Business Compliance Cost Statement
Liquidators currently compile a statement of affairs and a list of creditors. Under the proposed changes, any increase in compliance costs will be related to sending the list of creditors to each creditor. There will be a reduction in compliance costs due to the liquidator only being required to send the statement of affairs to the Registrar of Companies instead of every creditor and shareholder. It is difficult to estimate these costs as it depends on whether the creditors list are posted, emailed or faxed, and on the number of creditors a debtor company has, which could differ for companies depending how small or large the debtor company is.
Creditors will incur costs if they choose to go to Court seeking corrective orders where related entity voting has resulted in an unreasonable outcome that is contrary to the interest of creditors or class of creditors as a whole. A creditor who chooses to challenge this in Court would incur compliance costs in accessing legal advice and representation.
Similarly, where creditors have filed a petition with the Court to place a company into liquidation and the debtor company chooses to voluntarily wind up, the debtor company will incur costs of going to court if a consensus is not reached between the petitioning creditor and the debtor company on the liquidator chosen by the debtor company. A debtor company that goes to Court in this situation would incur compliance costs in accessing legal advice and representation. Alternatively, the debtor company could just wait for the Court hearing of the creditor's petition and propose its preferred liquidator, which would save costs for the debtor company. The debtor company would have had to incur legal costs anyway when the creditor petitioned the court to place the company into liquidation.
It is difficult to quantify what the legal costs would be as the cost of legal advice and representation differs markedly between barristers and solicitors. The Ministry will be looking into disseminating information, via the Companies Office and the Office of the Official Assignee, to increase awareness of the proposed changes and potential costs associated with these changes for the parties involved in order to minimise compliance costs.
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