Solvent wind-up under the Companies Act 1993
Solvent liquidations
A solvent liquidation is the orderly way to close a solvent company, one that can pay its debts in full, and return the surplus to its shareholders. We act as liquidator and manage the process for you, with fixed fees from $6,000 plus GST.
What a solvent liquidation is
A solvent liquidation, formally known as a members' voluntary liquidation, is the formal process for winding up a company that is solvent, meaning it can pay all of its debts in full. It is initiated by the shareholders under the Companies Act 1993, rather than being forced on the company by its creditors or by the court.
Because the company is solvent, this is a planned and orderly step rather than a response to financial distress. It is used when the owners have decided the company has served its purpose and they wish to close it down properly, settle any remaining liabilities, and release the surplus to the shareholders.
The directors must be satisfied of solvency
A solvent liquidation can only proceed where the directors are genuinely satisfied that the company is solvent and will be able to pay its debts in full within the period required by the Companies Act 1993. This judgement should be based on a careful review of the company's assets and liabilities. If the company cannot meet that test, a different process applies, and we can talk you through the options.
Common reasons companies choose this route
- Group simplification. Removing a dormant or surplus company from within a wider group structure.
- Retirement or succession. Closing a company in an orderly way when the owners are stepping back.
- The end of a venture. Winding up a company once a project, partnership or trading activity has run its course.
- Releasing surplus to shareholders. Returning accumulated reserves to shareholders, often in a more tax-efficient way than other forms of distribution.
A note on tax. The tax treatment of a solvent wind-up depends on the company's particular circumstances. We do not give tax advice. Please confirm the tax position, including any distributions and final returns, with the company's accountant or tax adviser before you proceed.
The liquidator's role
On appointment, the liquidator takes control of the company to bring its affairs to a proper close. In a solvent wind-up this generally involves realising any remaining assets, paying the company's debts and known liabilities in full, attending to the statutory notices and reporting required under the Companies Act 1993, distributing the surplus to the shareholders, and finally removing the company from the register. Throughout, the liquidator works alongside the company's directors and its accountant so that the process is accurate and complete.
At Principle Insolvency, appointments are taken by a licensed insolvency practitioner. You can verify a practitioner's current status on the public New Zealand Insolvency Practitioners Register.
How the process works
An initial conversation
We discuss the company, confirm that a solvent wind-up is the right step, and agree the fixed fee in writing before anything proceeds.
Confirming solvency
The directors satisfy themselves that the company can pay its debts in full, with the company's accountant confirming the financial position and any tax matters.
Shareholder resolution and appointment
The shareholders resolve to wind up the company under the Companies Act 1993 and appoint the liquidator, who attends to the required notices.
Realising assets and settling debts
The liquidator collects in any remaining assets and pays the company's creditors and liabilities in full.
Distributing the surplus
Once liabilities are met, the remaining surplus is distributed to the shareholders in accordance with their entitlements.
Final report and removal
The liquidator completes the final statutory reporting and the company is removed from the register, bringing the wind-up to a close.
Our fixed fee
For a solvent liquidation we offer fixed fees from $6,000 plus GST, depending on the circumstances of the company. We confirm the fee with you in writing before any appointment, so there are no surprises and you know exactly where you stand from the outset.
Frequently asked questions
What is a solvent liquidation?
A solvent liquidation is the orderly wind-up of a solvent company, meaning a company that can pay all of its debts in full within the statutory period. It is initiated by the shareholders under the Companies Act 1993 and requires the directors to be satisfied of the company's solvency. A liquidator is appointed to realise any remaining assets, settle the company's liabilities, distribute the surplus to shareholders and remove the company from the register.
How much does a solvent liquidation cost?
For a solvent liquidation we offer fixed fees from $6,000 plus GST, depending on the circumstances of the company. We will confirm the fee with you in writing before any appointment, so you know where you stand from the outset.
How long does a solvent liquidation take?
The time required depends on the company's affairs, including how quickly assets can be realised and whether final tax matters and clearances are outstanding. A straightforward solvent wind-up is often completed over a number of months. We will give you a realistic indication for your company once we understand its position.
Can the company keep trading during the wind-up?
No. Once a company is placed into liquidation its business is brought to an orderly end. The liquidator may complete work already in progress where that is in the interests of an efficient wind-up, but the company does not continue ordinary trading. If you wish to keep trading, a solvent liquidation is not the right step and we can discuss the alternatives with you.
Thinking of closing a solvent company?
A short, no-obligation conversation will tell you whether a solvent liquidation is the right step, and what it would involve.