Litigation In Respect Of A Company
Providing the debt is undisputed proceedings should be commenced with a Statutory Demand. This gives the debtor company 15 working days, from date of service, to pay the outstanding debt.
If payment is not received by the due date then liquidation proceedings can be filed in the High Court.
The High Court allocates a date for the winding up of the company, usually within 6 weeks of our filing our documents. The fees include advertising in the local paper and NZ Gazette.
- If the company is solvent then payment (including costs) is usually received by this date.
- If the liquidation proceeds, and liquidators are appointed, the court will, in most circumstances, award costs to the creditor in the sum of $1,750 together with disbursements of $800.
Bankruptcy / Liquidation
Winding up or Liquidation is against a company. Bankruptcy is against an individual. Both procedures are High Court matters and therefore relatively expensive.Liquidation of a company in effect dissolves that legal entity. All creditors are paid out from any company funds available (after realisation of all assets) in order of preference. A judgement obtained in a court of law rates as an unsecured claim.
Any secured creditors receive payment of funds over the asset secured. Should the sale of the asset fail to repay the security in full the balance of the secured claim becomes unsecured. Preferential creditors, as determined by law — wages due to employees and taxes due — are repaid in full before unsecured creditors are paid out. Should there be insufficient funds to repay all creditors the creditors are repaid, along with all others in their class of debt, on a pro rata basis.
Bankruptcy allows the Official Assignee to seize the bankrupt assets and to sell the same to repay creditors as a dividend on a pro rata basis. This may include future income the bankrupt will earn. After a defined period, usually three years, the bankrupt is normally discharged debt free and creditors' rights to any balance owing are lost.
Both procedures may restrict the entity from obtaining future income to repay the judgment debt. Because of this fact and the matters of cost and no guarante of success or payment, we only recommend the above procedures if the entity is known to be solvent.