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The Government is introducing legislation to change the Companies Act to help businesses facing insolvency due to COVID-19 to remain viable, with the aim of keeping New Zealanders in jobs.

A safe harbour is granted to directors of solvent companies, who in good faith consider they will more than likely be able to pay its debts that fall due within 18 months.

It essentially provides some certainty to creditors.

The changes allow directors to enter into a debt hibernation scheme with the consent of creditors.

Some Company Law changes are: 

 

  • Debt hibernation is binding on all creditors if a vote of 50% by number and value is obtained;
  • Creditors will have 1 month from the date of proposal to vote during which time there is a moratorium on the enforcement of debts;
  • If passed, a further 6 months moratorium will be available;
  • To access debt hibernation a threshold will need to be met 

 

This is not intended as legal advice and do not act upon anything contained in this article unless you first seek independent legal advice and consult your accountant or insolvency practitioner. 

A business may decide to sell it’s debt for a variety of reasons:

 

1. The business needs to raise CASH immediately;

 

2. The debt has become aged and considered uneconomic
    to pursue;

 

3. The business does not have the resources to actively
    work the debt to recover any amount;

 

4. The internal processes in the business are not robust
   enough to identify, control and recover overdue debt.

 

Ordinarily debt is sold (assigned) for between $0.00 to $0.10 cents in the dollar. Often the process of sale (assignment) can be conducted in a somewhat professionally crude manner.

 

It is important to fully understand what your bad debt is really worth and what additional value you can receive if you decide to sell (assign) it.

 

Specialist Collections & Consultants Limited can act for you to value your bad debt, act as your agent in sale (assignment) negotiations and also to find you a buyer.

 

Do not sell your debt, which is an asset, too cheaply and make sure that you obtain the best possible return.

 

For more information contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. or visit our website at www.collectionexpert.co.nz

What happens if a debtor leaves New Zealand and relocates to Australia owing a creditor money, in some instances a considerable sum.

 

Is all lost for the creditor?

 

The Trans-Tasman Proceedings Act 2010 in some circumstances may offer the solution.

 

A New Zealand registered judgment can be registered in Australia under the Trans-Tasman Proceedings Act 2010. The New Zealand judgment after registration, can be enforced against the creditor almost in a similar manner to the way the judgment can be enforced in New Zealand.

 

What are the steps involved in registering a New Zealand judgment in Australia where the amount owing to the creditor is at District Court level of $350,000.00 or less:

 

1. File ordinary proceedings or summary judgment proceedings in the District

    Court;

 

2. Serve the proceedings upon the Defendant (if the debtor is still in New Zealand);

 

3. Later obtain judgment by default or judgment after hearing against the Defendant;

 

4. Obtain a certificate of judgment against the Defendant;

 

5. If the Defendant has since relocated to Australia, contact a solicitor in Australia with

    a request that the New Zealand judgment be registered against the Defendant under

    the Trans-Tasman Proceedings Act 2010;

 

Send to the solicitor in Australia a copy of the judgment obtained and certificate of

judgment, along with other relevant information such as the Defendants physical

address in Australia, contact phone numbers, email address and date of birth.

 

The solicitor in Australia will file an application using Form 5 – Application to register a judgment under the Trans-Tasman Proceedings Act 2010 (subsection 17(1)) in a Local Court. Once the judgment has been registered, the creditor can proceed to enforce the judgment by filing applications similar to those that are used in New Zealand.     

 

Disclaimer:

The above is not legal advice and is not intended to be relied on as such.  In particular, it is not a substitute for independent legal advice.       

The change, in essence is to protect vulnerable subcontractors from the insolvency of the parties holding retention monies.

The change came in to effect from 31 March 2017 and is not retrospective.

The new rule applies to commercial construction contracts which provide for monies to be withheld by one party (Y) from an amount payable to another (Z) as security for Z’s performance of its contractual obligations.

From March 2017, retention monies under new contracts must be:

  • held on trust by Y for the benefit of Z,
  • held in the form of cash or other liquid assets that are readily converted to cash, and
  • properly accounted for.

It is possible that retention monies will become commingled with Y’s personal funds, as opposed to being held in a separate trust account. Research tells us that the intention is to create a “deemed trust model” rather than requiring the segregation of retention monies into trust accounts.

The amendments provide that the retention monies are:

  • not available for the payment of debts of any creditor of party Y other than party Z, and
  • not liable to be attached or taken in execution under the order or process of any court at the instance of any creditor of party Y (other than party Z).

Under the new rule Party Y will have to maintain sufficient liquid funds  to be held on trust to cover the full value of the retention monies owing.

The reforms will stop:

  • making the payment of retention money conditional on anything other than the performance of Z’s obligations under the contract,
  • making the date for payment of retention money later than the date on which Z has performed all of its obligations to the standard agreed under the contract,
  • requiring Z to pay any fees or costs for administering a trust. 

This article is of a general nature only and is not legal advice. Please do not act upon anything contained in the article without first seeking and obtaining legal advice. 

