Liquidator considering legal action over missing funds
Saturday, 23 November 2024
The liquidator of a long-running Timaru kitchen business says he will take legal action over a shareholders’ account overdrawn by an estimated $685,000 if a satisfactory repayment offer is not made.
In May, liquidator Mohammed Jan of Liquidation Management issued Kitchens Direct (NZ) Ltd director and shareholder Karl Te Raki a formal demand over the company’s shareholders’ account which was overdrawn by an estimated $685,000.
At the time, Jan said no settlement had been achieved and he had been following up with Te Raki. He also said a party loan, estimated to be worth $47,945, was also being investigated by liquidators who would take “appropriate action in due course”.
In his third report, dated November 19, Jan said the matter of the shareholders’ current account had not been resolved and he would be “commencing legal proceedings”.
On Thursday, Jan told The Timaru Herald that Te Raki had stated he “wishes to settle” the overdrawn account.
“I have given him time to raise funds. We have been negotiating. If I do not get a satisfactory offer I intend to progress legal proceedings.”
Jan said his investigation into the financial affairs of the company had “identified several voidable transactions”.
Under the Companies Act, a voidable transaction can be unwound by a liquidator.
“I’m working on recovery options and investigations,” he said.
He said Bartercard had confirmed a balance of $44,604 in the Kitchens Direct (NZ) Bartercard account at the time of liquidation.
“I’m in discussions with Bartercard to transfer the credits to me,” Jan said.
He said an insurance refund, listed as an asset, had been turned down by the insurer based on the information they received.
On Friday, Te Raki said he remained “committed to working towards a resolution”.
“This journey has proven to be long and challenging, carrying a significant personal and financial toll.
“While the liquidator initially suggested a timeline of up to 12 months, feedback from others indicates the process may take closer to two years, which appears to align more closely with reality.”
He said it was no secret the local business community was under immense pressure.
“Tough times like these call for unity and resilience within our community.
“Looking back, I still feel that the decision I made for my business was the right one, though it’s been a sobering experience to witness how these circumstances are unfolding in South Canterbury.”
Kitchens Direct (NZ) Ltd was placed into liquidation in October 2023, along with three companies linked to it — Kitchens Direct Appliances Ltd, Kitchens Direct IP Holdings Ltd and Kitchens Direct Franchising Ltd. The company, which traded as Kitchens Direct, was established in 1970 and was involved in the design, manufacture and installation of kitchens.
In his first report, Jan said Te Raki told him the companies had failed due to a variety of factors. Those factors 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 said the director had tried to restructure the company and refinance loans but was unsuccessful. He also said “substantial drawings by the shareholders affected the business’s cashflow”.
At the time of the liquidation, Te Raki gave an assurance creditors and customers would be looked after, saying: “The liquidator is following his process to wind up the businesses. That can take time, but as he completes that process, I will be making sure that creditors are fully paid and that any outstanding customer issues are resolved.”
More than a year on, creditors, including six staff, remain out of pocket.
Jan had received claims totalling just over $353k not including Inland Revenue, which was yet to file a claim.
Of the claims received, staff were owed a total of just over $35k, 23 are from unsecured creditors owed more than $308k combined, and one is from a secured creditor owed $17,814.
There is $32,723 in the liquidator’s bank account after distributions.
Jan said it was not possible to give an estimated date for completion of the liquidation, nor could he “provide a definitive statement as to whether certain transactions will be clawed back” to enable creditors to be paid.
“Any prospect of a distribution to the creditors is dependent upon the quantum of the recovery of the overdrawn shareholder’ current accounts and voidable transaction(s).”
Jan repeated a plea issued in his previous report for anyone with any information they believe may assist him to provide it in writing with supporting evidence via email.
“If the information is relevant to the liquidation, then they are welcome to contact me as it will assist with my ongoing investigation.”
In May, Timaru mayor Nigel Bowen confirmed Te Raki had been asked to resign from his position as a director of Venture Timaru, the Timaru District Council’s economic development and tourism promotion agency, after his companies were put into liquidation.