Archive | MED enforcement

Published 5 September 2011

Banned franchising company director Campbell Spencer & his father, Neil Spencer, have been charged with breaches of the Companies Act and also under the Crimes Act.

Also charged with them by the Ministry of Economic Development’s national enforcenemtn unit is Leon Norris, who took over as director of Campbell Spencer’s company Base Franchise Ltd after Mr Spencer was banned from holding office.

Their first court appearance was last Thursday and they were remanded to an Auckland District Court status hearing on Tuesday 1 November.

All 3 have been charged under section 385 of the Companies Act, which relates to the prohibition of a director. Both Spencers have been charged under section 111 of the Crimes Act, relating to making a false statement, and Neil Spencer & Mr Norris have been charged under section 66 of the Crimes Act, which relates to parties to an offence.

Campbell Spencer was banned as a company director for 3 years from 9 December 2009. He was a director of Base Franchise Ltd (incorporated March 2009; Neil Spencer is director & holder of 99 shares, Campbell Spencer holds one share), Pan Pacific Marketing Ltd (now U-Sell East Ltd, Neil & Patricia Spencer directors), Team Maddison (NZ) Ltd (wound up February 2009) and a number of companies now removed from the register – CC-TM Ltd, CSTM Ltd, EC-TM Ltd, MC-TM Ltd, NZG-TM Ltd, Oasis-TM Ltd, Regency Home Management Ltd, Stonehead Management Services Ltd, Team Maddison Franchise Systems Ltd, Team Maddison International Ltd, The Chaucer Group Ltd, The Chaucer Institute Ltd, TTT-TM Ltd, & WD-TM Ltd.

Earlier reports:

U: The names behind the action, the week to 24 July 2011, part 4, Team Maddison to be struck off

17 February 2010: Banned directors, and their details

4 April 2007: U: The names behind the action, the week to 8 April 2007, part 3, Defamation allegation rejected

21 July 2006: U: The names behind the action, the week to 23 July 2006, part 4, The Chaucer Group wound up

10 June 2006: U: The names behind the action, the week to 11 June 2006, part 3, The Chaucer Group faces liquidation

17 February 2006: U: The names behind the action, the week to 19 February 2006, part 2, Team Maddison folds ahead of court call

2 February 2006: U: The names behind the action, the week to 5 February 2006, part 5, African franchise group pursues Team Maddison

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Attribution: Charges, Companies Register, story written by Bob Dey for the Bob Dey Property Report.

Published 26 August 2011

Former Queensland property marketer & developer Dudley Quinlivan, 67, has failed in a bid to overturn a 5-year ban from being a company director.

After bad publicity in Queensland, Mr Quinlivan & his family brought their business to New Zealand several years ago. He remains registered here as a director of Freedom Group Ltd & Robb Resources (NZ) Ltd, but other Quinlivan companies in New Zealand have been removed from the register. They included Arrow Insurances NZ Pty Ltd, Consolidated Property Investments Ltd, NZ Credit Card Protection Services Ltd, NZ Fraudwatch Services Ltd & Rental Options NZ Ltd.

The Australian Securities & Investments Commission banned Mr Quinlivan on 21 November 2008 for 3 years. He appealed to the Administrative Appeals Tribunal, which extended the ban to 5 years after discovering Mr Quinlivan continued to be involved in largescale commercial property developments.

Mr Quinlivan then took his appeals & applications for special leave to the Full Federal Court and, most recently, to the High Court of Australia, which confirmed the ban this week.

The 5-year ban applied from 15 February 2010, once the original appeal was dismissed, and was extended to New Zealand, so Mr Quinlivan is banned from being a company director until February 2015.

He was banned due to his involvement in 14 companies that were wound up between 2002-07 – Ausblue Pty Ltd, Australian Financial Management Corporation Pty Ltd, Coastal Administration Services Pty Ltd, Consolidated Property Investments Pty Ltd, Coventry Finance Pty Ltd, First Home Buyer (Aust) Pty Ltd, Freedom Mortgages Pty Ltd, Manorbase Pty Ltd, National Consolidated Investments Pty Ltd, Remi Morgan Burns Pty Ltd, Rental Options Pty Ltd, Scottsdale Homes No 10 Pty Ltd, Shellston Pty Ltd & Statefort Pty Ltd.

