The liquidator's report: what it tells you, and what to do with it

When a New Zealand company goes into liquidation, the liquidator must send every known creditor an initial report, then another every six months, and a final report at the end. The report sets out the company’s situation, lists the secured creditors, then lists everyone else. Read it, check where you sit, and go back to the liquidator with any questions.

When does the report arrive?

The timing is set by section 255 of the Companies Act 1993. A liquidator appointed by the company’s shareholders or directors must prepare a list of known creditors and send each of them an initial report within 5 working days of being appointed. A liquidator appointed by the court has 25 working days. After that, they send a report on the liquidation within 20 working days of the end of every six-month period, until the liquidation finishes. Each report also goes to the Registrar of Companies.

When the work is done, section 257 requires a final report to every creditor whose claim has been admitted, stating that the known assets have been realised or dealt with, that the proceeds have been distributed, and that the company is ready to be removed from the register.

What if you haven’t received one?

The liquidator can only send it to creditors they know about. If a customer of yours has gone into liquidation and nothing has arrived, contact the liquidator. Their public notice gives an address and phone number for creditors’ enquiries, and you can find the notice through this week’s list of companies in liquidation.

Following the liquidation on the Companies Office

Look the company up on the Companies Register by its correct legal name, and you can follow what is happening through every report and document that has to be made publicly available there.

Then take the director’s name from the company’s record and put it into a director search on the register. It shows you whether the same director has other companies that are also affected, which gives you a broader view of what you are dealing with.

The full lists of secured and unsecured creditors are not always available on the Companies Office. As a creditor you may receive them directly, and some liquidators publish their reports on their own websites.

What does the report contain?

What goes into each report is set by the Companies (Reporting by Insolvency Practitioners) Regulations 2020, which apply to every liquidation that started on or after 1 September 2020.

The initial report

• The company’s name, company number and NZBN, and the date and time it went into liquidation.
• Who appointed the liquidator, and the liquidator’s contact details.
• A brief summary of why the company went into liquidation.
• What the liquidator plans to do, and, where they can say, when, along with an estimated completion date.
• For a company that cannot pay its debts, a statement of the company’s affairs: a list of every known creditor; the company’s known assets, with an estimated value and any security held over them; its known debts, including the total owed to each class of creditor; where practicable, an estimate of what is likely to be available for each class, expressed in cents in the dollar; and any court proceedings the company is involved in.

The classes of creditor in a liquidation are preferential, secured and unsecured. The liquidator can leave out asset values or pending proceedings if publishing them would prejudice the work, and must leave out the address of any creditor who appears to be an individual. The initial report also comes with a notice of your right to ask the liquidator to call a meeting of creditors, and a statement disclosing any conflict of interest the liquidator has.

Every six months

• What the liquidator has done so far, and since the last report.
• Any material change to the plan.
• The estimated completion date, and the reason if it has moved.
• An updated statement of affairs, with the reasons for any material differences from the last one.
• The money received and paid out, with payments broken down by class of creditor.
• Every fee and reimbursement paid to the liquidator since the liquidation began.

The final report

• A summary of everything the liquidator did, and all money received and paid, with the total fees taken.
• Where the final numbers differ materially from earlier estimates, and why.
• Any money recovered from creditors, shareholders or directors. Money recovered from creditors is usually payments the liquidator has clawed back.
• What was paid to each class of creditor, in total and in cents in the dollar.
• Any debts that were not paid in full, and the reason.

A cents-in-the-dollar figure in a report is the liquidator’s estimate or result for that one company. It says nothing about any other liquidation.

How is the report laid out?

Most reports follow the same shape, and it helps to know it before you open one.

• First, the company’s situation. Where it stands financially and what is going on. This is often where you see debts you had no way of knowing about. In one report we went through with a client, the company owed $850,000 in GST.
• Then the secured creditors. Everybody who registered a security interest on the Personal Property Securities Register (PPSR). There are not very many of them up there.
• Then the unsecured creditors. Everybody else, which is where most suppliers and subcontractors find themselves.

We walk through that report, and what it meant for our client, in who gets paid first when a customer goes into liquidation.

What is worth checking?

Which list you are on, and for how much

Find yourself in it, and check the amount shown against your own records. If the figure is wrong, or you are not listed, tell the liquidator.

Whether you are listed at all

The initial report must list every known creditor, and each six-monthly report repeats the statement of affairs. The word that matters is known. Early on, a liquidator can usually see who holds registered security, but often does not yet know who the unsecured creditors are, and an initial report may show that list as “to be determined”. If your name is not there, tell the liquidator you are owed and put in your claim.

The legal name on your invoices

We have seen invoices on liquidators’ reports without the customer’s legal name on them. Your agreement was with a legal entity, and the entity in liquidation needs to be the one you actually invoiced. If there is any doubt, check the company on the Companies Register.

What being secured actually means

If you are on the secured list, you are in a much better position. Being secured gives you a higher likelihood of getting paid, but it doesn’t guarantee payment. Secured creditors can still take a big hit.

How to respond to the report

Read it, and make sure you understand it. Then go back to the liquidator with any questions you have. Having some transparency and oversight over where things are at is important, and the reports that follow every six months are how you keep it. Keep communicating with the liquidator as it runs.

How much of yourself you put into it is a case-by-case call, and it comes down to your own mindset. Some people will say it is pointless. Others want to keep on top of it. And it is completely understandable to want to let it go and let it run its process, especially when the amount is small against everything else you have on.

Best practice in a liquidation is to leave it in the hands of the liquidators and let it run its course, while keeping yourself informed and up to date. Once a liquidation or receivership starts, it has to go through that process, and even a debt collector’s hands are tied. The report is your window into it.

Then ask: do you have a personal guarantee?

This is the question that matters most while the liquidation runs. If a director gave you a personal guarantee, then whether the business is in receivership or liquidation, you can potentially pursue the unpaid amount through that guarantee. The liquidation carries on over there, and your recovery through the guarantor’s own assets can carry on over here. Dig out what was signed when the account was opened, and if there is a guarantee, it is worth getting advice on how to pursue it.

What the report tells you about future risk

Look at how short the secured list is. You want to be on it, and there are not very many up there. Getting there is decided before the work starts, by what your customer signs and what you register. That is the lesson most reports teach, and it is one you can act on this week for every customer still on your books.

There is one more thing worth knowing. A director whose company has gone into liquidation can often start again under a new company. Once the old company is removed from the register, there is nothing left to recover from. That is why a personal guarantee matters: it holds the director personally responsible, whatever happens to the company.

If your customer has only just gone under, start with what happens to your money when a customer goes into liquidation.

This page describes the process in general terms, from our own research and commercial experience. Do your own research, and get legal advice for your own situation.