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Application for Liquidation

Overview of an Application for Liquidation

A company can be put into liquidation by any creditor, shareholder, or Board of Director. Often it will be initiated by a creditor with an outstanding debt, known as a Creditor Liquidation.

The most common process is that the creditor will take the initial step of issuing a Statutory Demand (requiring an unpaid debt to be greater than $1,000). However, the creditor can initiate an Application for Liquidation, outside of this preceding process.

If the Statutory Demand process is initiated, the creditor must wait/comply with the 15 working day period relating to a Statutory Demand. If the outstanding debt is not resolved within this period, the creditor has 30 working days to initiate an Application for Liquidation at the High Court after the expiry of the Statutory Demand. An Application for Liquidation is not handled at the District Court.

An Application for Liquidation is issued under the New Zealand Companies Act 1993, Section 241.

The Application Process

If the creditor / other approved party, wishes to commence the liquidation process, following issuing a Statutory Demand, the process is:

  • To engage a liquidation expert or legal counsel to complete the necessary proceedings and document, to meet the prescribed High Court requirements.
  • To submit these completed documents (which outline details of the debt and other key details) to the High Court.
  • The High Court will then file this Application and issue a CIV number for the Liquidation and issue a hearing date.
  • A hearing date is then confirmed which is likely to take somewhere between 4 to 12 weeks. Ideally at that hearing the creditor and debtor company should be present.
  • Once these documents have been filed, a copy of these documents must be served to the debtor company within 5 working days. Furthermore, the creditor must run public advertisements in (1) the local newspaper where the debtor undertakes its trading and (2) in “The New Zealand Gazette”. The ads must run to meet stated placement requirements, e.g. at the initial stage and for 5 days just prior to the court hearing.
  • On the day of the hearing, if no progress has been made by the debtor company, the High Court can place the company into immediate liquidation, if it is satisfied that the company is unable to pay its debts.
  • If this occurs, the Court will appoint liquidators, which will often be the preferred liquidators nominated by the creditors, or in the absence of this, a court-appointed liquidator.

Book Your Free Consultation

To learn more about how to commence an Application for Liquidation, or your options to respond to receiving an Application for Liquidation, please contact us. We will explain to you the process and guide you through your options.

We offer a free initial 30-minute consultation, this can be by phone, Microsoft Teams or Zoom

Book Your Free Consultation

Next Step | Appointed Liquidators

At the High Court hearing the Court can immediately approve the company to go into liquidation. The liquidator then takes immediate control of the company, with the following key steps generally undertaken:

  • The company normally ceases trading at that point, and the liquidator commences the closing of the business.
  • The liquidator informs the New Zealand Companies Office of the business being placed into liquidation; they also advertise their appointment as a liquidator. This is normally placed in local publications and The New Zealand Gazette.
  • The liquidator takes control of and freezes all the companies assets and will proceed to sell to recoup all appropriate funds.
  • The liquidator determines the company’s current financial status, and they contact and liaise with the creditors, in order to determine total debts owing.
  • The liquidator then proceeds to determine the best approach for payment to creditors with the available funds.
  • At the end of the process, a final report is sent to creditors which includes the details of assets sold, total liabilities and how remaining funds were distributed.
  • At the very end, the liquidator informs the Companies Office, and the business is removed from the Companies Office Register.

Receipt of an Application for Liquidation | Key Facts

If you are served an Application for Liquidation, you do have a number of options to consider. Most importantly, you have up until the stated hearing date to either pay the debt or negotiate a settlement / payment schedule that is agreeable to both parties.

Your options include:

  • Making payment in full, where possible, if the debt is not being disputed.
  • Making a part payment and/or negotiating a repayment schedule.
  • Providing some level of ‘security’ as part of a repayment approach.
  • Challenging the Application for Liquidation at the Court hearing; or turning up in person and requesting the case to be adjourned to allow more time for parties to negotiate and/or come to a settlement.
  • You also have the option to appoint your own liquidator within 10 working days of the receipt of the notice of proceedings.

If you choose not to respond to the Application for Liquidation, this leaves the creditor and the High Court with minimal options, with the most likely outcome being a High Court approved liquidation.

 

The Liquidator’s Role & Responsibilities for Keeping All Stakeholders Informed

Within 5 working days from the date of liquidation, the liquidator must send a report to the creditors outlining:

  • The state of the business, as it was on the day of liquidation;
  • Its intended approach on how it will manage the liquidation; and
  • Likely timeframes including the estimated completion / wind-up date.

Throughout the process, the liquidator provides regular six-monthly reports about the activities and outcomes of the liquidation for creditors and shareholders, and files these reports with the Companies Office.

 

How We Can Help

With our considerable experience we can help you with all aspects of the Application for Liquidation process.

  • We understand the legal requirements, the strict timelines, and range of options regarding issuing and/or receiving an Application for Liquidation.
  • We can assist and advise you on the best options regarding your financial circumstances, cashflow, and your assets/liabilities.
  • We can create and complete the necessary documents for you and arrange these are correctly filed in the High Court and served to the debtor company.
  • If you are the creditor, seeking payment of an outstanding debt, we can assist with determining the full amount outstanding, suitable payment options, and develop the appropriate supporting documents regarding your Application for Liquidation.
  • If you are the debtor, receiving the issued Application for Liquidation, we can assist you with identifying your most appropriate payment / cashflow options, or other suitable remedies for negotiating with the named creditor.

 

 

An Application for Liquidation is an official and ‘last step’ process undertaken by creditors seeking payment for outstanding debts. It is important that strict processes, timelines, and options are carefully considered, to achieve the best outcome.

At Liquidation Management we can advise and guide you through the process. Most importantly, it is important to act promptly to ensure an optimal outcome.

 

Providing full advice and support throughout the Application for Liquidation process.

Full documentation completion including covering letter to accompany the application and document/s

Experienced in-house team, who can complete, file & serve the documents on your behalf.

Prompt, efficient, reliable service. Focused on achieving optimal outcomes.

Liquidation Management is a Licensed Insolvency Practitioner We are listed on the New Zealand Companies Office Official Register