Business briefs

Directors have personal liability for company debt in liquidation

A recent decision in the Court of Appeal[1] has made a director liable for almost $500,000 of company debt due to the company’s failure to keep adequate accounting records. The decision highlights the importance for directors to understand their duties under the Companies Act 1993. The Act requires directors to ensure that the company keeps proper financial records.

If you are a director and fail to keep adequate accounting records, and the company is unable to pay its debts in liquidation, then the court can make you personally liable if the failure has resulted in:

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Construction industry and its retentions scheme

High Court provides useful guidance for subcontractors

The collapse last year of Ebert Construction Limited took many in the construction industry by surprise, particularly its subcontractors who were owed retention moneys. In our Spring 2018 edition (No 50) we published an article on Ebert Construction and subcontractors which had a section on retention moneys. Since then, the High Court decision has provided some guidance on the retentions scheme under the Construction Contracts Act 2002. We explain the main aspects of that decision and how subcontractors can help manage their risk.

retentions

The retentions regime

The retentions regime was created under the Construction Contracts Act 2002. It requires all principals/head contractors to hold moneys they retain on trust. The regime aims to protect retention funds if the principal/head contractor becomes insolvent. While Ebert was not legally required to establish a separate bank account to hold the retention money, it did so.

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Over the fence

The Animal Welfare (Care and Procedures) Regulations 2018

The Animal Welfare Act 1999 provides for offences and penalties for serious animal abuse or neglect.

In May 2015 the government amended the Animal Welfare Act enabling regulations to be made on matters such as animal care and procedures performed on animals.

The Animal Welfare (Care and Procedures) Regulations 2018 are the latest set of regulations to be issued; they were issued in March 2018. Most of these regulations will come into force in October this year. Examples include the prohibition of the use of traction in calving cows and the requirement to ensure that dogs transported on an open deck or trailer of a moving motor vehicle are secured to prevent the dog falling off or hanging off.

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How to Recover Undisputed Debts

When the court makes a decision that an individual or business is owed a debt, it issues a judgment order telling the debtor that they must pay the creditor. However, often creditors are left wondering what happens if the debtor doesn’t pay. Find out how the court can assist you in recovering an undisputed civil debt.

Collecting civil debt

The process of collecting civil debt if the debtor doesn’t pay is called ‘civil enforcement’. A creditor can only initiate civil enforcement where a court or tribunal has ordered a debtor to pay a civil debt. The court doesn’t enforce judgement orders automatically; a creditor must select the appropriate enforcement actions and manage the process independently, or with the assistance of a lawyer. When you make an enforcement application, you can claim interest on civil debt that’s more than $3,000. If your order is more than six years old, you may need the court’s approval before taking enforcement action.

You must know a debtor’s correct address before the court can take some enforcement actions on your behalf. If you don’t have the debtor’s address, you can:

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What happens to Kiwisaver funds in bankruptcy?

fraud The Court of Appeal has recently confirmed what happens to a Kiwisaver account when a person is made bankrupt. The short answer is the bankrupt gets to keep their money.

Since the introduction of the Kiwisaver legislation there has been confusion and uncertainty around what happens to a person’s Kiwisaver account once they are made bankrupt. This uncertainty is caused by two seemingly incompatible provisions contained within two different Acts. On one hand the Insolvency Act says that all the bankrupt’s property belongs to the Official Assignee (the government employee who manages bankruptcies), Kiwisaver funds are property so those funds would belong to the Official Assignee. However, on the other hand the Kiwisaver Act says that unless a law ‘specifically’ requires the withdrawal of Kiwisaver funds then it is not possible to withdraw the funds unless the person is suffering financial hardship.

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Latest EJ update

johnny automatic Christmas wreathThe latest EJ update is available here.

In this issue:

  • Trust review
  • A commercial property opportunity in Te Awamutu
  • New debt recovery service
  • Update on gift duty changes
  • Stay informed with email alerts from the Edmonds Judd website

If you wish to discuss anything in the EJ update please don’t hesitate to contact us.

Edmonds Judd will be closed for the holiday period from 12:00 pm on Thursday, 23rd December 2010. The office will reopen on Monday 10th January 2011 with a skeleton staff between the hours of 9:00am and 3:00pm. A full complement of staff will be available from 8.30am Wednesday, 19th January 2011.

Have a merry and safe holiday!