Dec. 11, 2019
Debt Recovery and Insolvency
Chasing debtors and resolving debt related disputes can be costly, stressful and time consuming. We advise individuals and corporates on a number of options and processes for debt recovery. In some cases, a letter of demand from your solicitor is all that is required to motivate a debtor into making payment, and letters of demand provide proof of your attempt to contact a debtor should you decide to obtain judgment.
If court proceedings are necessary, we can advise creditors on court processes, draft and file court proceedings, and obtain and enforce court judgments against debtors.
We can assist judgment creditors by obtaining:
Warrants to seize property
Freezing orders (Mareva injunctions)
If a debtor is an individual (not a company) and judgment has been obtained in the District Court, we may be able to enforce that judgment in the High Court by bringing bankruptcy proceedings against the judgment debtor. Service of a Bankruptcy Notice often prompts the judgment debtor into payment of a Judgment Sum. If a judgment debtor fails to comply with a Bankruptcy Notice within 10 working days from the date of service, then an act of bankruptcy has been established and you can apply to the High Court to have the judgment debtor adjudicated bankrupt.
The liquidation process is essentially the "winding up" of a company and precedes the removal of the company from the New Zealand Companies Register. The main purpose of liquidation is to collect and realise the assets of the company, and to distribute the proceeds to creditors and (if any surplus remains) to shareholders. Liquidation may be voluntary or compulsory.
The most common basis for High Court applications to liquidate is that the company is unable to pay its debts. If a company is unable to pay its debts, and this can be shown, then the company is insolvent and may be place into compulsory liquidation. When a company enters into liquidation, a liquidator takes control of the company's unsecured assets which are then sold to repay the creditors and shareholders. Liquidators are given wide powers to investigate a company's financial affairs and potential offences by the company or a director of the company.
We can act for creditors who have secured debt and wish to pursue a Court ordered liquidation. The first step is usually issuing a statutory demand pursuant to section 289 of the Companies Act 1993. A statutory demand requires the debtor company to pay the debt, enter into a compromise or give charge over the property to secure payment of the debt to the reasonable satisfaction of the creditor within 15 working days of the date of service, or a period the Court may order. The service of a statutory demand often leads to the debtor company taking swift action to satisfy the demand so as to avoid being liquidated.
We also assist debtor companies issued with statutory demands. A debtor company that receives a statutory demand has the option of making an application to the Court to have the demand set aside. In accordance with section 290 of the Companies Act 1993, the Court may set aside a statutory demand if it is satisfied that there is a substantial dispute as to whether the debt is due and owing, there is a counter-claim, set-off or cross-demand or the demand ought to be set aside on such other grounds that the Court thinks fit.
The liquidation process has strict timeframes which must be complied with. If you receive a statutory demand, then you should seek legal advice promptly.
If a company is unable to pay its debts to a secured creditor, it may be forced into receivership. Receivership is a process which enables a secured creditor to enforce its security and recover the debts due. A receiver is an independent third party who is appointed to manage the sale of assets to repay the debts owed by a company to a secured creditor. A receiver may be appointed under the terms of a Deed of Agreement between the company and a secured creditor or by the Court. Generally, a receiver only acts for the benefit of the secured creditor who appointed the receiver, whereas in liquidation, the liquidator effectively acts for all of the unsecured creditors. A company can be in receivership and liquidation at the same time.
We can also assist with voluntary administration.
The team at Becker & Co are highly experienced in bringing proceedings. If you or your company has defaulting debtors, please contact us at firstname.lastname@example.org so we can discuss your debt recovery options
Disclaimer: The information contained in this article is general in nature and not tailored to your personal circumstances. It is only current as at the date posted and should not be relied upon as legal advice. If you require legal advice, please contact us for further assistance.