Coming up on Sunday morning 23 August 2015 on Radio NZ Insight with Wallace Chapman (just after 8 am news):
A very important programme dealing with:
(1) Increased powers being sought by the Ministry of Business Innovation & Employment (MBIE) to ban “badly behaving company directors” who engage in illegal “Phoenixing”: i.e. the creation (incorporation) of new companies just prior to putting a failed company into liquidation, and the illegal transferring of assets from that old (failed) company into the new entities with similar names to the liquidated company, with the whole process carried out by the director(s) to specifically avoid paying creditors (including IRD), fines, and employee entitlements (unpaid wages and arrears). Under this “trick” [CORRUPT PRACTICE] the illegal “phoenix company” re-emerges from the ‘ashes’ of the old (failed) company (now in liquidation) with the same director(s) or shadow director, plus a very similar trading name and corporate structure. Note: “Phoenixing”, as Liquidator Damian Grant of Waterstone Insolvers, Auckland, points out to Radio NZ, can be legal, but only in a case where the phoenix company purchases “all the assets of the old company directly from the liquidator”, and all shareholders and creditors are privy to all the financial transactions that are carried out involving the assets, which must be done in a fair and transparent process.
(2) Insolvency Law. The setting up of a Register of registered Insolvers (Liquidators). David Milne, Manager of the Northern Labour Sector Inspectorate of MBIE admits to RadioNZ that “9 out of 10 Liquidators” refuse to cooperate with their MBIE audits of companies that have been put into liquidations. [This confirms the findings of SPCS that CORPORATE CORRUPTION is rife in New Zealand]. Milne reports that when the Employment Relations Authority ascertains through its investigations, prompted by employee complaints, that considerable arrears and unpaid wages are owing; rogue company directors just put the company into liquidation, “ripping the assets out of the old company” and transferring them into the “phoenix company”; and carry on with business as usual under the veil of the new corporate structure. Milne confirms that MBIE investigations (audit processes) always commence with “open source researching” – determining the identity and relationships of the various company officials etc. based on the Companies Office online records. [Unfortunately, the problem with this approach, as the SPCS has found following a six year investigation, is that these records are in significant ways “shambolic” and lacking in integrity].
(3) May Moncur, an employment advocate with Employment Disputes Services, in dealing with her clients, has reported that unscrupulous company directors are putting their companies into liquidation to specifically avoid paying significant settlement fines awarded by the Employment Relations Authority Tribunal to workers for unpaid wages etc. The assets from the liquidated company are transferred promptly into the phoenix company so there is no money available to pay the fine. With the cooperation of an unscrupulous liquidator the company director continues his rip off of new unsuspecting employees under a new corporate veil – brazenly using an almost identical company name.
(4) Minister of Commerce and Consumer Affairs – the Hon. Paul Goldsmith – concedes that there is a need for “robust legislation to deal with rogue directors. However, he makes no mention of the need for active and effective enforcement of the law and/or the need to resource enforcement agencies to effectively enforce the law. The Minister points out that in the last three-and-half years the MBIE has only made eight prosecutions of company directors for engaging in illegal “phoenixing” under “Phoenix Law” and of these there were only five convictions. He sees this “low number” of prosecutions as clear proof that there is no no need to expand the powers of the MBIE to deal with illegal “Phoenixing”, despite the fact that MBIW says it is “on the rise”. If there is to be a compulsory public register of registered Insolvers (Liquidators) set up, he sees no need to look at changing any laws dealing with “Phoenixing” until after the register regime has been operating for at least one year. The Restructuring Insolvency & Turnaround Association of New Zealand is currently engaging in public consultations as to the need for such a public register, in part to address the problem of unscrupulous liquidators.
Two links to Morning Report audios (Friday 21 August) promoting the coming Sunday programme: