As New Zealand businesses continue to face mounting financial pressure, one firm is urging owners not to wait until the only choice left is liquidation.
BWA Insolvency is a leading New Zealand specialist in voluntary administration (VA), a process that allows financially distressed companies to restructure and recover rather than collapse.
But despite its potential to save viable businesses, VA remains severely underutilised.
According to BWA Insolvency’s latest quarterly market report, more than 700 businesses entered liquidation in the most recent quarter – in contrast, just four opted for VA.
Bryan Williams, principal of BWA Insolvency, said the data reflects a widespread lack of awareness.
“We invariably only get appointed when there are no further options left for the director,” he said.
“That does explain why liquidation is the most elected - not preferred, but elected - formal state of insolvency.”
Williams believes one major barrier is psychological.
“Directors don’t really want to lose control of the affairs of their company. Voluntary administration essentially gives the key to the business activity to a stranger. It’s not in human nature to just devolve control when they can maintain it, even if their plan ultimately may fail.”
While owners may fear VA as a loss of power, Williams said those who do take the leap often experience a profound shift in outlook.
“They’re highly enlightened. Effusive. They suddenly see something concrete around the potential for their aspirations for the business to survive. We can create a step-by-step ladder out of the mire and into something that projects a future.”
Williams has seen this transformation time and again, particularly among small business owners in tough personal circumstances.
“Their houses are on the line. Their families haven’t had a holiday in years. They’re eating baked beans while others are having steak.”
Williams notes voluntary administration “gives them scope for a future”.
A common misconception is that VA is prohibitively expensive, but Williams argues that his costs are almost always covered by the benefit created or the prevention value so often destroyed in liquidation.
“It’s only as expensive as the trouble the company’s in. The deeper the hole, the more time and expertise are needed to climb out of it.”
But VA is a strategic option that focuses on saving what’s valuable in a struggling business and building a path forward. In any event, Williams explains that BWA provides a free assessment allowing the business owner to understand the available options and what each process would involve.
“We want to be sure that the Directors know all about VA before any decisions are made to commit.”
For many owners, the biggest mistake is waiting too long.
“While there are resources there to be used or managed, the director is going to use them. But when it’s clear there’s no viable way forward, they often realise too late that there was an alternative.”
So how do you know it’s time to call someone like BWA?
“If there’s no clarity about how the business viability can be preserved, that’s a major sign. Liquidity tightening up, compliance costs not being met, accounts payable ageing, these are red flags. Or if your liabilities are starting to creep above your asset values.”
Voluntary administration is not about failure, Williams said, but the possibility of turning things around.
“Liquidation is the final step of a company’s life. Voluntary administration gives business owners an alternative that can be viewed as a chance to pause, reassess, and fight for survival.”
If your business is facing mounting pressure, visit bwainsolvency.co.nz/voluntary-administration to find out how VA could be the circuit-breaker that helps you rebuild.