What happens during receivership
An overview of the receivership process
If your company is unable to pay its debts to a secured creditor, it may be forced into receivership, where a receiver is appointed to deal with secured assets.
What receivership means
A secured creditor can appoint a receiver to collect and sell 1 or more of your company assets over which they have a financial claim.
For example, you may have offered equipment or machinery as security against a loan. If you don't repay the loan on time, a receiver can be appointed to sell off that asset — known as a secured asset — to repay the creditor.
In New Zealand receiverships are managed under the Receiverships Act 1993.
Appointing a receiver
A receiver is appointed:
- under the terms of a deed of agreement, which is a binding agreement between your company and creditors setting out how you will repay your debts, or
- by a court.
A receiver must be a licensed insolvency practitioner.
More than 1 secured creditor can request the appointment of a receiver, and more than 1 receiver can be appointed to act at a time. If 2 or more receivers are appointed, they may act jointly or individually.
Once appointed, a receiver must file a notice of appointment with the Registrar of Companies and give public notice of their appointment.
Once a notice is filed, the status of your company on the Companies Register is changed from 'Registered' to 'In receivership'.
The role of a receiver
A receiver, who is usually an insolvency expert:
- collects and sells 1 or more secured assets on behalf of a secured creditor, and
- manages other preferential claims against your company, such as unpaid wages and amounts owing to Inland Revenue.
- must be a licensed insolvency practitioner.
Preferential claims are paid before those of secured creditors.
A receiver also prepares and files reports with us on the status of, and activities conducted, during the receivership.
Your responsibilities as a director
As a director of a company in receivership, you remain in office but have restricted powers.
You must:
- cooperate with the receiver so that the financial and business affairs of your company can be resolved fairly and equitably, and
- provide your company's accounts, records and any other information the receiver requires.
When receivership ends
Receivership ends when we receive:
- notice from the receiver that the receivership has ended
- a final report from the receiver on the activities and outcomes of the receivership, and
- a summary report.
Once these documents have been filed, and provided there are no other receiverships continuing, your company's status on the Companies Register is changed from 'In receivership' to 'Registered'.
Filing annual returns
You don't need to file annual returns while your company is in receivership. Once the receivership ends, you must file your next and future annual returns as they become due.