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When a business can no longer pay its
bills, a secured creditor can place it into receivership. A receiver
is then appointed by the secured creditor or a Court to take over
the business and its assets.
The receiver will recover as much of the debt owing to the
secured creditor(s) as possible.
Receivership
The business can continue to run and can be sold as a going
concern. Proceeds of sales are paid to creditors in a strict order
of priority, with secured creditors having priority.
A business in receivership is no longer run by its own
management. The receiver is like a caretaker running the business
for the benefit of the secured creditor.
If the business can't trade its way out of trouble, or be sold,
it will be liquidated.
Liquidation
The business and its assets are sold by a liquidator.
Liquidations are often handled by the New Zealand Insolvency &
Trustee Service, which is part of the Ministry of Economic
Development. Call the Service on 0508 467 658 for information on how
to lodge a claim as a creditor.
Secured creditors
A secured creditor is a person or a company who has lent money to
a business with some form of security over the loan. A secured
creditor can appoint a receiver if they are concerned the business
can' keep up the payments on the loan.
eg, a bank who has loaned the business
money.
Unsecured creditors
An unsecured creditor does not have any protection or security
for the debt that is owed to them. The unsecured creditor must wait
until all the secured creditors have recovered their money before
they have any chance of receiving any payment.
eg, customers with gift vouchers, deposits
paid for goods not received, goods on layby.
Finding the receiver or liquidator
Check in the public notices of a major newspaper in your area.
Check the company's business premises. Often there is a sign on
the door stating the receiver's or liquidator's details.
If the company is continuing to trade while in receivership, ask
a staff member for the receiver's contact details.
Contact the Companies Office. Check your phone book for your
local office, or find them on the Internet.
If they have been appointed by the Court, you can find out
directly from the Court.
Unsecured creditor rights
If you have a gift voucher, or have paid a deposit on goods, you
can lodge a claim with the receiver. Contact the receiver and find
out how to do this. You will have to put your claim in writing and
give proof of your claim - eg, send in the gift voucher or receipt
for payment of deposit.
Often the receiver will not ask unsecured creditors to lodge a
claim unless it looks like there will be enough funds to pay them.
When a business goes into receivership it has usually been in
financial difficulty for some time, so there are many unpaid bills
and unmet obligations -eg, suppliers of goods to the company, phone
and power bills, staff who are owed wages or holiday pay, Inland
Revenue Department.
Usually there is not enough money to pay all these creditors -
even after all the assets have been sold. The law sets down strict
rules about who should be paid first -
eg, staff wages must be paid before a
customer with a gift voucher. The receiver would be breaking the
law if they honoured the gift voucher - that would be preferring
one creditor over another.
Recovering deposits
If you have paid a deposit for goods to be made or ordered in for
you, you are an unsecured creditor. Write to the receiver.
In the future, if you are asked to pay a deposit for goods,
negotiate to pay a smaller deposit.
If you paid a deposit on goods to be held aside for you and the
remainder was to be paid at a later date see the information on
"Goods on Layby" below.
Goods in for repair
These should not be part of the receivership and the receiver
will return them to you if they can identify the goods as yours. A
serial number is the best form of identification. If goods are being
repaired, contact the receiver ASAP with a complete description of
your goods.
Goods on layby
You have special protection under the Layby
Sales Act. The Act says you can pay off the layby and collect
the goods - as long as there are goods of that type available in
stock.
If there isn't enough stock, the Act says that customers with the
earliest date on their laybys will take preference. Those who miss
out on goods will be deemed creditors, but have preference over all
other unsecured creditors and many secured creditors.
Protection under the Act does not apply to customers who have
breached the terms of the layby by not making any payments during
the three months before the date of receivership or liquidation.
If you have goods on layby, pay off the amount owing and collect
them ASAP.
Gift vouchers
When a business is trading in receivership it is no longer the
same business that sold you the gift
voucher. The receiver is now managing the business, even though
it may be operating from the same premises, with the same goods, and
often the same staff. The voucher holder is owed the goods by the
business and not by the receiver.
In these circumstances it can be very difficult to get the gift
voucher honoured. There are some things you can do to minimise the
risk:
- Buy the type of vouchers that can be redeemed at more than one
business - eg, petrol vouchers
- If you are given a voucher as a gift, use it as soon as
possible
- Before buying a voucher, ask the business if they have any
system to protect voucher holders in the case of receivership.
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