Consumer magazine ran articles about Mr Quinlivan’s business in New Zealand & Queensland 9-10 years ago, highlighting high-pressure sales methods & property seminar scams.

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Attribution: ASIC release, story written by Bob Dey for the Bob Dey Property Report.

Published 17 February 2010

The Ministry of Economic Development said last week it had bumped up the number of company directors banned from holding office to 31 in 2009, 24 of them after policy changes that took effect in May.

Since that announcement I’ve managed to get the ministry to update a few of the details on its website.

I knew the Registrar of Companies had been shy about publicising the prohibition orders – they would appear, belatedly, in newspaper public notice columns but not on newspaper websites. And if the ministry made any statement about these prohibitions, the distribution list was mightily small.

Although the ministry said it had banned 31 directors, said it changed the policy on dealing with multiple-company directors and even said where to find this information, there was no list of banned directors on the ministry website. And not all those who were banned were on its register.

Not surprisingly, I’ve missed many of these prohibition orders, and I both watch out for them and have asked to be told of them. Given that, the chances of people in business – who are supposedly to be protected from these banned directors – finding out about them are slim.

3 of the early bans in 2009 were for the directors of the Five Star Finance Ltd group – Nicholas Kirk, Marcus MacDonald & Anthony Bowden – all banned for 5 years from 23 March. Neill Williams, allegedly a de facto Five Star director, was banned for 5 years from 22 May.

The 3 directors go to a defended hearing on Securities Act charges on Monday 8 March. All 4 have a district court callover on Tuesday 27 April on further prospectus charges.

2 of the early bans were for Bridgecorp Ltd executive directors Rod Petricevic & Rob Roest, both banned for 5 years from 22 May. Bridgecorp chairman Bruce Davidson joined them on the banned list on 1 December. He’s appealed, but doesn’t have an appeal date set. A depositions hearing of Securities Act charges against those 3 Bridgecorp directors & an Australian director of the failed finance company, Gary Urwin, began in the Auckland District Court on Monday. The fifth director, Peter Steigrad, of Sydney, admitted there was a case to answer and will go to trial.

The other director banned early in the year, Terry Buxton, was prohibited from holding office for 5 years from 12 March. Mr Buxton, of Christchurch, was a director of Avon Property Management Ltd (in liquidation), Bay of Plenty Credit Control Ltd, NZ Property Services Ltd & a string of other property-related companies, and was associated with Sharon Bartlett (see down the list).

Readers of the Bob Dey Property Report U column will be familiar with many of the names below – the company directors banned following the change of ministry policy.

Among those still in business late in the year were Erne Joyce, whose Nationwide Building Certifiers Group collapsed in 2004. Mr Joyce, of Waikanae, was working in 2009 in Auckland on leaky building projects.

Another banned at the end of the year – for 3 years – was Campbell Spencer, of franchise business Team Maddison. Despite highly detailed criticisms of his business practices which were disclosed to me, Mr Spencer blamed others for his failures. At the start of November, his father sought a meeting with me to explain their position, missing critical details, including a written threat Campbell Spencer made against me. The meeting was requested by a PR agent who, the website of the Spencers’ new company, Base Franchise Ltd, discloses, became Base’s PR & marketing consultant. The Base website narrative is written from Campbell Spencer’s perspective. Leon Norris took Campbell Spencer’s place as sole director of Base on 18 January.

The list (excluding Bridgecorp executive directors, Five Star & Buxton):

