South Island company liquidations are steadily tracking towards levels of the past two years with creditors chasing average small business debts of between $200,000 and $250,000.
In the past three years the number of financial stresses has not increased, and the stresses have not increased in size, but Inland Revenue remains aggressive in its liquidation applications, says Insolvency Management director Ian Nellies of Dunedin.
"It is a sign of the times that creditors are seeking to take an active control of debtors. They will likely have their own debt to manage," Mr Nellies said.
Insolvency Management, which has offices in Dunedin and Christchurch and handles more than 50% of South Island liquidations, expects to manage 100 small South Island companies being placed in liquidation by creditors this year - similar numbers to the totals in 2006 and 2007.
Mr Nellies said the number of private creditors pursuing debts from companies through liquidation proceedings is well up on five years ago, for the past three years accounting for 40% of proceedings, while Inland Revenue applies for the 60% balance of southern liquidations.
Overall, the number of southern liquidations handled by Insolvency Management was up about 20% on the several years before 2006, but in 2005 Inland Revenue wound up several groups of companies, he said.
"We are tracking toward 100 again this year with 54 [South Island] liquidations to mid-July," Mr Nellies said.
Public awareness of liquidation and receivership proceedings have been heightened in recent weeks with high profile applications going through courts around the country.
Multiple applications for receivership and liquidation are being sought against Queenstown developer Dave Henderson and his $2 billion Five Mile housing project.
In July receivers for Bridgecorp began bankruptcy proceedings against its founder, Rod Petricevic, who failed to lodge almost $600,000 to stave off proceedings.
For Insolvency Management, 90% of its 100 annual liquidations are "mom and pop" businesses with fewer than five employees, owing creditors between $200,000 and $250,000, Mr Nellies said.
When placed in receivership, a company may continue to be operated by the receiver in order to trade its way out of its debt, then possibly be sold.
If that is not viable it could be placed in liquidation.
Proceedings will ascertain a company's assets and debts and sell the former to pay off as much debt as possible, beginning with secured creditors and then moving through to unsecured.
Mr Nellies said the most common problem for small business management appeared to be people not tracking their accounts through the year and delivering an accountant "a shoebox of receipts to sort out at the end of the year".
"Management should especially be watching cashflows during the year. The general public aren't spending at present and are making it difficult for several sections of the the economy," he said.
Inland Revenue "remained aggressive" since 2005 in its investigations, going back more than five years in some individual cases when uncovering company tax, GST or PAYE problems.
Mr Nellies' advice was talk to Inland Revenue as soon as a problem arose.
Some liquidations had been for an original $40,000 debt to Inland Revenue which had then ballooned to $100,000, with penalties, four years later.
The smallest liquidations managed by Insolvency Management were around $20,000.
The airline Origin Pacific's liquidation, for a debt of about $21 million,was the largest on its books.
