accepting future appointments as Liquidator. The business of operating as an insolvency practitioner will soon require licensing. To operate as an insolvency practitioner, a minimum numb...

July 15, 2016

IRD’s queue jump thwarted

The Supreme Court thrown out the Inland Revenue's "super priority" claim on insolvency won in the High Court. If a Company runs into financial difficulty, and a Liquidator is appointed; and on the date of appointment the Company has money in its Bank account; which creditor has first claim to the funds? The usual answer is that certain secured creditors, the liquidator's fees and expenses, and the Company's employees, all rank ahead of the Inland Revenue Department. However, in the case...

June 28, 2016 Posts 1-9 of 9 | Page
 

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