Our prediction

With New Zealand’s economy in recession, we predict an increase in insolvency-related disputes and litigation over next 12-months.


A variety of factors combine to give rise to the expected uptick in insolvency-related claims:

  • Insolvency is slowly but steadily increasing across the board - company liquidations in 2023 were up 18% and receiverships almost 60% on 2022 (from record low numbers in 2021). Some of that is fuelled by increased enforcement activity from Inland Revenue, but also increasingly from banks and other large lenders. For the past couple of years, we have seen enforcement activity from non-bank and lower tier lenders, but a reluctance from banks to do so unless absolutely necessary. However, with higher interest rates and the rising cost of living and doing business affecting more borrowers, that is no longer sustainable. 
  • Borrowers’ ability to refinance locally and from overseas is proving more difficult. Overseas decisions or events are also having an impact. We have also seen two high-profile voluntary administrations in the last six months prompted by the collapse of Australian parent companies (Godfreys and Sara Lee) and Newshub’s decision to close shop followed a decision by its US owners. Tighter economic conditions, the fight against inflation and government cut-backs are also creating job losses, which will start to impact the consumer credit space.
  • There is a contagion effect - insolvency doesn’t just impact the direct business, but also their customers, suppliers, contractors and employees. Where a project or contract is adversely impacted by insolvency, disputes frequently arise as to who bears the costs (or whose insurer bears the costs).
  • Companies, directors and insolvency practitioners have recently had guidance from the Supreme Court on the current state of directors’ duties in the form of the Mainzeal case (you can read our summary here and here), which is likely to encourage more claims against directors. The decision also leaves open a number of questions for determination in future cases - in particular, in relation to calculation of damages and creditor’s rights to bring claims (under s 301 of the Companies Act).
  • Prior to any formal insolvency, companies or individuals under financial stress may take more aggressive positions in relation to disputes and debts than they otherwise would.

What it means for you

More than ever directors should:

  • Be active and realistic in monitoring company performance.
  • Seek professional advice early if you have concerns about the solvency of the company or its ability to meet ongoing obligations
  • Be active in monitoring debtors and the position of suppliers.

More generally, businesses should:

  • Be aware of the impact that the insolvency of suppliers or customers may have on your overall business. Ensure that: 
    • where you are providing credit to other companies, the risk is properly assessed and, where possible, appropriate security taken; and
    • your contracts adequately provide for and allocate risks and costs of default.
  • Be proactive in addressing and resolving potential disputes to minimise the effect if a company you work with does become insolvent; and
  • Expect greater resistance to chasing your debts. Ensure you always assess the cost-benefit of chasing the full debt and be alert to what other creditors are doing, as this may affect your position.
  • Keep a close eye on areas where employee fraud is possible. It is not unusual for personal financial pressures to lead to employee or other fraud, which can have wide impact both financially or reputationally on a business.

Get in touch

For more information please contact our litigation experts below.



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