Facing liquidation can be a daunting and stressful process. Our skilled liquidation lawyers and insolvency practitioners provide essential legal guidance to help you navigate this complex situation.
Whether you’re a company director, creditor, or shareholder, having the right legal support ensures the process is handled efficiently and fairly.
At InSolve Partners, we bring extensive experience in insolvency and liquidation law. We are dedicated to providing you with practical, effective solutions during what can be a difficult time. Our team is committed to protecting your rights, whether you are initiating liquidation or are a creditor seeking to recover debts.
Liquidation refers to the legal process where a company is brought to an end, and its assets are sold off to pay creditors. This typically happens when a company is insolvent, meaning it can no longer pay its debts as they fall due. The liquidation process is governed by New Zealand’s Companies Act 1993 and usually involves appointing a liquidator who oversees the distribution of the company’s assets.
There are three main types of liquidation in New Zealand:
Voluntary liquidation occurs when the directors or shareholders of a company decide to close it down because it is no longer viable. This process is often initiated when a company is insolvent, meaning it cannot meet its debt obligations. The decision is made through a shareholders’ resolution, and a liquidator is appointed to oversee the winding-up process.
In voluntary liquidation, the company decides that the business cannot continue to trade effectively and choose to wind it up to protect creditors’ interests. The company will sell assets, and the proceeds are distributed to creditors in the order of priority outlined by New Zealand law. Employees’ outstanding wages and secured creditors are usually prioritised.
Voluntary liquidation is typically quicker and less contentious than other types of liquidation, as the decision to liquidate is initiated internally. The directors may also avoid legal consequences by acting promptly, as trading while insolvent can lead to personal liability under the Companies Act 1993.
Court-ordered liquidation is initiated by a creditor, shareholder, or another interested party through the High Court. This type of liquidation occurs when a company cannot meet its debt obligations and is deemed insolvent. The creditor, often owed a significant sum, applies to the court to appoint a liquidator to wind up the company and recover funds from its assets.
In a court-ordered liquidation, the appointed liquidator takes control of the company’s affairs, sells off its assets, and distributes the proceeds to creditors. Court involvement ensures that the liquidation process follows legal procedures, and the court may step in if any disputes arise between creditors or shareholders.
This form of liquidation can be a last resort for creditors who have unsuccessfully attempted to recover their debts through other means. Once the court orders liquidation, the company is placed under the control of the liquidator, and directors lose their management rights.
Creditors’ voluntary liquidation (CVL) is initiated by a company’s directors when the company is insolvent, but it differs from a standard voluntary liquidation in that the control shifts to creditors rather than the shareholders. In a CVL, directors acknowledge that the business is no longer viable and initiate liquidation, but creditors take an active role in the process.
The liquidation begins with a meeting of the company’s shareholders to pass a resolution to wind up the company. Soon after, a creditors’ meeting is held where they vote to confirm the liquidator’s appointment. The liquidator, once appointed, manages the sale of assets and distribution of funds to creditors based on legal priorities.
This process gives creditors more influence over the liquidation, and they can choose the liquidator or replace one appointed by the directors if they believe a different liquidator would better serve their interests. Creditors’ voluntary liquidation is typically used when a company is financially troubled but there is a cooperative approach between directors and creditors to settle the company’s affairs.
Each of these liquidation processes follows a distinct path, but all ultimately lead to the dissolution of the company once its assets are sold and debts settled.
The liquidation process involves winding up a company and distributing its assets to pay off creditors. Here’s a general outline of the liquidation process in New Zealand:
A licensed liquidator is appointed to take control of the company’s affairs. The liquidator’s job is to manage the company’s assets and distribute them according to legal priorities.
Once a liquidator is appointed, they notify the company’s creditors and the Companies Office. Creditors are invited to submit claims for any amounts owed.
The liquidator identifies and collects the company’s unsecured assets, such as cash, equipment, property, and receivables. These assets are then sold or liquidated to generate funds.
The liquidator uses the funds from asset sales to pay off creditors in a specific order:
The liquidator will review the company’s financial dealings before liquidation to determine if there was any illegal or reckless trading. They may take legal action if necessary to recover additional funds for creditors.
Once all assets are distributed and creditors are paid, the liquidator prepares a final report and lodges it with the Companies Office. The company is then removed from the Companies Register, officially dissolving it.
This process can take months or even years, depending on the complexity of the company’s assets and debts.
The appointment of a liquidator in New Zealand depends on the type of liquidation process being initiated. Here’s how the liquidator is appointed in different types of liquidation:
In voluntary liquidation, the company’s shareholders appoint the liquidator. The decision is usually made during a special shareholders’ meeting, where a resolution to wind up the company is passed. The shareholders then choose a licensed liquidator to manage the winding-up process and oversee the sale of the company’s assets.
In a creditors’ voluntary liquidation, the company’s directors initially appoint a liquidator, but the creditors have a say in confirming or replacing the liquidator. After the directors decide the company is insolvent and call for liquidation, a creditors’ meeting is held. At this meeting, creditors vote to either confirm the appointment of the directors’ chosen liquidator or appoint a different liquidator of their choice.
In a court-ordered liquidation, the High Court appoints the liquidator. This occurs after a creditor, shareholder, or another interested party applies to the court to have the company liquidated due to insolvency or unpaid debts. The court-appointed liquidator then takes control of the company and manages the liquidation process.
In each scenario, it’s important that the appointed liquidator is a licensed professional with expertise in handling company liquidations according to New Zealand law. Liquidation lawyers can guide directors, shareholders, or creditors through the process of appointing an appropriate liquidator to ensure the legalities are handled properly.
Unsure whether liquidation is the right solution for your situation? We’ll assess your company’s financial position and guide you through your options, including voluntary liquidation, creditors’ voluntary liquidation, or court-ordered liquidation. Our liquidation experts ensure you make the right decision based on your unique circumstances.
From the appointment of a liquidator to managing creditor claims, we handle all aspects of the liquidation process. We ensure that every step follows New Zealand’s Companies Act requirements, protecting your interests and reducing the risk of complications.
If you’re a company director, we’ll help you navigate your legal responsibilities during liquidation, ensuring you avoid personal liability for insolvent trading. We’ll guide you through the process to safeguard your personal assets and reputation.
If a court-ordered liquidation is necessary, our legal team will represent your interests in court. Whether you are seeking liquidation or defending against it, we’ll ensure your case is handled professionally and efficiently.
Disputes between creditors, shareholders, or directors can slow down the liquidation process. Our skilled negotiators will help resolve these conflicts swiftly, ensuring the liquidation process moves forward without unnecessary delays.
We work closely with liquidators to ensure the fair distribution of assets to creditors. Our role is to oversee the sale of assets, ensuring maximum value recovery while adhering to all legal obligations.
At InSolve Partners, we are New Zealand insolvency experts and bring extensive experience in insolvency and liquidation law. We are dedicated to providing you with practical, effective solutions during what can be a difficult time.
Our team is committed to protecting your rights, whether you are initiating liquidation or are a creditor seeking to recover debts. Speak to us now regarding your company liquidation by clicking the button below and filling out the form.
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