Court applications to liquidate failing businesses have picked up this year with the 453 filed to the end of October, already surpassing applications for the whole of last year.
The figures are still well below the previous two years (852 in 2018 and 702 in 2019) and are nowhere near the levels seen during the global financial crisis, when there were 600 liquidations in a single month (April 2009).
Whilst IRD have been more lenient with those in tax arrears, they have also busy processing the resurgence payments (RSP). The New Zealand business community has received over $5 billion in Government-backed Covid-19 loans and RSP and it is those companies who have only survived due to these that could be in the greatest trouble post-lockdowns.
These “zombie” companies that were already technically insolvent, or near to it, should have closed last year, but have been ‘propped up’ by Government support packages.
The risk of this is, a well-meaning Director trying to keep their business afloat/staff employed during this pandemic, and legitimately claiming government support to do so, may well be seen by any future liquidator as having seen ‘the writing on the wall’ for their company, and by not acknowledging their insolvency and closing the company they will have breached their duties as Director.
If you are concerned that, without the subsidies, you might be running a ‘zombie company’, there are other ways of confronting and addressing potential insolvency.
Often, a few accounting tweaks to make the company less of a risk, some budgeting advice or diversifying assistance, alongside an IRD negotiation on any tax owed can put a business back into a solvent position.
If you think you might need further assistance, Contact Us to receive professional and qualified advice on tax, IRD arrears and other matters, today.
Source: Stuff Nov 14 2021