It’s nearly two months since the announcement of the Mainzeal collapse. The full impact of the $93.5 million deficiency will be starting to bite for the many contractors and suppliers that have to absorb their portion of that loss.
It’s nearly two months since the announcement of the Mainzeal collapse. The full impact of the $93.5 million deficiency will be starting to bite for the many contractors and suppliers that have to absorb their portion of that loss. These are not anonymous people. They are the cornerstone of our society including local plumbers, electricians and roofers. They have worked hard to build up their businesses only to find that the insolvent circumstances of one major player has left them with an unstable future.How do Mainzeal’s sub-contractors come back from such circumstances?Times are tough today and many businesses are struggling to survive. They do so by pursuing projects with narrow margins to remain afloat – like those offered by Mainzeal. There is of course the expectation that an organisation the size of Mainzeal would not fail and leave them liable to pay for materials and labour provided.
Paying employees and suppliers may now be getting difficult for the Mainzeal sub-contractors. Some will be questioning their ability to meet their financial obligations. Safe guarding their business is now the need of the day. This requires diligence, focus on costs, versatility around issues, and engaging the help of professionals when needed.These are tough economic times and it is little wonder that many businesses are struggling to survive. Financial obligations to pay creditors start to pile up with many business owners opting to close their doors. However, that may not be the only choice available. In 2007, a regime was introduced into New Zealand law that provides a rehabilitative option for companies experiencing insolvency and possible liquidation.
Voluntary Administration (VA) is by no means an easy option nor is it for the faint of heart. But, if business restoration is the desired outcome rather than a miserable decline toward liquidation, then voluntary administration should be considered.
When a company becomes illiquid its structure serves to strangle the business activity and rob it of its ablility to survive. Voluntary Administration arrests this situation by providing breathing space for the company to consider the options available. In the moratorium period, individual creditor demands give way to the rights of the general body of creditors allowing time for a controlled approach to be adopted to address the issues consuming the business.Starting the voluntary administration process is normally achieved by the directors’ appointment of an administrator. The administrator takes control and responsibility of the business while working with the company’s directors to establish the best course of action. It is essential for the directors to be fully engaged and committed to the process; after all, they are the most knowledgeable about the affairs of the company. Not all companies will survive the voluntary administration process, but it will not be the process that is to blame – it is more likely to be that the engagement came too late. The safety net can only be of value to those that are above it.BWA specialise in business recovery and insolvency. We have achieved excellent results in this highly specialised aspect of its insolvency practice. In this short video Mike Robins and Craig Green discuss how voluntary administration saved their business.If you have a company that is experiencing difficulties contact us to discuss whether voluntary administration is an option.