Vojislav Krtolica, Murrays Bay, 5 years, 18 May 2009, Seamart Restaurant Ltd (in receivership & liquidation 2006)Michael Santo Colosimo, Tauranga, 4 years, 10 September 2009, Carbonara Enterprises Ltd, Il Passo Ltd, Nuovo Santo Ltd, Taffy’s Bar Ltd, Village Foods Ltd & a few other companiesMichael Edward Erskine, Bayswater, 5 years, 10 September 2009, WBCB Management Ltd (wound up 2008), WBCB Contractors Ltd (struck off 15 December)Teresa Ann Erskine, Bayswater, 5 years, 10 September 2009, WBCB Management LtdDavid Alexander Cunningham, Upper Hutt, 5 years, 5 October 2009, Joyce Group Ltd (10 Joyce companies folded in April 2008; another part of the group, Nationwide Building Certifiers Group Ltd, had receivers appointed for 9 months in 2004-05 then went into voluntary liquidation; Joyce Group was New Zealand’s largest independent specialised building quality assurance company)Ernest Ross Thomson, Christchurch, 4½ years, 5 October 2009, Mr Thomson & Neil Dougan were involved in several expensive apartment developments in Christchurch until late 2007, when a number of their companies were wound up. They were directors of Alpine Pacific Developments Ltd (the company built Te Kaikoura Lodge at Kaikoura, in liquidation September 2007, receivership October 2007), Braemar Lodge 2004 Ltd (incorporated in 2004 to redevelop Braemar Lodge, Hanmer Springs, in receivership July 2007), Braemar Lodge Operations Ltd (in receivership November 2007), Maisonettes on High Ltd (originally called Amuri Villa Developments Ltd), Real World Ltd, Real World Personnel Ltd, Te Kaikoura Lodge Ltd (in receivership October 2007, in liquidation November 2007), Thomson Development Holdings Ltd, Thomson Development Trustee Ltd, Thomson Investment Trustee Ltd & Warwick Mews Operations LtdSteven James Pilbrow, Lower Hutt, 4 years, 19 October 2009, Total Project Management Ltd (director now Katherine Pilbrow, now of Greytown), various Pilbrow construction companies, Aquaflow Roofing Ltd, Riverstone Developments LtdCatheryn Julia Faid, Christchurch, 5 years, 19 October 2009, 6 Faid companies – Canterbury Homes Ltd, Pegasus Property Ltd, Pegasus Property Ashburton Ltd, Pegasus Property Christchurch Ltd, Pegasus Property Palmerston North Ltd, XPTW Ltd (ex-Pathway to Wealth Ltd) &ndas
; went into voluntary liquidation in December 2008. The Faid group had a number of sections at the Pegasus Town development near Christchurch which it had onsold to builders, but was not related to Pegasus Town developer Bob Robertson or his Infinity Investment Group Ltd. Canterbury Homes’ liquidators said Ms Faid had attributed the company’s collapse to tight credit. After director Matthew Faid died in November 2007, Pathway to Wealth was unable to meet its commitments to buyers of his wealth promotion packages. The intellectual property was sold in March 2008 for $10,000.Joseph Colin Skudder, Epsom, 4½ years, 2 November 2009, Apollo Properties & Construction Ltd, Archilles Properties Ltd, Athena Professional Trustees Ltd (wound up in April), Best of Luck Ltd, Best Wholesale Ltd, College Hill Automotive Services Ltd (in liquidation), Glenview Lands Ltd, Hermes Properties & Construction Ltd, Pine Air Ltd, Sigma Properties & Construction Ltd and Three from Three LtdMark Joseph Wilson, Weymouth, 4 years 3 months, 2 November 2009, Investor Project Management Ltd, Project Management Residential Ltd & Signways Ltd (all in liquidation)Erne Joyce, Waikanae, 5 years, 2 November 2009, Joyce Group Ltd (10 Joyce companies folded in April 2008; another part of the group, Nationwide Building Certifiers Group Ltd, had receivers appointed for 9 months in 2004-05 then went into voluntary liquidation; Joyce Group was New Zealand’s largest independent specialised building quality assurance company)Gary McKay Sutherland, Alexandra, 3 years, 30 November 2009, Gow Holdings Ltd (ex-Central & Lakes Realty Ltd, wound up April 2009) & Highlander Holdings Ltd (wound up May 2009)Daneen Sheree Lascelles, Christchurch, 3 years, 30 November 2009, Coverme Blanket Collection Ltd, Living on Selwyn Ltd (wound up December 2008), Prophoto Ltd & Southland Estates LtdBrendon John Quinn, Picton & Christchurch, 4½ years, 30 November 2009, Alpha Processing Ltd (struck off), Beta Processing Ltd (in liquidation) & BQ Holdings LtdDavid Brent Orrell, Coatesville, 5 years, 30 November 2009, Albany Park Developments Ltd, As Safe As Houses Property Management Ltd, GH Developments Ltd & Pepperwood Properties Ltd all liquidated July 2009, receivers appointed to GH August 2009, Corel Homes Ltd (ex-All About Finances Ltd) changed its name in 2004 and was wound up June 2009, As Safe As Houses Properties Ltd liquidated 2008, Earthartistz Ltd 2006, Rangitoto Holdings Ltd 2008, Savannah Heights Ltd December 2008Sharon Ena Bartlett, Christchurch, 5 years, 30 November 2009, Addington Shopping Centre Ltd, Desmond Holdings Ltd, Lilybank Station Ltd, Park Terrace Apartments Ltd (developer of the 19-unit Parkbridge luxury apartment complex opposite Hagley Park in Christchurch) & Queenstown Property Holding Ltd all liquidated 2008, Clendon Shopping Centre Ltd (former owner of Auckland property, wound up 2007); Ms Bartlett remains listed as a director of numerous other property companiesDennis Lyall Thompson, Christchurch, 5 years, 30 November 2009, Centaurus Enterprises Ltd (in liquidation, struck off), D Thompson Racing Ltd (in liquidation) & Satellite Investments Ltd, and is a former director of Blue Water Resort Ltd, Platinum Bloodstock Ltd & Queenstown Investment Holdings LtdDavid Naylor Hillary, Christchurch, 5 years, 30 November 2009, Hillary & Marshall Ltd (in liquidation 2008) & a former director of Woodmere Properties LtdBruce Nelson Davidson, Parnell, 2½ years, 1 December 2009, Bridgecorp Ltd (in receivership & liquidation) & related companiesHudson Giles Lusty, Omaha, 5 years, 8 December 2009, Exotic Contracting Ltd & Exotic Group Ltd (both in liquidation) & The Woodshed North LtdSharon Mary Day (also known as Sharon May), Christchurch & Greymouth, 5 years, 8 December 2009, QED Ltd (finance company put into liquidation in 2008 with a $2.6 million deficit), former director of Mayday Trustees Ltd, QED Financial Services Ltd & RST Property LtdCampbell Shorland Spencer, Kohimarama, 3 years, 9 December 2009, Base Franchise Ltd (incorporated March 2009; Mr Spencer’s father, Neil, is shareholder; Leon Norris took Campbell Spencer’s place as director on 18 January, but its website indicates Campbell Spencer remains in charge, although not listed on the About page), CC-TM Ltd, CSTM Ltd, EC-TM Ltd, MC-TM Ltd, NZG-TM Ltd, Oasis-TM Ltd, Pan Pacific Marketing Ltd, Stealth Communications Ltd (wound up in 2000), Stonehead Management Services Ltd (struck off 2006), Team Maddison Franchise Systems Ltd (struck off February 2009), Team Maddison International Ltd, Team Maddison (NZ) Ltd (in liquidation February 2009), The Chaucer Group, TTT-TM Ltd, & WD-TM Ltd.Robert Frederick Donley & Laura Donley, Mt Roskill, 5 years, 9 December 2009, Fresh & Frozen Food Distributors Ltd & Total Food Services Ltd (both in liquidation 2008), Bono International Ltd, Hibiscus Freight Ser

