Welcome to the latest edition of Buddle Findlay’s insolvency update. It comes against the background of an economy that remains under stress. Unemployment is the highest it has been since the depths of Covid-19, and many businesses are struggling with tax payments. There is more than NZ$1.4b owed to the IRD in unpaid GST and PAYE from the 2025 tax year, and that's just a small part of the approximately NZ$8b the IRD is now chasing. In these circumstances, it comes as no surprise that monthly liquidations remain elevated - there were 1,296 liquidations in the six months ending June 2025, compared with 1,132 in the previous year.
The IRD's collection push, rising unemployment and weak economic sentiment suggest continued pressure across both corporate and personal sectors. In addition, the long period of higher interest rates has likely caused shrinking cash buffers for businesses and increased credit dependence. As a result, we are expecting more turbulence for the remainder of this year and beyond.
The economic challenges for New Zealand, and other jurisdictions, have led to a significant number of recent judgments on insolvency issues. Our update covers the most significant judgments from New Zealand and around the world. Topics from the New Zealand courts range from a successful claim by creditors under s 301 of the Companies Act, to shareholders challenging the voluntary administration of a company that had some cashflow difficulties but a strong asset base.
Looking further afield, we discuss the 'no worse off' test for Restructuring Plans in the UK, which are similar to New Zealand schemes of arrangement. We highlight the British Virgin Islands decision reaffirming the principle that once a company is insolvent or bordering on insolvency, the directors’ fiduciary duty to act in the best interests of the company extends to include the interests of the company’s creditors. We also cover the English High Court winding up a company for balance sheet insolvency, and then making an adverse costs order against the directors who controlled the company's defence of the application.
We trust that this update provides valuable insights in advance of an anticipated steady stream of issues arising in this busy area.
