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As a company director, you may begin to notice that your company is no longer serving its intended purpose. In such circumstances, it may be time to close, or wind up, the company. The formal process for winding up a solvent company is known as a voluntary removal. It is otherwise known as a short-form liquidation. This article will outline the formal procedure you should follow when you wind up your New Zealand company.

Is My Company Solvent?

Before engaging in the winding-up process, you should ensure that your company passes the solvency test. A company will be solvent if:

  • it can pay its debts when they are due; and
  • the value of its liabilities is less than the value of all of its assets.

If your company does not pass this test, you cannot engage in the voluntary removal process as the company will be insolvent

Resolution of Shareholders

The first step to winding up your company is to secure approval from its shareholders. You must convey this approval in a written resolution signed by all shareholders. This resolution must state:

  • that the shareholders agree to the closing down of the company; and
  • how the assets of the company will be distributed. 

If a shareholder is initiating the winding-up process, they must provide this resolution to the Companies Office when placing the removal application. However, if you or another director are responsible for closing the company, you do not have to provide this resolution to the Companies Office. You should check your company constitution before going ahead to ensure that you are following the correct process.

Obligations for Closing Your Company

There are certain obligations your company must first complete when it is looking to wind up. In practice, these can take time. You should ensure that: 

  • your company is no longer engaged in business;
  • you have discharged all outstanding liabilities;
  • you have distributed the company’s assets in the manner specified in your company’s constitution; and
  • no creditors have taken steps to place your company into liquidation.

Once the above steps are complete and you have a written and signed shareholder resolution, you can begin to complete your company’s tax obligations. We explain these obligations below.

Ensure Filing Requirements are Up to Date

You must ensure that the company’s filing requirements are up to date on the Companies Register. These filing requirements are the:

  • company’s address;
  • directors’ details;
  • shareholders’ details;
  • information concerning the shares in the company; and
  • company constitution. 

Before applying for the removal of your company from the Companies Register, you must also ensure that your company has filed any audited financial statements that are due. 

File a Final Tax Return

You are also legally required to file a final company tax return at the end of the tax year. The end of the tax year in New Zealand is 31st March. Unfortunately, you cannot file this early. It will only be due after the end of the financial year in which you closed your business.

This return must include all of the company accounts up to the date when your company ceased operations. 

Complete Other Tax Obligations 

Alongside these obligations, you must also:

  • pay any outstanding business tax and GST;
  • pay any employer-related or income tax; 
  • file your last employer monthly schedule;
  • cancel your company’s GST registration;
  • cancel your employer registration; and
  • set up any depreciation recovery.

Once you fulfil these obligations, you must write to Inland Revenue and request a ‘no-objection’ letter. This letter ensures that the Inland Revenue Department does not object to the removal of your company from the Companies Register. This letter can be written and sent to Inland Revenue by your company’s accountant or solicitor. 

Apply to Be Removed From the Companies Register

The final step to the winding-up process is requesting to have your company removed from the Companies Register. Upon removal, your company will officially be closed down. 

The application to the Companies Office must state: 

  • that the company has ceased trading;
  • the grounds for the request to be removed from the Register;
  • that the company has discharged all of its liabilities to known creditors; and 
  • that the company has distributed any surplus assets. 

Once you make your request, the Companies Office will give public notice in the New Zealand Gazette that it intends to strike the company off the register. The Companies Office will only remove your company from the register if no objections are received during a 20 business day period from the publication of that notice.

Once the Companies Offices removes your company from the Register, you are still obligated to keep your business records for seven years from the date of removal. 

Key Takeaways

A range of factors may contribute to you and the shareholders of your company deciding to wind up the company. If you are going to close your company, you must follow the appropriate voluntary removal process. This procedure involves:

  • confirming that your company is solvent; 
  • distributing all surplus assets and discharging all liabilities;
  • securing a written and signed resolution from your company’s shareholders affirming the company’s closure;
  • ensuring filing and tax obligations are up to date; and
  • applying to have your company removed from the Companies Register. 

If you wish to wind up your solvent company, contact LegalVision’s corporate lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What does it mean to wind up a company?

Winding up a company is another term for closing a company.

How do I wind up or close my company?

You can wind up a company by following the appropriate voluntary removal process. The first step is confirming that your company is solvent. Next you can distribute all surplus assets and discharge all liabilities. Following this, you need to secure a written and signed resolution from your company’s shareholders approving the company’s closure. Afterwards you must ensure all your company’s filing and tax obligations are up to date. Lastly, you can apply to have your company removed from the Companies Register. 

When is a company solvent?

A company will be solvent if it can pay its debts when they are due and the value of the company’s liabilities is less than the value of all of its assets.

How long does it take to close a company?

Closing a company can take an extended period as it involves multiple steps. For example, you must pay your company’s final tax returns at the end of the tax year (31st March). You must also ensure your company no longer engages in business and discharges all outstanding liabilities. In practice, these take time to complete.

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