Published 9 February 2010

The national enforcement unit of the Ministry of Economic Development bumped bans on company directors up from 19 in 2008 to 31 last year, largely the result of a changed approach to dealing with directors in multiple company failures.

The ministry used to undertake a full investigation – often with copious amounts of correspondence – for every proposed ban under section 385 of the Companies Act and will continue to do that for directors of a single failed company. For multiple failures, however, the ministry began a trial last May that puts the onus on the director to explain the failure & their actions.

After 4 prohibition orders in March last year, the Registrar of Companies banned 27 directors from May-December. In 2007, 21 directors were banned and in 2006 there were 26. Another 20 are under consideration.

Directors banned last year included the directors of the Five Star Group and 3 directors of Bridgecorp Ltd. The last of these was Bridgecorp chairman Bruce Davidson, banned for 2½ years from 1 December. Mr Davidson lodged an appeal in December but a date for hearing it hasn’t been set.

Section 385 gives the registrar the power to prohibit a person from acting as a director, manager or promoter of a company for up to 5 years. The enforcement unit explained the process this way: “Prohibition under section 385 means a director who has mismanaged a company or companies is denied the benefit of trading with limited liability. Its primary purpose is to protect the public from those with a proven record of commercial failure, going some way to holding directors accountable for their actions. This can be a balancing act. The power of prohibition is not intended to be punitive and not all company failures warrant action against its directors. The protection of limited liability is essential for encouraging business & the growth of the economy.

