NEW INSOLVENCY LAWS
Whether it is coincidental or a response to increased bankruptcies, reform relating to insolvency laws has now been enacted. The main change in this area is the introduction of “voluntary administration” whereby the failing company is put under management by an independent administrator with the hope of trading it out of its difficulties and returning more to the company’s creditors than would be the case if liquidated.
The independent administrator can be appointed by the directors, a liquidator, a secured creditor or the court, but only with the creditors’ agreement. Once the administrator is appointed, they take control of the company and its business operations and have 25 working days within which to investigate and decide whether the company is salvageable. At this point, the administrator will meet the creditors and put forward a proposal which the creditors may reject or agree.
It remains to be seen whether the voluntary administration process will work or be more effective than a receiver or liquidator because:
- The owners are often reluctant to disclose the financial difficulties of the company to its creditors until it has deteriorated beyond a point of no return - by which it may be too late to save the company;
- The administrator’s costs will be significant and the creditors may not be willing to meet these costs out of the remaining assets of the company;
- Many of the companies that become insolvent are too small to justify the cost of saving them,
- Creditors may have lost their faith in the company and are unwilling to prolong the inevitability of bankruptcy,
- The process is sudden death for the company if creditors do not agree to continuation. This takes all power away from the owners to otherwise restructure and save the business.
The onus remains with the directors of the company to spot financial difficulties at an early stage, make a frank assessment of the company’s position and act accordingly. After all, it is a director’s duty to act responsibly.
The new legislation also introduces a new offence for directors who act with intent to defraud creditors or do anything that causes material loss to any creditor. If convicted, they can be liable to a fine not exceeding $200,000, or imprisonment for up to 5 years.
FRASER ACCOUNTING TECHNOLOGY UPDATE
With the implementation of new computer equipment we have improved processing speed, improved security and increased remote access ability. All of which leads to an increase in efficiency and productivity.
We have also implemented the use of two monitors (screens) per person and have found significant time saving benefits. For example we can now view files faster, have more programs running at one time and work on two tasks at once.
Coinciding with the equipment upgrade we are no longer using the email suffix @ffm.co.nz. Emails using this suffix will not now be delivered.
Please use: @fraserco.biz when corresponding with us via email
Eg. pault@fraserco.biz for Paul Toomey
Thanks for your co-operation!
