It took some lateral thinking by insolvency specialists at BDO chartered accountants, but a pooling arrangement for assets and liabilities of companies in the Ovato printing group saw savings on liquidation costs which will flow through to an improved return for creditors.
Rees Logan and Andrew McKay were appointed liquidators of the four New Zealand subsidiaries of Ovato group in late 2022 after its Australian parent declared insolvency three months earlier; all victims of the online revolution leading to an interminable downturn in traditional print media.
Each of Ovato’s four New Zealand companies were originally set up for a different role: heatset printing; sheetfed printing; distribution of brochures, magazines and newspapers; and a corporate head office managing New Zealand group operations.
The four companies shared the same directors. Cashflows were managed through two bank accounts controlled by head office.
Logan and McKay told the High Court that while there were relatively clear paper trails identifying payments in and out, at least $250,000 of chargeable time would be needed to isolate and allocate both costs and revenue between companies if each company were to be wound up separately as a discrete legal unit.
Employees had worked across multiple companies without wage costs being specifically allocated. Paper and other printing supplies had been purchased by one company, then used by another. Many customers were unsure of which company they contracted with, simply making payments to corporate head office labelled as payment to Ovato.
In the High Court, Justice Robinson made a Companies Act pooling order having all four companies liquidated as if they were one. Resulting savings in liquidation costs will be shared between preferential and unsecured creditors, he said.
As a consequence, all assets and all liabilities will be thrown into the one bucket and dealt with as if the four companies were one company being liquidated.
Before going to court, Logan and McKay had discussions with both Customs and Inland Revenue regarding their claims as preferential creditors; collectively they are owed some $1.57 million. Each agreed to limit their claim as a preferential creditor; proving in the pool as an unsecured creditor for the balance of their preferential claim.
The High Court pooling order confirmed this agreement.
re Ovato NZ Ltd – High Court (1.11.24)
25.023