Frequently Asked Questions

I've been given a Statutory Demand. What should I do?

A Statutory Demand is a demand for payment. If it is not paid within fifteen working days, or there is no dispute raised within that time, the company demanding payment can ask the court to put the business into liquidation.

What happens to me if I liquidate my business?

You have signed a personal guarantee.
This is very common with business owners, and many business owners are surprised at the number of personal guarantees that they have signed over the course of their business. If there is a bank overdraft or other finance in place, it is almost certainly covered by a personal guarantee.

You owe the company money.
It is very common for directors to have an account with the company. This is where the director is not paid a wage but takes drawings. When the company is liquidated, however, this money needs to be paid back.

Your company owes income tax and your Company is an LAQC.
If your company is a LAQC and there are profits, you are personally liable for the tax on the profits of the company (but importantly, not any paye or GST that the company owes, unless you have personally guaranteed the debt to the IRD.

You have signed a personal guarantee.
This is very common with business owners, and many business owners are surprised at the number of personal guarantees that they have signed over the course of their business. If there is a bank overdraft or other finance in place, it is almost certainly covered by a personal guarantee.

How does a company go into Liquidation?

A company can be placed into liquidation by either an order of the court on the petition of a creditor, or the shareholders or directors can put the business into voluntary liquidation. Either way, a liquidator is put in charge of the company.

What happens when the company goes into Liquidation?

The liquidation will occur at a set point in time, and from that point the liquidator controls the business. The liquidator is responsible for collecting as much money from the business to pay back creditors.

What happens to money collected by the Liquidator?

Funds collected from the liquidation, including sale of any assets, debtors being collected or money collected from shareholders are paid out in the following order:

Payment of the cost of liquidation (including the liquidator fees)

Any money owed to a secured creditor

Any costs awarded by the Court to the creditor who made the application to wind up the Company (not applicable in a voluntary liquidation)

Employee wages; up to a maximum of $6,000 and limited to the last four months prior to liquidation.

Taxes owed to the IRD (IRD and PAYE)

Unsecured creditors Shareholders

What is Reckless Trading?

Reckless trading is where a company director is trading whilst insolvent, putting the companies creditors at risk. If the liquidator feels that the company director has been reckless the director can be prosecuted by the crown.

What advantage is there in a voluntary liquidation?

A liquidator has a large degree of discretion. Although the liquidator must follow the guidelines laid down in legislation and is legally obligated to achieve the best outcome for the creditors, there is a balance between the value of the recovered assets against the cost of pursuing the assets.

A company that owes me money has gone into liquidation: What can I do?

Ensure that you complete a creditor’s proof of debt claim. If you have a security, such as a claim registered on the PPSR you are entitled to re-claim the assets listed. Otherwise you are compelled to wait for a distribution from the liquidator to unsecured creditors.

If you have a personal guarantee you should rely on this guarantee.

You can request a creditors meeting, and if you like you can attend the creditors meeting and seek a new liquidator.

A company that owes me money has gone into Voluntary Administration: What can I do?

Ensure that you complete a creditor’s proof of debt claim. An administrator must call a creditors meeting within ten days of appointment. You should attend this meeting if you want to consider changing the Administrator.

The Administrator should call a second creditor meeting in 25 days of their appointment to put a proposal to the creditors. You should attend this meeting to listen to the repayment options presented by the Company and the Administrator.