“For a person to be considered for prohibition they must have been involved, as a director &/or manager, in at least one company that has failed within the last 5 years. The number of failures determines the level of evidence required by the enforcement and the role of the registrar. If a person is a director or manager of 2 or more failed companies in a 5-year period, the onus is on that person to satisfy the registrar that either:

mismanagement was not even a partial cause of the companies’ failure, orit would not be just or equitable for the registrar to exercise his power of prohibition.

“On the other hand, where there has been a single failure, the registrar must be satisfied on the evidence put to him by the enforcement unit that mismanagement was at least partly responsible for the failure.”

For multiple failures now, “the director is notified that they are being considered for prohibition and given the opportunity to explain the failures & their actions, providing reasons why their management or actions did not contribute to the failures.

“Comment on the candidate’s management of the companies is also invited from the liquidator, receiver or administrator of the failed companies, including any particularly relevant supporting documents.

“It is important for us to link the management of the company to its failure. There is no official definition of mismanagement in legislation and it’s different for every case. However, common allegations include the failure to keep company records, particularly accounting records; the failure to pay taxes; insolvent & reckless trading; the misappropriation of assets; and the intermingling of the affairs of the companies.”

The Australian Securities & Investment Commission can apply to an Australian court for an order that a person banned from being a director or manager in New Zealand also be disqualified in Australia.

The enforcement unit lists currently banned directors – but the list hasn’t been updated since last May. The Registrar of Companies has also been shy about publicising the prohibition orders, so I’ll update that list for the Bob Dey Property Report Friday newsletter.

Link: National enforcement unit, banned directors

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Attribution: Ministry of Economic Development release, story written by Bob Dey for the Bob Dey Property Report

The Registrar of Companies has laid criminal charges in the Timaru District Court against company directors Neville Cant & Rhys Morgan, Combined Financial Services Ltd & Investment Management Ltd. They’re due to appear in the Timaru District Court on Wednesday 5 August. 

The charges, under the Securities Act, relate to securities offered & allotted to members of the public in February 2006 without a prospectus or an offeror’s statement.

The securities were offered in relation to a proportionate ownership scheme for The Gables at Coatesville.

Investment Management (director Mr Cant, Timaru; Mark Tutty, Christchurch, was appointed and also resigned in July 2006, Mr Morgan, Geraldine, resigned in August 2006, Alison Kirkwood, Timaru, in April 2007) was the issuer in relation to the offer of securities in the scheme to the public, and Combined Financial Services (Mr Cant) was the promoter of the scheme.

The prosecution is being carried out by the National Enforcement Unit of the Companies Office, which investigated after matters were referred to it by the Securities Commission.

If convicted, the issuer, promoter & directors are liable to a fine up to $300,000.

Mr Morgan, Lorraine Morgan & Mr Cant gave the Securities Commission enforceable undertakings in June 2006 relating to the Coatesville project on behalf of themselves as directors and for 3 companies – The Gables Ltd (director Mr Morgan), Combined Financial Services and Aoraki Commercial Property Ltd (directors the Morgans).

The Securities Commission’s primary markets director, Kathryn Rogers, said when the undertaking was given in 2006 the companies believed the offer was made only to "eligible persons" pursuant to the Securities Act. However, they accepted the commission’s view, The Gables Ltd withdrew its offer and investors received refunds.

The Gables Ltd was to raise finance through an offer of equity securities, to acquire then manage the property at 11 Donaldson Drive, Coatesville, and to take a stake in the intended tenant, Sue McCarty’s life coaching business Via NZ Ltd. Combined Financial Services, a financial service provider with investment clients, and Aoraki were promoters of the offer.

The Gables Ltd was declined resource consent in July 2006 to use the 2.9ha property for a life coaching retreat.

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Attribution: Companies Office release, Rodney District Council consent decision, story written by Bob Dey for the Bob Dey Property Report.

Published 5 November 2008

Forestry Minister Jim Anderton announced a stand against illegal overseas logging last week, introducing a requirement for retailers to clearly display whether they have information about the legality of their kwila/merbau timber & timber products.

