Solvency the key
/Supreme Court decision a warning to directors trading near-insolvent companies
Madsen-Ries v Cooper [2020] NZSC 100
Debut Homes Limited (Debut) was a property developer. Mr Cooper is Debut’s sole director. In November 2012, Mr Cooper decided to wind down Debut’s operations. Existing developments would be completed but no new developments undertaken. At the time this decision was made, it was forecast that there would be a deficit of over $300,000 in GST once the wind-down was completed. The liquidators of Debut sued Mr Cooper. They claimed that he incurred debts on behalf of Debut without a reasonable belief that Debut would be able to meet them when they fell due, in breach of ss 135 & 136 of the Companies Act 1993 (the Act),. The liquidators claimed the full amount of unsecured creditor claims, being $449,507. The High Court found that Mr Cooper had breached the above provisions. This decision was reversed in the Court of Appeal but was later reinstated by the Supreme Court.




















