Since December 2007, directors of New Zealand companies that become insolvent or appear likely to become insolvent have been able to appoint an Administrator.

What can an administrator do?

The Administrator is supposed to oversee a corporate rescue mechanism that gives the company a better chance of surviving. That's the theory. In practice, while the entity and even the business may survive, the shareholders have almost invariably lost their investment.

The Administrator is empowered to do anything that the company or any of its officers could do previously. He can carry on the business of the company as well as terminate it, or any part of it. His job is to investigate the company’s activities and report to creditors at meetings. The first has to be held within 8 days of being appointed and the second within 25 days of being appointed.

Creditors make the decisions

The second meeting is the important one. At this meeting the creditors vote to either return control to directors, or place the company in liquidation, or execute a Deed of Company Arrangement, commonly called a DOCA. The DOCA may enable the company to continue trading and offers the prospect of a better return to creditors than liquidation. When the terms of the DOCA are effectuated the company reverts to the control of its existing directors or new directors. It can also go straight into liquidation.

Administration not a popular option

The voluntary administration process has not been adopted extensively in NZ. Why not? Firstly, the administration process is always outrageously expensive. Secondly, the Inland Revenue Department has preferential creditor status. Thirdly, directors are not responsible for tax liabilities and therefore do not have the same incentive as their Australian counterparts to appoint an administrator and thereby avoid those debts. Just how unpopular voluntary administration is, can be seen from the table below. Note the relative level of appointments of receivers, liquidators and administrators.

In Australia, voluntary administration has never augured well for shareholders; they usually lose all or most of their investment. Creditors via an Administrator (rather than shareholders via the board) control the company. In a few cases where a small previously listed entity has been resuscitated (by backing into the corporate shell a new business or another business and raising new capital) existing shareholdings have been savagely diluted. Administration is the beginning of the end for shareholders.

Voluntary Administration - 

what does it mean to you as a shareholder? 

If your company has been placed in administration, its business has almost certainly failed and your shares are of little, if any, value. The chances of any significant recovery, even if the entity is re-structured and recapitalised, are remote.

Remember who your directors and executives were and resolve to avoid in future any companies they may be involved in.

Finding your company

If your company has been delisted or is suspended from quotation it may well be in administration. There are three ways of finding a company that is in administration:

• Search by code (see box above right)
• Search by company name (see box above left)
• Click on the appropriate letter of the alphabet (see the alphabet index above)

If you are unable to find your company or the information is incomplete or incomprehensible we recommend you send us a message and we will try to assist.

Please bear in mind we are unable to help with private companies, public companies that have never been listed or with companies domiciled outside New Zealand or Australia. The NZ Companies Office on 0508 266 726 or the Australian Securities and Investments Commission on 1300 300 630 may be able to assist you with other companies.

FURTHER READING:

Voluntary Administration by NZ Companies Office

Don't leave it too late to save your firm by Damien Grant, a liquidator with Waterstone Insolvency