A bankrupted Auckland property developer’s failed firm allegedly owes millions to Inland Revenue and the man himself is accused of withdrawing more than $2 million from his company accounts.
One of the collapsed company’s liquidators is mulling legal options to recover that money, while another claims the developer also transferred funds between sister firms while they were insolvent.
Zhiwei Li, also known as Jack Li, operated at least six now-folded companies, some of which developed residential property.
The liquidators of five of those companies allege Li overdrew $1.3m from shareholder current accounts and that this money is repayable to the firms.
A separate liquidator alleges Li withdrew $875,000 from that firm’s account – and says they are investigating the commercial viability of recovery.
An overdrawn current account is where the shareholders remove more from the account than they have put in.
The liquidators also allege Li may have breached his duties as a director and are eyeing separate possible claims against him.
Li was tipped into bankruptcy last month by Carters building supplies company over a $225,000 debt.
He blamed the collapsing Auckland property market for his financial woes, but said he hoped to trade himself out of the quagmire once the real estate market rebounded.
Companies Office documents show one of Li’s failed companies, Kumeu Center, allegedly owes nearly $3.8m to Inland Revenue.
The company’s assets consisted of a residential property and debts arising from property transactions.
“The company’s real property has since been sold, and the secured creditors have been paid in full,” a report by liquidator Blacklock Rose says.
Separately to Kumeu Center, KPMG liquidators have been appointed to administer five of Li’s other companies, which allegedly owe creditors nearly $2.7m.
A liquidators’ report for one of them, Kumeu East Realty (KER), says KPMG has identified inter-company transactions across the failed firms.
The liquidators were aware of bankruptcy proceedings being taken against Li in his personal capacity by Carters.
“The liquidators will continue to monitor subsequent legal proceedings in this regard.
“Upon investigation into the company, the liquidators identified a [alleged] breach of directors’ duties ... and made a demand for payment of the claim.”
KPMG liquidator Leon Bowker alleged Li authorised transactions between companies while those firms were insolvent.
“Across all five entities, breach claims totalling over $1m, and overdrawn shareholder current account claims totalling over $1.3m, were identified and issued against Mr Li in his capacity as both director and shareholder,” Bowker claimed to the Herald.
The Herald has sought comment from Li but requests have gone unanswered.
Li’s bankruptcy proceedings arose out of a personal guarantee he gave in respect of KER for building supplies purchased on its Carters trade account.
Carters demanded repayment in March 2023 and launched legal proceedings later that year.
KER, described as a residential property development company, was placed in liquidation by the High Court in June last year after an application by IRD.
IRD refused to provide details about its application or say how much it was owed.
Li told the High Court the Carters debt was “the result of the property market in Auckland collapsing”, but said his business was recovering and cashflow would be available to repay creditors “in several months”.
He said he had invested nearly $250,000 in a property development with another housing company and anticipated recovering his investment with a 60% return.
However, Justice Lester said Li’s optimism was “misplaced”, pointing out he’d made no repayments to Carters since May 2023.
“Mr Li stood to take the profit if the development prospered – he must meet his obligations when it faltered,” the judge wrote.
The judge questioned why Li had invested $250,000 in another housing project when he knew he owed money to Carters.
“Mr Li chose not to meet his obligation under the guarantee, opting to divert cash into another investment.”
In granting Carters’ bankruptcy application, the judge said he had “real doubts” about Li’s ability to satisfy the Carters debt.
The Official Assignee is now responsible for administering Li’s bankruptcy estate under the Insolvency Act.
Lane Nichols is Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
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