When all options have been exhausted we help you bring business activities to a close.
What is Liquidation?
Company liquidation brings the company’s life to an end. It occurs because there are no other options for its survival.
During its life, the company’s activities have become woven into the fabric of both shareholders and directors, as well as the suppliers who have provided goods and services to the company.
Liquidation begins the process of bringing those activities to a close.
When does a company go into Liquidation?
Put simply, a company goes into liquidation when it cannot pay its debts. The company has run out of cash, and while there may be further cash flow coming in and assets to be sold, the value of its debt exceeds this. A decision must be made to formally place a company into liquidation. While this decision is most commonly made by a director, there are three other ways a company may be placed into liquidation.
Ways a liquidation commences
The role of the liquidator
What is a liquidator responsible for?
The liquidator’s job is to gather together all the property of the company and to liquidate that property for the benefit of the creditors – this is often called realising the property interests of the company. This may not be an immediate process – there may be contracts to complete or stock to sell. The liquidator will ensure the best price is obtained.
The liquidator must also consider if any breaches of the law have taken place and whether action may be required. Once all activities are completed, the liquidator will file a report with the Registrar of Companies which brings the liquidation to an end.
Finding the right liquidator
Liquidation must only be undertaken by a registered insolvency practitioner. The Registrar of Companies maintains a list of all insolvency practitioners in New Zealand.
Bryan Williams is a registered insolvency practitioner (Registration Number IP61) and liquidation is an area of expertise for BWA Insolvency.
Liquidation is terminal for the company. Liquidation often comes after many months of misery and anguish as a result of the company not being able to perform as the directors hoped it would.
It is a last resort measure and should not be considered until all other options have been explored. Voluntary Administration is an alternative to liquidation and should be considered before liquidation occurs.
Liquidation starts the minute a liquidator is appointed by whoever has decided the life of the company must end. The person that is going to be appointed to be the liquidator must agree in writing before the appointment is made – this is called providing consent to act.
From the time the appointed liquidator is responsible for the affairs of the company. The directors remain as part of the company but have no authority. The liquidator will work in the best interests of creditors, doing whatever is necessary to ensure maximum financial recovery.
As a liquidator is personally responsible for any actions taken going forward, great care is taken to ensure no further loss within an operation. This could mean that a business is immediately shut down or reconsolidated to shed the loss-making parts in preparation for sale. The first few days are a critical time and can require the appointer and appointee to work in close quarters together.