Martelli McKegg

On August 28th, we gathered at Martelli McKegg in Auckland, with members joining online from around New Zealand, for an evening of networking, insightful discussions and our AGM. Richard Ennis from Invest Northern Ireland provided an update on their focus for New Zealand, setting the stage for an exciting year ahead. Our guest speaker, David Downs, CEO of NZ Story, captivated us sharing his story of growing up in New Zealand with Irish parents, his connection to their homeland, and his passion for telling the story of New Zealand to the world. Thanks to Invest Northern Ireland and Martelli McKegg for their support in making this event a success. #Networking #IBNNZ #BusinessEvent

What does all you’ve seen in the media about Du Val group mean for directors of companies generally? I spoke with BusinessDesk NZ to try and explain the (bespoke) orders that are in place here. I’ll come to that - but first - let me explain why it’s important for directors of struggling companies to sit up and (probably) act as a result of this. Another company collapse many would have seen in the media is Mainzeal. Formally one of NZ’s largest construction companies (and with a former Prime Minister on its board), it collapsed in the wake of the global financial crisis. A case was brought against the directors of the company by the liquidators to try and recover funds for creditors. The years long fight started in the High Court and wound its way up to the Supreme Court. The judgment of the Supreme Court which came out in 2023 now sets the law on what directors need to do when their company is facing major financial difficulty. The upshot is that directors must have front of mind what is in the best interests of creditors (and not shareholders). While recognising some period for “taking stock”, the reality is, once a company is into the grey zone of insolvency directors must act quickly, seek advice and take steps to protect creditor interests. Part of the problem is that many directors do not understand the solvency test which is set out in the Companies Act 1993. In simple terms to satisfy the solvency test you must meet two limbs. First, assets should exceed your liabilities (balance sheet limb) and second, you should be able to meet expenses as and when they fall due from cashflow (cashflow limb). Borrowing more to fund capital your business needs to keep trading should send major warning bells for directors. And Mainzeal follows another Supreme Court decision in finding that getting into “new debt” from the true date of insolvency could cost directors personally. Getting advice as a director and getting it early cannot be emphasised enough. However, where we are now - namely in the middle of a significant insolvency cycle - the likelihood is that you need representation. If you do, myself and my highly experienced team are here to help so get in touch. Returning to Du Val, the directors are now facing the full force of what occurs when a group of companies continues to trade in the face of significant solvency issues. The FMA has obtained draconian (and rare) orders from the High Court freezing personal assets of some directors and the assets of the companies of the group. To assist with managing the complexity of such an order the FMA have had an experienced Receiver appointed to manage those assets and preserve them as best as possible while a better understanding is reached of the financial state of the group. In addition, a major secured creditor has used usual powers to appoint a different Receiver.