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Asset Protection for Business People

ARTICLE by Ivan Vodanovich

August  2012 (as featured in the Western Leader)

It is common knowledge that business in New Zealand is predominantly made up of small to medium business enterprises (SME’s).

A large proportion of these businesses use the concept of a limited liability company as the vehicle under which the majority of New Zealand SME’s operate.

While a limited liability company protects shareholders by limiting their liability to the value of their shares it does not by itself protect shareholders/business owners who advance money or assets to the company.

It is common particularly on a business start up for shareholders to transfer plant (for example trucks or machinery) to the company to assist its operation. Shareholders also commonly loan money to the company to assist it in its formative years. Shareholders also commonly advance money to the company at times when the company may be short of funds.

It is these advances which are at risk as they are essentially unsecured loans.

This means that if the company ever finds itself in financial difficulty with the result that a receiver or liquidator is appointed the shareholders who have advanced assets or money become unsecured creditors and have to wait in line any secured creditors. If any money is left over after the secured creditors are paid out and the receivers/liquidators have taken their fees then such balance will be distributed proportionately to all of the unsecured creditors.

This situation is obviously not ideal for shareholders who have supported their company by advancing money or assets.

Corban Revell is able to assist small to medium enterprise business owners by structuring the company’s affairs in such a way that the shareholders become secured creditors thereby securing the value of the assets or funds advanced to the company. This can be done economically and efficiently and is a “great insurance policy” which will assist with the protection of your assets. Please contact Ivan Vodanovich at Corban Revell, Solicitors for further information on how your assets are able to be protected.