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Insolvency experts are tipping 2009 to be a record year for receiverships.
Deloitte recovery and forensics partner Barry Jordan told the Herald on Sunday there was "definitely a vast increase" in company receivership and liquidation numbers compared with the past two years and many more were in train this year.
Insolvency and Trustee Service monthly statistics show there have already been 141 company liquidations nationally for the five months from July to November last year. That compares with 182 for the whole year from June 2007 to June 2008.
Like many insolvency practitioners, Jordan is working through the holiday period to cope with a heavy workload. Insolvency specialist Chris Horton, of Horton Price, describes the surge in corporate insolvency activity as "bedlam" but far from the peak it will reach this year.
Jordan said highly indebted companies and those mismanaged were the first to be hit when credit conditions tightened.
Horton said retailers failed as a lack of consumer confidence curtailed spending and wallets would stay closed as unemployment continued to rise. Loss of access to mezzanine financiers and banks withdrawing credit availability from the construction sector has hurt tradesmen's businesses; many of which have no work lined up beyond March.
John Roberts, director of Veda Advantage, says with 97 per cent of local businesses are small to medium-sized enterprises, their loans are typically secured against directors' personal assets. This creates a correlation between corporate insolvency and personal bankruptcy statistics. But Jordan says the bright side of receiverships are the merger and asset acquisition opportunities they present to stronger companies.
Roberts describes this period as one of "self-correction", brought about through over-representation in certain sectors.
Before the spate of finance company demises, he says New Zealand had the highest number per capita in the OECD. Those left, as the industry regroups, will emerge stronger, with better governance and regulation.
This year will also bring more corporate criminal charges, such as those laid against three directors of Bridgecorp and four Nathans Finance directors. There will be "a lot of finger pointing in terms of people trying to make others responsible".
High-profile receiver John Waller, who led the receivership of Bridgecorp until his retirement from PricewaterhouseCoopers on December 24, says many investors do not fully understand the risks when they invest in various financial products and rely on information from others.
The flood of corporate collapses has made the receiver's role in uncovering misconduct more prominent, Waller says, rather than the profession accelerating pursuit of corporate criminals.
