Removing Your Company from Liquidation

9 May, 2019 | Nathan Tetzlaff

If your company has been put into liquidation, what can you do? There are still options available to help you get your company back. Even after a company has been ordered into liquidation, Courts can terminate the liquidation any time after the appointment of a liquidator.

An application to terminate liquidation may be made by the liquidator, a director, a shareholder, or a creditor of the company under s 250 of the Companies Act 1993.

What are the requirements to remove a company from liquidation?

The Court’s power to terminate liquidation is discretionary and the onus is on the applicant to show that termination of the liquidation is just and appropriate in the circumstances. Generally, the court will not grant an order to terminate liquidation unless:

• all creditors have been paid in full or satisfactory provision has been made for them to be paid, or creditors have consented;
• the liquidator’s costs have been paid; and
• the shareholders have given their consent or will not be in a worse position;
• it is in the public interest to do so (creditors and the public will not be put at risk).

Although the above items are not an exhaustive set of criteria, the Court will first consider whether these principles have been met. If not, the Court will consider whether exceptional circumstances exist for making an order to terminate liquidation where the above criteria are not fully satisfied.

For example, the High Court in In Tai Ping Trading Co Ltd v Regina Enterprise Ltd CIV-2009-404-7754 ordered termination of the liquidation of a company even where the company owed a disputed debt to a remaining creditor. However, the company had otherwise paid all remaining creditors, paid the liquidators costs, and had the support of all shareholders. The Court ordered the termination of the liquidation with the provision that the disputed amount be held in escrow pending the outcome of legal proceedings.

What is the process to apply to the Court to terminate the liquidation?

An application to terminate liquidation can be made any time after the appointment of a liquidator. The application should be made as soon as possible in order to avoid additional liquidator’s fees and the sale of company assets.

A lawyer with experience in liquidation matters can prepare an application to the court pursuant to s 250 of the Companies Act 1993. Such an application should include evidence of solvency and payment to all creditors, address whether any unpaid creditors exist, and detail the actions taken by liquidators to date and payments of their fees. Filing such an application to terminate liquidation will incur a $500 filing fee.

What happens if the liquidation is successfully terminated?

Where an application is successful and the Court orders termination of the liquidation, the company can resume trading. Note that the applicant is required to file a copy of the Order with the Registrar of Companies for registration within 10 working days. A failure to do so can result in a fine of up to $10,000.

Have liquidation proceedings been issued against your company? Has your company already been liquidated? Do set up an appointment to discuss how we could help, contact our liquidation experts by phone on 09 836 0939 or email partners@smithpartners.co.nz.