Warning Signs Your Business Is in Difficulty
Recognising early warning signs of business distress gives you more options. Here are the signals that should prompt immediate action.
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Business & Commercial
Warning signs? Know your options.
Financial difficulty is stressful, but it doesn't always mean the end. Early advice keeps more options open.
No judgement, just solutions
Confidential, practical advice
Understanding Your Position
The first step is understanding where you stand.
Financial difficulty is stressful, but it doesn't always mean the end. Sometimes businesses can be restructured. Sometimes controlled wind-up preserves more value than collapse.
Cash Position
Can you meet your obligations as they fall due? This is the fundamental test of solvency. A profitable business can still fail if it runs out of cash.
Creditor Position
Who do you owe money to, and when is it due? Understanding your creditor profile helps identify options and priorities.
Asset Position
What assets does the business have? What security is registered against them? What would they realise in a sale?
Trading Position
Is the underlying business viable? Are current difficulties temporary or structural? This shapes what options make sense.
What are your options?
Every situation is different. We help you understand which path makes sense based on your specific circumstances.
If the Business is Viable
Options to restructure and continue
Creditor Negotiation
Payment plans, extended terms, or partial forgiveness when creditors believe they'll recover more than in a formal process.
Refinancing
New funding to bridge short-term gaps when the business has viable prospects.
Asset Sales
Selling non-core assets to generate cash without affecting core operations.
Operational Restructuring
Cost reduction, contract renegotiation, or changing how the business operates.
Voluntary Administration
A structured framework for restructuring while protected from creditor action.
When Recovery Isn't Possible
Controlled wind-up preserves more value
Solvent Liquidation
If the business can pay all its debts, shareholders can choose to wind up in an orderly way, preserving value and maintaining control.
Insolvent Liquidation
When debts exceed assets, a liquidator distributes available assets to creditors in priority order.
Receivership
A secured creditor appoints a receiver to realise their security. The receiver's primary duty is to the appointing creditor.
A controlled process usually preserves more value than collapse.
Director Obligations
Get advice on your position
Understanding your obligations matters.
Directors who breach their duties can face personal liability, including being required to contribute personally to the company's debts.
Safe Harbour
The Companies Act provides protection for directors who take appropriate steps when they believe the company may be unable to pay its debts.
When It Ends
Safe harbour protection is not unlimited. Continuing to trade when you know the company cannot pay its debts may create personal liability.
Document Everything
Record your decisions and reasoning. Maintain proper records. Get professional advice early. These steps demonstrate responsible conduct.
Know When to Stop
At some point, continuing to trade creates more risk than benefit. Recognising this point is a key director responsibility.
After Liquidation
Phoenix company restrictions
If a company goes into liquidation, its directors face restrictions on using the same or similar company names for five years. These rules prevent "phoenix" schemes where directors walk away from debts and start again under a similar name.
Penalties are serious: Breach can result in up to 5 years imprisonment, a $200,000 fine, and personal liability for all debts of the new company incurred during the breach.
What's Prohibited
Companies Act 1993, s386A–386F
Who is affected
Any person who was a director at any time in the 12 months before liquidation.
The restriction
For 5 years after liquidation, you cannot be a director of, or involved in promoting or managing, a company with the same or a "suggestively similar" name.
Exceptions
- • You acquire the whole business from the liquidator with proper notice
- • The High Court grants leave
- • Another company already traded under that name for 12+ months
For Hawke's Bay Farmers
Special protections under the Farm Debt Mediation Act 2019
If you are a farmer facing debt pressure, you have the right to mediation before a secured creditor can enforce their security over your farming property.
Following Cyclone Gabrielle, many Hawke's Bay farmers face circumstances beyond their control. The Act was designed precisely for these situations.
Talk to Us About Farm Debt →Paul Morgan has decades of rural banking experience; he understands farming and farm management from both sides.
Your Rights Under the Act
Right to Mediation
Before a secured creditor can enforce, they must offer mediation
Standstill Period
Enforcement paused while mediation is attempted (usually 60 days)
Independent Mediator
Government-funded mediators facilitate negotiation
Farming Property Covered
Land, buildings, stock, plant, and equipment used for farming
Important: Engage early. The Act's protections work best when you engage before your bank takes enforcement steps.
How We Help
Position Assessment
The First Step
We examine your cash, creditor, asset, and trading positions to give you a clear picture of where you stand and what options are available.
Creditor Negotiation
Finding Solutions
Negotiating with creditors for payment plans, extended terms, or formal arrangements that give your business room to breathe.
Director Advice
Protecting You
Helping you understand and meet your obligations as a director, protecting yourself from personal liability while doing what's right for the company.
Formal Processes
When Needed
Guiding you through voluntary administration, liquidation, or receivership processes when formal action is the best path forward.
Creditor Advice
For Those Owed
Helping creditors understand their position, protect their interests, and make good decisions when a debtor is in difficulty.
Resources
View all articles
Related Reading
Your Team
Your Insolvency &
Restructuring Team
Practical experience helping businesses navigate financial difficulty.
Common Questions
Any existing documents relevant to your situation: company records, contracts, agreements you are considering, or details of issues you are facing. But if you are just at the thinking stage, that is fine too.
