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IRD files to liquidate Allied Farmers’ rural unit over $4.2m tax bill

Allied Farmers, which kept itself alive in March through a fire sale of toxic loans, is back in the firing line after its rural unit was today served with a liquidation notice by the Inland Revenue Department over a $4.2 million tax bill.

The Hawera-based company was today served with the notice, 26 days after it was filed with the High Court, it says in a statement. Allied Farmers' rural subsidiary received a statutory demand from the tax department on February 25 and has been in discussions with the IRD since then.

The court filing "is surprising given that AFRL (Allied Farmers Rural) understands the statutory demand had expired" by May 1, it says.

"AFRL will be seeking legal advice to clarify the matter, but in the meantime continues its discussions with IRD and remains hopeful of achieving a settlement with the IRD before the hearing which is set down for July 32, 2013."

The company survived a call on debt from an unnamed creditor earlier this year after it sold various loan assets with no book value for $100,000 upfront and potential for a further $500,000. It later sold its Taranaki real estate unit for $472,500 last month.

Allied Farmers Rural held assets worth $7.72 million and liabilities of $9.44 million as at December 31, according to the company's first-half report. The division reported a first-half loss of $800,000, down from a loss of $1.5 million a year earlier and said it expects to be profitable in the second half, when it gets most of its earnings.

In December 2011, Allied Farmers Rural sold its livestock business, with $280,000 of assets, for shares in a wholly owned subsidiary, New Zealand Farmers Livestock.

It then sold part of that company to a firm owned by employees of Allied Farmers Rural, and issued more shares to Allied Farmers Rural's livestock agents, leaving it with 68 percent of the new company. Those transactions were settled on a cash basis, with a valuation of the livestock business at $7.5 million.

Allied Farmers is trying to rebuild itself after its disastrous acquisition of financial assets from Hanover and United Finance for $394 million in 2009. It has ring-fenced what is left of the assets in its Allied Farmers Investments unit, which had assets of $25.7 million, according to its first-half accounts.

The shares were unchanged at 2.5 cents today, valuing Allied Farmers at just $2.27 million.

(BusinessDesk)

Comments and questions
10

How on earth you manage to turn independently valued assets of $394 million into $25.7 million can only be described as incompetence of the highest order.

The directors of this company surely must be in the FMA's firing gun for allowing such wholesale destruction of shareholder value.

Or the "independent valuers" should be charged with fraud?

They were never worth that much in the first place. Allied were so desperate to stay a float that they went and did this diabolical deal. They hoodwinked investors by saying that they had the infrastructure to handle the Hanover assets, while all along they had nothing! If they had only looked into the assets they would have found heaps of worthless 2nd mortgages and debt.
Time has shown that they only sold off the reasonably good stuff to cover their own debt. At the same time they have lost their finance company (Allied nationwide), all of their stores and most of their rural stuff. Plus they have now sold off their real-estate firm. Precisely what they still own is a small livestock sale company. They are a shell of what they used to be. I think this latest news will be the final nail!

See what happens when a wide-eyed country bumpkin takes a ride in his tractor to see the bright city lights, without a chaperone: he gets stitched-up by a couple of wide boys in pin-stripe suits.

How can IRD suing a struggling company be helping the economy?

I've never understood this ... why does the IRD manage to put so many companies out of business? How is that good for NZ? Surely it is up to the banks or other creditors to finally pull the pin on a struggling company ... but the State? It doesn't make any economic sense.

I would rather the Inland Revenue gets first chew on the carcass. If you want someone to blame over this fiasco, look no further than the directors.

Because we ain't Greece. You earn profits, you pay tax. They have failed to pay tax on profits, it seems. And another company will step in to earn the revenue and pay the tax going forward (assuming the AFR business it can pick up is still profitable). So it is fine for the IRD to act as they have.
Please advise on what basis a company should not pay the tax it is due.

So the IRD should become a lender of last resort, where companies borrow from us taxpayers safe in the knowledge that nothing bad will happen if they never pay us back?

They are helping the economy by preventing even more creditors getting burned than already have been. Would you prefer that companies be let to just continue racking up more debt ?

Based on the logic here the IRD should go about winding up all NZ businesses ... it seems to be quite a profitable lark.