FAQ’s

What is the difference between liquidation and receivership?

The two terms are often used interchangeably and usually in error. Liquidation is where the shareholder or creditor appoints a liquidator to control the company. Receivership is where a secured creditor, usually a bank or finance company, that has a security over the entire company (General Security Agreement or GSA) appoints a receiver to control the company.

Although liquidators and receivers have very similar duties, a receiver has a primary duty to the secured creditor that has appointed them. There are also some powers that are specifically available to liquidators only.

My company has been served a Statutory Demand. What are my options?

This is a legal demand for payment. You have 15 working days to pay or to enter into a formal compromise with your creditors. If you dispute it you must do so by filing a notice to set aside within 10 working days. Failing this the creditor that has served the Statutory Demand may apply to Court to put your company into liquidation.

I have a General Security Agreement (GSA) over a company. What are my options?

This means you are a secured creditor. A GSA document will usually have certain rights and powers the secured creditor has when the debtor company defaults on its obligations. One of the powers usually allows the secured creditor to appoint a receiver to control the company. The receiver will then realise as much as they can to pay the secured creditor back.

How does a company go into liquidation?

A company can be put into liquidation a number of ways. The most common two ways are by the shareholder (voluntary liquidation) or by a creditor (court liquidation).

What happens when a company goes into liquidation?

The liquidation will occur at the set date and time on the appointment document. From then on the liquidator is in control of the business. They have duties under the Companies Act 1993 as to their role and responsibilities. In summary, they are tasked with realising as much money as possible from the company to pay back to its creditors.

What happens to the funds that are realised by the liquidator?

The funds realised by the liquidator is distributed according to Schedule 7 of The Companies Act 1993. This schedule sets out the order of priority in which funds must be distributed from the liquidation.

A company that has gone into liquidation owes me money. What do I do now?

This means you are a creditor in the liquidation. You should complete a proof of debt form to register your claim. Make sure you attach all relevant documentation to prove your claim. Filing a claim in the liquidation does not necessarily mean you will get your money back. This will depend what is recovered during the liquidation.

If you have a personal guarantee then now may be a good time to look at options to enforce this.

I am an employee of a company that has gone into liquidation. Do I have priority as a creditor?

Yes. As an employee you are what is called a preferential creditor which means you should get a distribution before other creditors. However, this is subject to the what assets have been realised and whether there are other competing priorities.

Am I automatically bankrupt if my company goes into liquidation?

No. Your company and you are two separate legal entities. Therefore, any debts that relate to the company stay with the company. However, if any creditors have a personal guarantee from you, they may choose to enforce that against you and force you into bankruptcy if you can’t pay it.

I've been served a Voidable Transaction Notice. What are my options?

This will very much depend on the facts in your situation. It does not automatically mean you will need to pay money back. It depends if you have any defenses that you can rely on. Contact us to see how we can help you.

My company is struggling financially. What can I do without going into liquidation?

The sooner you seek help and know your options the more chances you will have of a favourable outcome. Leaving things right to the end will likely lead to your company being put into liquidation or receivership. We can help you with understanding your options before it is too late.

 

Khov Jones is a specialist insolvency and consulting firm that delivers practical solutions to clients that encounter often challenging and complex issues.

With over 20 years of commercial experience providing specialist advice we have the skills and expertise to provide robust advice to clients when it counts.

CONTACT

Auckland Office: 59 Apollo Drive, Albany, Auckland 0632

Waikato Office: Level 7, 711 Victoria Street, Hamilton 3204

Postal: PO Box 302261, North Harbour, Auckland 0751

Phone: 0800 275 554

Email: contact@khovjones.co.nz