Delays ahead for farmers caught up in GDEx liquidation
An unusual liquidation case is a reminder to farmers to take an interest in the solvency of the businesses they transact with, a Federated Farmers leader says.
“It’s certainly a warning to others,” dairy industry group chairperson Richard McIntyre said.
The farming advocacy body had issued advice to its members after 95 New Zealand farmers were contacted about repaying money they had received from Hamilton-based Genetic Development Exports (GDEx) before it went into liquidation.
Liquidator Malcolm Hollis was expecting defences to be brought forward and hoped to make the process as efficient as possible for all parties.
The Companies Act 1993 allows a liquidator to unwind transactions for a period leading up to the liquidation to make sure that certain creditors haven’t been given preferential treatment.
In other words, the liquidator recalls the funds to make sure that whatever money the company paid out can be distributed more fairly among the parties it owes money to. These transactions are considered voidable.
The problem is that these payments were made for cattle sold by farmers almost two years ago.
McIntyre said the money would have been used for expenses or debt repayments and it “wouldn’t be a small amount”.
The case was a reminder that “when it comes to dealing with a business on shaky ground, having the money in your bank account doesn’t mean ownership”, he said.
GDEx, a livestock export company, went into liquidation in September 2022 after incurring losses of $5 million.
Earlier that year, farmers from all over the country sold some 12,300 cattle to GDEx for export to China. However, the business ran into shipping logistics issues and reduced the shipment to 5000 cows.
It’s understood about 360 farmers sold to GDEx, and 40 of them were collectively owed $1m.
The voidable transaction gives creditors, or those who have been paid, a chance to explain the payment and why they believe it should not be voided.
Federated Farmers advised its members to seek legal advice from insolvency experts to formulate a defence specific to their circumstances.
Hollis, a director at PwC New Zealand, said: “It’s a relatively complicated process and it’s just going to take some time to work through. It’s very early days.”
The liquidators were considering a test case with one farmer, rather than going through the process with all 95.
According to the last liquidators’ report, filed on April 12 and available on the New Zealand Business Number Register website, the liquidators will “continue to investigate the actions of the directors of the general partner and the affairs of the partnership to identify if there are any further avenues for recovery or breaches of law which we may refer to the authorities for further investigation”.
Other known creditors include veterinary services, livestock agents, auditing services, agritech and information services, testing services, insurance companies, trucking firms and port services.
Live exports by sea have been banned in New Zealand since April 2023, but the National-led Government is looking at reversing the ban as part of ACT’s policy programme.