NZ Insolvency Statistics – Pressure On NZ Companies

NZ Businesses continue to be affected by overseas economic factors (Ukraine war and China’s lockdown policies), from supply line shortages and disruptions, from interest rate increases, labour shortages and generally rising costs. Insolvencies in NZ are set to increase as new challenges emerge.

GRIP (Global Network of Restructuring and Insolvency Professionals) is an international network of independent insolvency firms who specialise in corporate restructuring and insolvency. The GRIP members in Australia and UK suggest that NZ may be one year away from seeing a notable shift in insolvency appointments. Australia predicts an increase in the final quarter of this financial year. Keaton Pronk of McDonald Vague Limited (NZ GRIP member) reports that NZ appears to be six months behind Australia.

While Covid affected many NZ businesses, insolvency statistics remain well below prior years. The Construction and Property Development sectors and accommodation and food service sectors make up the largest proportions of insolvencies in NZ. Continued closed borders, inflation and a slowdown due to winter trading are all contributors.

Many business owners have taken the opportunity to wind up and sell. In May 2022 there were 34 solvent liquidations. The numbers of company strike offs are high.

Court liquidation appointments of insolvent companies continue to remain low with 25 in May 2022. There were 71 voluntary shareholder-appointed insolvent liquidations in the same period.

The Inland Revenue were responsible for 77% of the total company winding up applications in May 2021. By October 2021 debt collection activity started to increase. In May 2022 IRD winding up applications represented 44% of total winding up applications. This is the highest activity as a percentage of total applications since October 2021 and shows IRD is beginning to pursue its extensive debtors list.

A more vigorous approach to debt collections is likely to prompt company directors to take a more proactive approach to managing their debts and IRD obligations. This is likely to lead to a lift in business insolvencies. Directors should be considering their options to restructure their business or consider entering into formal compromise arrangements or voluntary administration. Liquidation is an option for discussion for some and early advice is always recommended. Businesses need to otherwise prepare for expected hardship.

McDonald Vague

Insolvency Practitioners

11 July 2022

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