 

For many credit controllers, credit managers, debt collectors and other professionals, the Construction Contracts Act 2002 is confusing and part of the confusion relates to how to recover money that is owing under the Act.

So basically what is the Construction Contracts Act 2002.

The act sets out to achieve three basic objectives:

The first, by making conditional payment provisions and “pay if paid” claims in construction contracts unenforceable and by making express provision for progress payments and the procedure for making and responding to payment claims for progress payments.

Secondly, by providing for the adjudication of disputes relating to construction contracts.

Thirdly, by setting out remedies for a party’s failure to pay or to comply with the determination of an adjudicator.

Section 6 of the Construction Contracts Act 2002 sets out what type of work is regarded as a construction contract. Be careful that the Act does apply.

Section 12 of the act states that the parties to a construction contract cannot contract out of the act.

Section 13 of the act stipulates that there is a prohibition of conditional payment provisions.

 The act allows the parties to freely agree upon a mechanism for determining progress payments. If the parties do not, then Section 16-18 of the act sets out the default provisions of making and responding to payment claims.

You, the payee may serve a “payment claim” on a payer requiring the payer to make a progress payment. A payment claim must :

 

a.be in writing;

b.identify the construction contract to which it relates;

c. identify the work to which the claim relates;

d.indicate the claimed amount and the due date for payment;

e.indicate the manner in which the payer calculated the amount; and

f. state that it is a payment claim under the  Construction Contracts Act 2002.

 A payer (debtor) has 20 working days (unless the construction contract provides otherwise) to respond to the payment claim with what is called a “payment schedule”. A payment schedule must:

 

a.be in writing;

b.identify the payment claim to which it relates;

c.indicate the amount that will be paid; and

d.if the amount to be paid is different than the payment claim, give reasons as to why there is a difference;

e.if the amount to be paid is less than the payment claim give reasons as to why an amount is being withheld.

 If the payer does not provide a payment schedule within 20 working days the payer will be liable to pay the whole amount of the payment claim within the time provided in the contract or, if the contract does not provide a time, within 20 working days of the service of the payment claim.

 Construction Contracts Amendment Act 2015

On all contracts from 1 December 2016 every payment claim must include a prescribed “notice to payer” This is a prescribed form and must be in the correct form without defect. You run the risk of your claim failing if the prescribed form is not correct.

 If the prescribed form has not been sent with the payment claim or is defective, then you have not complied with Section 20 of the act.  

In summary, a payment claim is served on the payer, requiring the payer to make a progress payment. The payer has 20 working days (unless otherwise provided) to respond to the payment claim with what is called a payment schedule. If the payer does not provide a payment schedule within 20 working days, the payer will be liable to pay the whole amount of the payment claim within the time provided in the contract; if the contract does not provide a time, within 20 working days of service of the payment claim. If the payer does not pay and the payer is a limited liability company, you can serve a Statutory Demand under S289 of the Companies Act 1993 demanding payment; but before doing so you must make sure that a dispute has not been raised.

 

Disclaimer:

This article is not legal advice and is of a general nature only.

Do not act upon anything contained in this article without first obtaining independent legal advice-01 August 2017.         

 

The Court receives applications all the time to “Attach” either the WINZ benefit or the wages of a debtor person (judgment debtor) to repay by instalments the debt amount that is owed.

Usually, when an Attachment Order is applied for through the District Court the judgment debtor is either receiving wages from their employer or Government assistance through WINZ.  

So what happens if you apply for an Attachment Order and at the time of applying  the judgment debtor was working as a full time employee and receiving a wage and then through a change in circumstances, is no longer employed as a full time employee and starts receiving a WINZ benefit.

The Attachment Order served upon the judgment debtor’s employer will of course stop, because the judgment debtor is no longer employed.

So how do you, the judgment creditor, ensure that you continue to be paid.

It is important that the address details that you provide to the Court in civil enforcement procedures are correct, particularly in respect to a Financial Assessment Hearing.

If a summons for a Financial Assessment Hearing is served upon your debtor, who later does not turn up at the Court to be examined, you can request the Deputy Registrar to issue a Warrant to Arrest.

The District Court from 01 July 2014 has a new process for filing a claim.

The process seems to go back to the formal pleading process of some years ago and a case management conference among other things has been added.

I recently met with a 70 year woman who had just recently retired, to discuss the payment of a debt that we were asked to collect. The woman, quite honestly was the salt of the earth. During the conversation to discuss the debt owed, I was told the following.

The woman had worked hard all her life from the age of 15. She stopped work for a few years to have children, but was forced to return to work quickly to support her family. Her late husband she says, whilst capable was a poor money manager, lacked the discipline to save and to make a plan for their future and stick to it. The woman’s husband passed away suddenly some years ago and at the time of his untimely death, owned nothing and owed a bit. The woman kept on working to pay rent, pay her household bills and service debt. The income that she was able to generate did not leave any money to be saved for the unexpected.

Default judgment can now be sought where the defendant's response does not disclose any defence to the plaintiffs claim or admits the facts which are subject to the claim.