“The new scheme will require all retailers & merchants of products made from kwila (also known as merbau) – a tropical hardwood tree species native to South-east Asia & the Pacific Islands – to clearly indicate at the point of sale whether they have information about the legality of such products from a New Zealand Government-recognised verification scheme.”

Kwila is most often imported for use in decking or as outdoor furniture.

Mr Anderton said illegal logging had devastating effects environmentally, socially & financially. From the New Zealand perspective, it could depress the world price for timber, affecting New Zealand exports.

“13% of all sawn timber imported into New Zealand may be illegally logged. Kwila has been targeted for this new labelling requirement because it is estimated to comprise over 80% of that potentially suspiciously sourced imported timber.

“Before introducing the scheme, the Government will consult with industry & other stakeholders in order to develop practical standards & procedures. This will almost certainly mean the scheme will be finally introduced in 2009-10. From that time, all kwila/merbau timber & timber products sold must indicate whether they are accompanied by documentation from a Government-recognised certification or verification scheme to substantiate their legality.”

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Attribution: Ministerial release, story written by Bob Dey for the Bob Dey Property Report.

Published 17 February 2008

The Registrar of Companies banned Columbard developer Peter Chevin on 8 February from the management of companies for the next 4 years (the decision was initially reported in part 2 of this week’s U column).

The ministry’s national enforcement unit alleged 3 issues of mismanagement against Mr Chevin when it asked the registrar to ban him from acting in the management of companies. It said these issues caused or contributed to the failure of the companies:

reckless tradingunsubstantiated inter-company fees, andexcessive advances to related parties. 

But Mr Chevin isn’t taking the order lying down, issuing a news release at the same time as the enforcement unit on Friday, with his own perspective on events.

The enforcement unit looked at 4 of Mr Chevin’s companies – Columbard Management (NZ) Ltd (struck off), Columbard Wyndham Street Ltd (formerly in receivership), Gridlock Ventures Trustee Limited (in liquidation) & Wyndham Construction Ltd (in liquidation).

“In prohibiting Mr Chevin from acting as a director or in the management of companies, the Deputy Registrar of Companies found Mr Chevin had acted recklessly in his management of Gridlock & Wyndham. He allowing Gridlock to enter into an unconditional contract to buy an $18 million property when he had not secured finance for the purchase, and then immediately advancing a resulting $2.25 million gst refund away to other related parties. The purchase ultimately failed. In Wyndham, Mr Chevin incurred debt on behalf of other related entities without observing legal requirements or Wyndham’s interests.

“The deputy registrar also found Mr Chevin entered a ‘highly questionable’ transaction to retrospectively amend Columbard’s financial statements to avoid paying income tax. The deputy registrar stated that ‘the aspects of good faith & reasonableness on the part of Mr Chevin are absent’.  Mr Chevin could not rely on his accountant’s advice to absolve himself of responsibility.

“Prohibition under section 385 of the Companies Act is meant primarily for the protection of the public.  Despite Mr Chevin undertaking to operate differently in the future, the deputy registrar noted that he still believed entering an unconditional $18 million contract without finance was a legitimate business risk. The deputy registrar also referred to Mr Chevin’s lack of co-operation with liquidators following the company failures.”

Chevin’s response

Mr Chevin responded to the banning order with a news release of his own on Friday, saying: “In the short term this defence has not been successful and I will live with that for now.”

He said he intended to appeal: “The record needs to be put straight and we will be successful in having this turned over.” He alleged that he has suffered from an ongoing attack on his various businesses by the IRD: “It is the IRD that is behind the complaint to the Ministry of Economic Development (and its national enforcement unit). The history of the transactions is far more complicated than described by the MED in their short press release.

“In brief, tentative funding from a large fund in Australia had been arranged for the purchase of the large commercial property in 2004. In 2005, an affluent Auckland property investor unconditionally contracted to purchase the first Columbard building in Auckland; Columbard was to lease back the building. This person defaulted on their purchase agreement in early 2006. Further, this person contracted to fund the completion of the second Columbard building in Auckland; once again this person defaulted in early 2006.

“Once these 2 defaults occurred it caused irreparable damage to Mr Chevin’s reputation. Replacement funding could not be arranged in the very short time available. At the moment we have strong litigation proceedings underway against this person who defaulted. Once justice has prevailed here, we will be able to reveal more of the truth.

“Every funder involved with Columbard buildings has always been repaid in full – it is a track record we are proud of.”

