KEY POINTS:
The careers of more than a dozen hip-hop artists are in limbo after the collapse of entertainment group Dawn Raid, which has gone into liquidation owing hundreds of thousands of dollars.
Dawn Raid comprised seven companies with interests in clothing, publishing, graphic design, a nightclub and music recording
before it went bust.
At least one group signed to Dawn Raid, the top-selling R&B duo Adeaze, are expected to fight any attempt to sell or transfer their contract to another company.
Dawn Raid owes Inland Revenue around $400,000, but the entire debt is not thought to exceed $1 million.
Liquidators have asked a lawyer for advice on the contracts of 14 artists - including Adeaze and Deceptikonz, and individual acts Savage, Aaradhna and Mareko - and whether they could be included in the value of the company.
"It will depend on who holds the copyrights," said liquidator Peri Finnigan.
Adeaze lawyer David McLaughlin said the recording agreement was "unclear" but his clients believed they were no longer under contract to Dawn Raid.
"Our view is that as soon as Dawn Raid went into liquidation then our clients were effectively out of contract," he said on behalf of Adeaze brothers Nainz and Viiz Tupa'i.
Dawn Raid founders Andy Murnane and Danny "Brotha D" Leaosavai'i this week blamed a downturn in revenues for the demise of their business.
They said the company suffered from a shift in the local urban music market, which was compounded by a high overhead structure and increased illegal downloads.
Mr Murnane said Dawn Raid had spent two years expanding into Australia when it should have been consolidating its local operation.
It is thought the company pumped more than $250,000 into the production of Mareko's White Sunday album, which was produced in New York and featured US hip-hop artists, but was unlikely ever to recoup thecosts of production.
Cath Anderson, general manager of the Government-funded New Zealand Music Industry Commission, said the Dawn Raid liquidation represented a big loss to the industry.
However, she said that on the whole the local music industry had remained surprisingly resilient against the international downturn.
"We continue to have lots of music businesses locally that are doing well."
Ms Finnigan said two parties had contacted the liquidators to express an interest in buying the company but they were "on hold" until legal advice came back on the artists' contracts.
Dawn Raid company records showed "fairly substantial" debts were owed to music distributors Universal and Sony BMG but the figures on paper may not represent the true debt.
Two secured creditors are first in line for any money from the sale of assets but liquidators were unsure if there would be any money for unsecured creditors, although that would depend on whether any value could be gained from artists' contracts.