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For Barry Byrnes, the coronavirus was “the nail in the coffin” that caused the bankruptcy of his Auckland construction company.
His business, Tempo Construction, is one of approximately 100 New Zealand companies that went into liquidation in the six weeks after New Zealand first entered alert level 3 on March 24.
Analysis of the liquidator reports shows that at least 13 business failures during that period were the direct result of the Covid-19 impact.
Liz McDonald / Things
The economic impact of the coronavirus has forced some construction companies to liquidate. (File photo)
Collectively, the companies owe at least $ 4.1 million to creditors, and their collapse leaves some 70 employees unemployed. For some owners, it marks the end of almost 20 years in business.
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Byrnes said he had already been encountering difficulties in the construction sector earlier in the year, with clients pushing big projects.
Then Covid-19 appeared and the business went from bad to worse.
“I can’t say it was just Covid-19 that sank us, but anyone who had any kind of crack in their armor, that wouldn’t have helped,” Byrnes said.
The business received $ 28,118 in wage subsidies for four employees.
The company’s collapse resulted in the loss of seven jobs, including contractors and subcontractors, he said.
Byrnes said he tried to keep the company operating but, after completing existing contracts, he chose voluntary liquidation to eliminate the risk of impacting others.
“We haven’t taken anyone with us, which is good.”
A first report of liquidators has not yet been published.
Kevin Stent / Things
Finance Minister Grant Robertson says the penalties for business owners who incur dishonest debts will remain in effect.
To support companies facing insolvency due to Covid-19, the Government is introducing changes in insolvency and company law.
The Covid-19 Response Legislation Bill makes changes to the Business Law to help businesses facing insolvency due to Covid-19 remain viable by putting existing debt into hibernation and delaying payments by up to six months.
The bill also provides directors of companies facing significant liquidity problems with a “safe harbor” for their insolvency-related duties.
Finance Minister Grant Robertson said it was inevitable that some companies would have to go out of business.
“However, these measures provide an accessible and pragmatic means to help some companies weather the storm in a way that does as little harm as possible to the interests of creditors,” said Robertson.
Serious breaches of the duty to act in good faith and to punish those who incurred dishonest debt would remain in place, “said Robertson.
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McDonald Vague insolvency practitioner Peri Finnigan says some business owners may be waiting for the wage subsidy to end before they liquidate their business.
Peri Finnigan, an insolvency practitioner at McDonald Vague, said insolvency could be established using a cash flow test or a balance test.
The cash flow test is whether a business can pay its debts when they become due.
The balance sheet test is whether the company’s assets are exceeded by its liabilities (includes contingent or prospective liabilities).
If a business failed in one of these two, then it was insolvent, he said.
If a company was unable to demonstrate that they were solvent as of December 31 and were already facing insolvency or distressed by Covid-19, then they could not rely on the safe harbor scheme, he said.
She said that there would be a number of companies, which had taken advantage of the low interest rates by borrowing more, that were in that position.
Continuing to negotiate could further harm creditors and would be a violation of the director’s obligations, he said.
She said the wage subsidy had allowed business owners to delay settlements. Others expected to have access to their facilities before making a call to close a business or not, he said.
Some owners were concerned that if they opted for liquidation they would help account for personal guarantees on things like leases if the liquidated business did not have enough to pay creditors, he said.
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Khov Jones’ liquidator Steven Khov says that not all companies will be able to use the debt hibernation scheme.
Khov Jones’ liquidator Steven Khov said the commercial debt hibernation scheme would benefit only companies that were viable in the first place.
If a business was not viable or profitable, then there was no plan that could help it, he said.
“There is not enough support for it to move forward if the business model breaks down,” Khov said.
The safe harbor would provide viable companies with a window of breathing space to get them back up and running, he said.
He said there would be many companies that had simply been “treading water” in their daily operations, and that the blockade would have forced some business owners to reevaluate their situation.
“What the blockade has probably done is force some business owners to reevaluate and rethink their businesses.”
Other businesses had been so affected by the blockade that there was no realistic way to move forward, he said.
COVID-19 CASUALITIES
David White / Things
The New Zealand border is currently closed to almost all travelers to help stop the spread of Covid-19. The restrictions have paralyzed New Zealand’s tourism sector.
The travel agent
Auckland tourism company New Travel Brokers operated as a travel agent with the majority of its sales from China and Japan.
The director decided to put the company into liquidation after experiencing “a rapid decline in sales” due to the Covid-19 pandemic and failing to continue operating profitably, according to a report by early liquidators.
It went into liquidation on March 24, operating since 2003.
He owes almost $ 760,000 to creditors, including $ 666,000 to unsecured creditors and $ 64,500 to staff.
The company received $ 49,207 in wage subsidies for seven employees.
The comany fit
Established in 2018, Auckland UDP Shop Fitters’ West UDP business was marketed as store installers, primarily in the boutique retail market. The business was last negotiated on March 25.
The company’s director told liquidators that the reason for the insolvency was due to the adverse impact of Covid-19.
It has not been established how much is owed to creditors in total, but employees are owed $ 19,418 in unpaid wages and vacations.
The little contractor
Incorporated in 2017, Cam’s Contracting operated agricultural contracting services outside of Ashburton.
It went into liquidation on March 25.
“Directors have some serious health problems, with the various problems related to Covid-19 can no longer work,” said the liquidators report.
The report did not show any creditors, but initial investigations indicated an overdrawn bank account, he said.