Mr Chevin said that, regardless of the outcome of the action by the MED & IRD, independent directors were already in the process of being appointed to all his current companies: “This is going to bring an extra layer of rigour & governance that will give comfort to all, including himself.

“Columbard is an outstanding success story, 95.4% occupancy over 2.5 years, that is a statistic to be proud of. I look forward to the opening of the new Columbard building at Scotia Place in Auckland and Columbard on Victoria St in Wellington in early 2009. Once these milestone are completed I will feel vindicated.”

Mr Chevin, who operated for a long time through the Stonne Trust, developed the very narrow Columbard shoebox-apartments hotel on Wyndham St and is a director of Blake Street Trustee Ltd, Chevin & Co Investments Ltd (in receivership), Classic Motors & Restoration Ltd, Columbard Ltd, Columbard Scotia Place Ltd, Columbard Wyndham Street Ltd, Coronation Land Ltd, Coronation Land Trustee Ltd, Durham Street Trustee Ltd, Gridlock Ventures Trustee Ltd (in liquidation), Lighthouse Trustee Ltd, Northeden Developments Ltd, Small Ltd, Stokes Road Trustee Ltd, Stonne Ltd (wound up on 29 November 2007), Tawari Street Trustee Ltd (wound up on 8 February), Victoria Accommodation Trustee Ltd, Wine Bar Ltd, Would Café Ltd & Wyndham Construction Ltd (in liquidation).

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Attribution: MED list of banned directors, National enforcement & Chevin releases, story written by Bob Dey for this website.

Published 7 November 2007Amendments to the Companies Act which came into force on 1 November will make it harder for directors to create phoenix companies.

The Ministry of Economic Development said yesterday a number of provisions had been introduced in the Companies Amendment Act 2006 to deal with phoenix companies.

The amendments prohibit a person who was a director of a company placed in liquidation (because it was unable to pay its due debts) within the preceding 5 years from incorporating a new company under a former name or a similar name to that of the failed company. The person must have been a director within 12 months before the liquidation began.

Penalties for breaching these provisions are up to 5 years in jail or a fine of up to $200,000.

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Attribution: MED release, story written by Bob Dey for this website.

Published 15 October 2006

Commerce Minister Lianne Dalziel issued a statement on Friday 13 October, Insolvency practitioners rules up for discussion, which read like something new was happening.

The discussion document she was announcing even went so far as to suggest it contained “draft proposals for changes to the Companies Act 1993”. What the document does is pick up submissions made to a 2004 discussion document on the same subject, and ask for more submissions.

It sets out options and discusses them, and it makes the curious statement that “the source of the money (for a licensing system) is not the main issue. What matters most is whether the benefits outweigh the costs of a licensing system.”

That statement is made in the context of a series of points which demonstrate that:

putting the cost of a scheme on practitioners could be very expensive for them
that the cost would affect the kind of scheme put in place
but omitting any suggestion that the cost might be incorporated in the cost of registering a company or in a general Government cost which might be matched by the benefit of less white-collar crime or through business efficiency
and omitting any matching of costs & benefits.

While the source of the money might be secondary, the discussion document fails to even look at matching costs & benefits. Practitioners might pick up the cost of a new regime – an overhead which is somehow charged to the liquidation process – but the prime beneficiaries of an efficient scheme would be creditors and the prime beneficiaries of an inefficient scheme would be shareholders, and possibly related creditors.The discussion document contains options on regulating insolvency practitioners, company liquidators & administrators “after earlier submissions on insolvency law reform overwhelmingly supported the establishment of a regulatory framework.”

Ms Dalziel said the Government “has not decided to introduce a regulatory framework for this small but important profession, but we have been persuaded to take further advice on the matter.”

Submissions close on Friday 2 February 2007.

The “required standard”

Ms Dalziel put the polite version of the industry: “While submitters felt the great bulk of liquidations are carried out by capable & honest practitioners, concerns were expressed about the competence & professionalism of a minority of practitioners.”

The new discussion document also raised the impolite version: Submissions to the 2004 document indicated that “up to 20 practitioners may not be up to the required standard.”

The “required standard” amounts to competence on the one hand and ethical behaviour on the other. Ethical behaviour can be broken down to acting in the interests of shareholders when the law stipulates that a liquidator must act in the interests of all creditors, and acting in the interests of a group of creditors against the interests of others.

