Push to scrap clawback law

Photo / Herald on Sunday

A small North Shore business goes to court next week to defend a demand for a $37,000 payment it earned working for an electrical firm more than 18 months ago.

The liquidators of Aden Electrical say cabling company Boss Systems must hand back the payment because it should have known Aden was insolvent.

The claim is being made under Section 292 of the Companies Act, which allows liquidators to claw back payments made by an insolvent company up to two years before it went under.

"It looks like we're probably going to lose; it's just the law is against us," Boss general manager Brayden Jack said.

The legislation is designed to stop creditor queue-jumping but recent cases have left a group of small-business owners vowing to lobby for a law change.

Bill McEntee, owner of hire company McEntee Hire, has joined forces with Boss and others to campaign against Section 292.

McEntee Hire lost a similar case in the Rotorua High Court last year against the liquidators of a paving company. McEntee ended up handing back $21,000 it received from Taupo Paving in 2008, several months before the company failed.

McEntee said the group had met the Employers and Manufacturers Association, which was interested in the issue.

The clawback provision has existed for many years but its use has become more prevalent in the tougher economic times.

McEntee said he had noticed clients had been particularly slow to pay in the past couple of months. McEntee Hire provided equipment to a festival held in Auckland in November and still hadn't been paid. "That's just typical of what's going on."