Business Update

ITS October 2009 Newsletter

General

Insolvency law provides all creditors with some measure of equality in order to avoid destructive fights between creditors and wasteful races to courts to recuperate their debts. 

Employees are one of the categories of creditors that have statutory preference so that wages and salary are paid before payments are made to unsecured creditors of an insolvent company. 

The maximum amount employees can claim in an insolvency proceeding under the Companies Act 1993 and the Insolvency Act 2006 was previously set at $16,420.  There is a statutory requirement to adjust this amount every three years based on a prescribed formula.  The prescribed formula provides for the revised figure to reflect any overall percentage increase, over the relevant adjustment period, in average weekly earnings (total, private sector), calculated by reference to the last Quarterly Employment Survey published by Statistics New Zealand. 

The new employee preferential claim figure has been adjusted to $18,700.  This reflects the overall increase in average weekly earnings in the private sector of 13.9 per cent over the three-year period ending 30 June 2009. 

Please see http://www.companies.govt.nz/cms/how-do-i/close-a-new-zealand-company/liquidation/how-does-liquidation-affect-you

There are 27 cases currently in court and 15 cases under investigation.

Related link

• Further information on the National Enforcement Unit