This is not legal advice. Seek advice from your solicitor or other professional before taking action in regard to this general in nature article.

A party can now apply for summary judgment within

20 working days after the date by which the defendant is required to serve its response.Once an application for summary judgment is filed, the proceeding is in abeyance until the summary judgment application is dealt with.

The parties are not required to serve Information Capsules unless the application is unsuccessful.

If the application is successful, judgment will be given and the matter concluded.

This is not intended to be legal advice. Do not act upon anything contained in this article without first consulting your solicitor.

Question:
Can a director of a company who has not signed a personal guarantee be liable for a company's debts?

The answer is YES!

The notion of limited liability applies to a persons shareholding. A director owes various duties to the company and ultimately the creditors of the company.

If a director allows a business to be carried out in such a way as to create a substantial risk of serious loss to creditors, the director can be sued for the resulting loss.

Whether you are a large company or a small one, the risks are the same. Get your corporate governance right.

A debtor company faced with a Statutory Demand must apply to the Court within 10 working days if it wishes to have the Statutory Demand set aside. A debtor company can only challenge a Statutory Demand on the grounds that the debt owed is disputed, is not owed or the Statutory Demand was procedually defective.

The High Court will hear the creditor's application to have the Statutory Demand set aside. Interestingly, these application hearings  usually get heard a lot quicker than the processing of a liquidation application.

If the Court concludes that the debt is not disputed, the Court has the option to make a ruling right there and then to place the debtor company into liquidation. The High Court may decide to leave the matter in abeyance for a short period of time to see if the debtor company can in fact pay its debts. If the High Court does not do this, and the creditor asks, the High Court can place the debtor company into liquidation immediately.

Many of you will remember and remember well the lessons you received from your parents early in your life, particularly your father. Sons and daughters will remember well their father’s constant chanting about the things that were important to develop, demonstrate and protect. Things that you were told were values in life and would set you apart from others who are less scrupulous, and ensure your reputation would remain intact, and therefore society would come to trust and respect you. You earned a reputation as being ‘solid”. So what are these “things”, these “values”. Let me list a few for you:

 - When you shake hands with someone else, give a strong grip;

 - Look the other person in the eye;

 - Mean what you say and say what you mean;

In liquidations, there is an opportunity to pursue action against either the director(s) or some related party for funds or assets removed from the company prior to the liquidation.

If an unsecured creditor funds the costs of legal action, the creditor stands ahead of all creditors, including GSA holder, staff and the IRD. Any money that comes from a successful action funded by a funding creditor will be paid to the funding creditor, up to the value of the unsecured debt.

Shane Crawford

04/10/2012

DISCLAIMER: This is not legal advice. We strongly recommend that you take independent legal advice in the first instance.

There has been a further change to the District Court Rules - Civil Procedure

Previously a defendant had 30 working days or 31 working days including the day of service to file Form 3 - Response by Defendant.

The defendant now has only 20 working days to file Form 3 - Response by Defendant.

The Plaintiff's Information Capule and the Defendant's Information Capsule must also be served within 20 working days.

We suggest that you check with your solicitor in the first instance. 

There is a new District Court rule now in force which requires, at the time of serving a Notice of Claim, to serve initial discovery of documents.

We suggest that you contact your solicitor to find out exactly which documents you must serve along with your Notice of Claim.

Quote:

"the only person who will stay closer to you in adversity other than a friend, is a collector from Specialist Collections & Consultants Limited"

Question for you.

Who can escape a customer with poor morals and morale quicker? An insurance company or a financier?

The difference is, mostly, in the term of the contract. Generally insurance contracts are renewed every 12 months and before the contract is renewed, the insured must make a full disclosure again of things that happened in the previous 12 months such as accidents, speeding fines, criminal convictions, and even accidents that the insured person did not make a claim under the policy for. The insurance company can decide whether to renew the policy for a further 12 months, and take the risk of a financial loss for a further 12 months. The insurance company can also elect not to renew a policy or even cancel the policy anytime during the insurance year. In essence the insurance company can escape "risk" quickly if the insured person for a number of reasons becomes an undesirable risk.

Not so with financiers. Once money is handed over the financier is on risk until the loan is re-paid in full or compromised. This means, unlike an insurance company, who can leave the relationship at any time, a financier must endure a change in a customer’s morals and morale. Loans can vary in terms from 1 year to 30 years, depending on the type of the loan. The risk for the financier is being repaid in full. It is not simple, if at all possible in some cases, for a financier to escape a contract where a customer refuses to pay or constantly defaults on payments. Why? Where will the money come from to re-pay the financier?

We are pleased to advise, and say about time, that the Ministry of Justice has updated the form to file a Disputes Tribunal claim.

You can find the form by visiting http://www.justice.govt.nz/Tribunals, Disputes Tribunal, forms and guides, Disputes Tribunal claim form.

You can download the PDF version or from the Ministry of Justice website you can complete the form on line.

Shane Crawford

23/11/2011