Winding up a company in NZ
Company Liquidation in New ZealandUpdated on Friday 09th April 2021
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The Company Law in New Zealand covers all the aspects related to opening, running and closing a local company. When it comes to winding up a company, there are several options, among which there is also the company liquidation procedure of the New Zealand business.
Company liquidation in New Zealand will usually occur when the business can no longer pay its debts. Winding up a company in NZ can be voluntary or compulsory.
Below, our lawyers in New Zealand explain the procedures related to liquidating a company in this country.
Voluntary liquidation in NZ
Voluntary company liquidation implies an agreement between the New Zealand company’s shareholders. Based on this agreement, the shareholders will file the decision for liquidation with the Trade Register and will appoint a liquidator.
There is no need for the company’s representatives to appear before a New Zealand court, however, they can do so in order to have a liquidator removed.
Our law firm in New Zealand can advise company representatives in case of voluntary winding up.
Compulsory liquidation in New Zealand
Compared to the voluntary liquidation in NZ, the compulsory winding up requires the appearance before the court of law. This is because compulsory liquidation can be requested by a business’ creditors. Compulsory liquidation can also be requested by the majority of the managers of the company or by the Trade Register in New Zealand.
You can also rely on our New Zealand lawyers for assistance in compulsory liquidation cases. Winding up a company in NZ becomes more complex in this case and legal assistance is recommended. We can help answer your questions if your company has started to experience financial difficulties or is already unable to pay its debts to creditors.
Company liquidation steps in New Zealand
No matter the type of company liquidation procedure a New Zealand company undergoes, the steps are the same. These are:
- - the decision to liquidate: the company is no longer able to pay its creditors; the decision is made by the shareholders or decided by a judge;
- - liquidator appointment: a liquidator must be appointed and he takes charge of the business and assesses all the assets of the company;
- - liquidation administration: the company liquidation procedure in NZ starts and this means that the company can be closed; the final step is to pay the creditors and then divide the remaining assets among the shareholders;
- - liquidation completion: the final liquidation report is sent to the creditors; the company will then be removed from the Companies Office Register.
It is common to hold a creditor’s meeting in order to confirm the appointment of the liquidator. the administration of the liquidation is a multi-step process that can include the closure of the business and will focus on settling the creditor claims but will also include a stage during which the dividends are paid. During this time, ongoing reports are sent to the creditors and the Companies Office.
- in July 2020 there were 7 total liquidations: 4 ITS administered liquidations in Auckland, 1 in Hamilton and 1 in Wellington; 1 liquidation was voluntary;
- 2 liquidations were administered in September, and 4 in October;
- in November 2020 there were 4 liquidations and in December there were 6: 1 voluntary one and one liquidation each administered by ITS in Auckland, Blenheim, Dunedin, and Hamilton.
The company: the business will continue to function for a short while in order to be sold; however, in some cases, trading companies cease their activities altogether (usually they are closed down);
The directors and shareholders: they will be asked to provide documents and assist the liquidator during the process; they cannot destroy, hide or otherwise remove essential documents (penalties include fines and imprisonment); if any surplus remains after settling the creditors, the shareholders will divide it between them;
The employees: it is most likely that they will be affected by the liquidation of the liquidator decides that the company will cease it activities; in some situations, employees can file a claim in the liquidation (if they are owed wages);
The creditors: only secured creditors can deal with the secured assets of the company, unsecured ones cannot take legal action against the company in liquidation nor deal with its property (unless they have been allowed to do so by the liquidator or the Court).