With increasing frequency, shareholders are putting their companies into voluntary liquidation at the last minute before a court-appointed liquidator is imposed, reducing the counting back period and possibly eliminating what would be considered voidable preferences from the liquidator’s purview.

Blather versus acting on the obvious

Ms Dalziel said insolvency practitioners were a relatively small industry in New Zealand but carried out a specialised task which was “crucial to protecting & promoting the integrity of the corporate insolvency system….

“Despite undertaking such a crucial role in New Zealand commerce, insolvency practitioners are not required to be licensed or registered by a regulatory body with powers to investigate possible misconduct. There are some statutory requirements, but practitioners are not required to have particular qualifications or levels of education, nor do they have to belong to any professional organisation.”Because of this, there is no official record of the number of insolvency practitioners or their qualifications. This information gap has the potential to create problems as those appointing practitioners may not always know whether practitioners are competent to liquidate or rehabilitate companies.”

It’s my impression that those appointing a liquidator know very well the kind of liquidator they want and choose accordingly. Or, if they don’t know one liquidator from another, they find out pretty quickly who suits their needs. Very often, that appointment is contrary to the interests of creditors.The discussion document coincides with a proposal in the Insolvency Law Reform Bill to introduce a regime of voluntary administration for companies not yet insolvent but heading that way. “Early use of the regime will provide the company, the insolvency practitioner and major secured parties with more options,” the document says.”Provisions in the bill seek to address some of the concerns raised in relation to shareholder-friendly liquidators, for example:

by prescribing in regulations the set of core processes that have to be undertaken by the administrator
by prescribing in regulations various reporting requirements, and
by not allowing a discretion to waive core requirements.

“However, a potential for mischief still remains as there is no body with an explicit oversight role for practitioners.”

The 2004 discussion document identified 3 basic options to remedy deficiencies in the regulatory framework:

strengthening existing statutory measures
introducing a voluntary accreditation regime
introducing a mandatory licensing regime.

Stronger statutory measures could include:

giving the Registrar of Companies explicit oversight of liquidators and increased enforcement powers
strengthening remedies available to the court in the event of non-compliance, and
strengthening reporting requirements for liquidators to notify the Registrar of Companies where they consider the company or any of its directors has committed an offence under the Companies Act.

Some of that change is already incorporated in the Insolvency Law Reform Bill, which would remove the provision in the Companies Act allowing liquidators a discretion to send specified information to creditors, shareholders & the Registrar of Companies if returns to unsecured creditors are unlikely to be more that 20c:$1.

Another change would require a liquidator to send a list of creditors to all creditors to help them organise themselves collectively.

Those 2 changes would go some way toward preventing shareholder-friendly liquidators from snubbing their noses at creditors. A third change would limit shareholders’ ability to appoint a liquidator in the face of a court liquidation application.

Websites: Insolvency Law Reform Bill

MED, insolvency law review (7 years of links)

Insolvency practitioner discussion document

Ministerial release

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Attribution: Ministerial release, insolvency law documents, story written by Bob Dey for this website.

Published 16 July 2006

The Ministry of Economic Development said on Tuesday the partners in 2 film production companies had been fined a total $256,000 for breaches of the Financial Reporting Act, as LAQCs which hadn’t properly filed financial statements for 2004 & 2005.

The partners in 4T Production Partnership No 1 & 4T Production Partnership No 2 were prosecuted as directors of a total 32 registered companies which were the general partners of the 2 partnerships. Each company attracted an $8000 fine.

The 32 companies had a total of 122 shareholders, invited to invest through partnership prospectuses. They contributed a total $3.76 million.

All the companies were registered as LAQCs (loss-attributing qualifying companies) with Inland Revenue. The ministry said use of LAQCs in the business structure was to deliver tax advantages to the investors.

Each partnership was an issuer for purposes of the Financial Reporting Act because they allotted securities pursuant to an offer for which a registered prospectus was required under the Securities Act. Each was obliged to annually prepare, sign & have audited financial statements and file them with the Registrar of Companies., which hadn’t been done for 2004-05.

For purposes of the Financial Reporting Act the directors of the issuer & reporting entity are the partners in the partnerships.

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Attribution: Ministry release, story written by Bob Dey for this website.