Owner of Timaru kitchen business issued formal demand over overdrawn funds
Wednesday, 15 May 2024
The owner of a long-running Timaru-based kitchen business, which was put into liquidation in October, has been issued a formal demand over a shareholders account overdrawn by an estimated $685,000.
Liquidator Mohammed Jan, who released his six monthly liquidator’s report on May 9, said he expected to meet with Kitchens Direct director and shareholder Karl Te Raki this week.
Kitchens Direct (NZ) Ltd, which traded as Kitchens Direct, began in 1970 and was involved in the design, manufacture and installation of kitchens in Timaru.
It was put into liquidation in October 2023, along with linked companies Kitchen Direct Appliances Ltd, Kitchens Direct IP Holdings Ltd and Kitchen Direct Franchising Ltd.
On Tuesday, Jan, of Liquidation Management Ltd, said he was still investigating a number of matters including debtors and other funds thought to be owed to the company.
“I have been pursuing the shareholders’ current account and having settlement negotiations with the shareholders.
“The director is co-operating with my investigations and I have a meeting scheduled with him this week to go over pending matters,” Jan said.
In his first report, Jan said Te Raki had told him the companies had failed because of a variety of factors that included a “steady loss of customers over the years, an increase in material and labour costs/shortages, profit margins not achieved, profit plagued by debts, suppliers stopping credit due to non-payment and the ongoing effects of Covid-19”.
Jan’s report says Te Raki “tried to restructure the operations, including refinancing the loans, but was unsuccessful”.
He also said “Further, substantial drawings by the shareholders affected the business’s cashflow.”
His second report shows the shareholders current account was overdrawn by more than $685,000 as of March 31, 2023.
“A formal demand has been issued to the shareholder (Te Raki). No settlement has been achieved, and the liquidator has been following up with the shareholder.”
A party loan, estimated to be worth $47,945 was also being investigated by the liquidators who would take “appropriate action in due course”.
Jan’s report says staff contracts were terminated by the liquidator and staff were instructed to fill out a creditor’s form.
As of May 8, six staff had lodged claims for a total of $35,496. The liquidator said that amount is holiday pay owed to employees, but Inland Revenue is yet to file proof of debt.
Jan has also received 23 claims from unsecured creditors for $308,268.38 and one from a secured creditor for $17,814.57.
The creditors include ANZ Bank, Heartland Technology, Mercedes Benz Financial Services NZ, ACC, Inland Revenue, and a list of local businesses including Blacks Fabricators, Cloake Creative, Mitre 10 Mega Timaru and the Timaru District Council as well as a list of private individuals.
Jan said he had put the business up for sale and received some offers, but nothing significant and he was not able to sell it.
He engaged an auctioneer to sell the company’s plant and equipment which netted $81,761, and had sold a vehicle separately for $8000.
Having paid $29,966 in auctioneers fees and rent of $20,932, the liquidator’s account holds $42,723 which includes an ACC refund and a bank transfer of funds.
At the time of the liquidation, Te Raki told The Timaru Herald he would ensure creditors were “fully paid” and customer issues were resolved.
In March, Timaru residents Peter and Kay Dellow spoke out about the financial and emotional impact the failure of the business had on them after they were left $17,000 out of pocket for a new kitchen they had ordered.
The following month, competitor Ezy Kitchens came to their aid - offering to install the kitchen free of charge.
Jan said it was not possible to give an estimated date for completion of the liquidation and he could not definitively say whether payments would be able to be made to creditors.
“Any prospect of a distribution to the creditors is dependent upon the quantum of the recovery of the sale of assets, overdrawn shareholders current account, insurance refund and related party loans.”
Jan has asked anyone with any information they believe may assist him to provide it in writing with supporting evidence via email.
“I would welcome information being sent directly to me.
“Please not that the liquidators can only act on written information, as any conversations would be regarded as hearsay only by the court and be inadmissible.”
Any creditors can also lodge a claim in the same way, via email.