If your business is struggling to pay its debts when they fall due, you may be facing insolvency. But that does not mean liquidation is your only path forward. There are several alternatives to insolvency that may help stabilise your financial situation, reduce pressure from creditors, and give your company time to recover.
In this blog, we outline practical insolvency options under New Zealand law, including debt restructuring, compromises with creditors, and finance solutions. The key is to act early, assess your position clearly, and communicate with those you owe money to.
If your company cannot pay its debts when they fall due, there are a few options that are really worthwhile considering.
One is a liquidation, which a lot of directors will think carefully about before they take that step. However, it is absolutely worth considering if the company is insolvent.
In fact, all directors have an obligation to consider liquidation when a business is no longer able to repay its debts. It may not be the first choice, but for some companies, it is the best insolvency option available.
Another option is negotiating debt restructuring. Consider whether you can modify the payment terms, the amount that needs to be paid, or extend the timelines for payments.
Sometimes spreading repayments out can buy the time you need to finish a project or get the business back on track. That being said, you do need to make a sober assessment of the company’s finances. You want to avoid simply delaying the inevitable.
The third option is a formal creditor compromise, which has a whole process set out in the Companies Act. The end point is you combine creditors if the majority of those creditors vote to support your compromise.
If a formal process is not justified, there is also the option of an informal compromise, where you negotiate one-on-one with creditors to buy that time that you need. This can be a powerful way to secure reduced payments, extended timeframes, or other temporary relief—without involving the courts or the New Zealand Insolvency and Trustee Service.
Another option could be seeking finance or lending to get you through the period. Whether through traditional banks, alternative lenders, or asset-based solutions, funding may be available to repay existing debt or keep critical parts of the business running.
That said, be cautious of high-interest loans or repayment terms that could make your financial situation worse in the long run.
With all of these options to avoid insolvency, the key themes are clear:
Lack of communication is one of the most common mistakes we see in insolvency cases in New Zealand. If you are falling behind on repayments, do not go quiet—start a conversation.
If your company is unable to keep up with repayments, or you are unsure which insolvency option is best for your situation, we can help.
At Norling Law, we guide business owners, directors, and self-employed individuals through their debt options, whether that is a formal compromise, restructuring, or planning for liquidation. Book your free 30-minute consultation today to get practical, confidential advice on your next steps.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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