Recent changes to the Companies Act have resulted in delays in distributions to creditors in many cases.

Preferential Creditors

This class of creditors includes, among others, the Inland Revenue Department and employees. The Inland Revenue Department’s claims in respect of GST and payroll related deductions rank equally with employees.

This means that, where the claim of these two classes of employee exceed the recoveries from assets over which they are granted preference, the distribution to them abates equally. Because of this requirement, we are required to delay any distribution to employees until the assets recovered are sufficient to meet the claims of employees and the Department.

Alternatively, if insufficient is recovered from the assets nominated by the Act for employees and the Department, we will make a distribution to both when it is clear that no further recoveries from these classes of assets is possible.

Secured Creditors

The realisation of assets which are covered by securities, is undertaken with communication between us and the secured parties concerned. Normally on release of the security, a distribution will be made to the secured party.

Unsecured Creditors

Distributions to unsecured creditors in a liquidation are not normally made until the liquidation is complete. Due to the difficulties often experienced in making recoveries from debtors, the completion of the liquidation may take many months.

In the case of a receivership, no distribution is made to unsecured creditors. When we are released as receivers, control of the company reverts to the directors unless a liquidator is appointed. In the case of the latter, any funds remaining in the receivership are passed to the liquidator who will be responsible for processing unsecured creditor claims and making any distribution to them.