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Sister Kong on Victoria St in downtown Christchurch has closed.
The hospitality group
Christchurch hospitality chain Hoop Groop, Hoop Victoria (operating as Sister Kong) and Yaki Welder (operating as Bar Yoku & Salut! Salut!) Went into liquidation on April 21.
Hoop Victoria was last traded on March 25, the last day before closing.
The reason for the insolvency was due to the adverse impact of Covid-19, according to the liquidators’ reports.
How much was owed to creditors across the group was still being investigated, but until now employees owed about $ 20.00 and other creditors owed about $ 180,000, according to liquidators’ reports.
Hoop Victoria claimed $ 32,318 in wage subsidies for five employees.
Yaki Welder received $ 46,377 in salary subsidies for seven employees.
The importer
Euro Metals imported construction metals, mainly copper and aluminum, from Germany to sell to construction companies and its sister company Architectural Roof & Facade Innovations with the same owner and director.
Problems in one project led to a financial loss for Architectural Roof & Facade Innovations, resulting in the director taking a more conservative approach to contract acceptance and a drop in revenue, according to a report by the liquidators.
Faced with cash flow difficulties and the Covid-19 crash, the director sought the advice of his accountant. After receiving this advice, the shareholder resolved to put the companies into liquidation, he said.
The companies were formed 15 years ago and went into liquidation on April 3.
Euro Metals owes creditors $ 1.1m while Architectural Roof & Facade Innovations owes creditors $ 443,000. About half of that is due to a family trust.
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Gemma Hazeldine was a 25 percent shareholder in Pita Pit Rangiora, which went into liquidation during the shutdown.
The fast food restaurant
Incorporated in 2012, Etheredge was marketed as Pita Pit in Rangiora, Canterbury,
It went into liquidation on April 3.
The business had been for sale for some time, but, due to a significant drop in trade as a result of Covid-19, along with uncertainty about the future, the shareholders decided to liquidate the company.
Secured creditors owe $ 104,000 and unsecured creditors owe $ 10.00.
The company received $ 35,059 in salary subsidies for seven employees.
The recruiter
Auckland Legal Personnel recruitment company was established in 2017.
The company was liquidated on April 7 after restrictions announced in response to Covid-19 and the closure that resulted in “a dramatic decrease in the number of clients seeking to recruit new candidates in the short term,” the first report from the liquidators said.
“Due to continued economic uncertainty on a national and global scale, shareholders concluded that they were unable to continue financing the business for an extended period of time and without certainty of future earnings.”
The company owed $ 410,000 to its secured creditor ASB Bank, about $ 30,000 to Inland Revenue, $ 25,000 to staff, and $ 165,000 to unsecured creditors, according to the report.
The company received $ 54,777 in salary subsidies for nine employees.
The haute cuisine restaurant.
Auckland’s 46 & York restaurant was forced to liquidate “as a result of current economic conditions, which are beyond the control of directors,” according to the liquidators report.
“The company had stopped trading and was unable to incur ongoing costs and was recommended to liquidate.”
Director Dana Johnston said the Covid-19 impact was “clearly” the reason the company failed.
46 & York was incorporated in 2013 and went into liquidation on April 8.
$ 75,866 in wage subsidies was paid for 12 employees.
Creditors, which include Moet Hennessy in France and Auckland Urbanaut craft brewery, are owed $ 177,000.
123rf
Hairdressers have not been allowed to operate at alert levels 3 and 4.
The stylist
The Auckland Designlink hair salon, which was marketed as Cutting Edge Silverdale, had been in existence since 1998.
It went into liquidation on April 17.
The reason for the company’s failure was due to the inability to maintain overhead due to the inability to trade as a result of the Level 4 alert block, according to the liquidators report.
There were no security interests recorded against the company and liquidators were still investigating whether there were creditors.
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Salt n Pepper Cafe in Hanmer Springs, which went into liquidation, received a wage subsidy for 14 employees.
The coffee
Salt n Pepper operated a café, restaurant and bar and sold fresh fruits and vegetables in Hanmer Springs.
The business was generating good sales revenue, however, the Covid -19 crash affected its peak sales period in April and May, according to the liquidators report.
It went into liquidation on April 22. Salt n Pepper received $ 92,755 in salary subsidies for 14 employees.
The company had considerable debt to the tax department, the bank and suppliers, according to the liquidators’ report.
“Even after the close is over, the business will not be able to recover financially due to a lack of sufficient working capital.”
Almost $ 80,000 is owed to unsecured creditors, nearly $ 130,000 to secured creditors, and $ 8,000 to preferred creditors.
The builder
Future Foundations NZ provided construction and management services for domestic projects in the Canterbury region. It went into liquidation on April 27.
The liquidators report said initial investigations indicated the projects had been priced too low, resulting in a major loss for the company.
“The Covid-19 blockade put more pressure on the cash flow and resulted in the shareholder deciding to liquidate the company.”
Future foundations owed an estimated $ 400,000 to unsecured creditors and preferred creditors to $ 20,000.
The company received $ 21,088 in salary subsidies for three employees.
The public relations consultant
Auckland’s public relations company The Social Experience had been operating since 2016 and went into liquidation on April 29.
A liquidators report said the company’s failure was due to the impact of the Covid-19 pandemic and associated Level 3 and the Level 4 crash.
“This has resulted in forward revenue streams being decimated, resulting in insufficient cash flow to meet existing liabilities.”
He owed almost $ 38,000 to creditors, according to the report.
