Ongoing uncertainty, as well as postponement and cancellation of events has placed increased pressure on businesses dependent on tourism (including domestic tourists) as well as large scale gatherings.
On 22 June 2021, the ASB Showgrounds’ (Showgrounds) board put itself into voluntary liquidation by a majority of the valid votes cast by the members of the Board pursuant to s 14 of the Agricultural and Pastoral Societies Act 1908 and s 241(2)(a) of the Companies Act 1993. The appointed liquidator is Rodgers Reidy director, Paul Vlasic. This voluntary liquidation was a shock for many as the venue has been around since 1889 and is a key part of Auckland’s event hosting infrastructure.
The initial liquidator’s report (the Report) was issued on 29 June 2021. The next report is expected to be published in January 2022.
The Showgrounds had reported rental arrears of $2 million as well as fixed costs of more than $200,000 a month. The Report discloses that approximately $4.6 million is owed to creditors with nearly $1.6 million to unsecured creditors including the IRD and the remaining $3 million to 10 secured creditors, including ASB Bank and Ricoh Finance.
Various factors were behind the financial pressure experienced by the Showgrounds. Due to Covid-19 restrictions, the Showgrounds lost significant revenue as it was only able to operate at alert level 1 due to its reliance on hosting events with large gatherings. This was exacerbated by an ongoing rental dispute with the landlord, The Cornwall Park Trust, which wanted to increase the annual rent from $750,000 to $2.3 million. The rental dispute had been ongoing since 2018 and was heading towards an arbitration even before the Covid-19 outbreak. The outcome of that process has not yet been released, however, the Report anticipates that a significant rental liability will crystallise upon the decision being issued.
Showgrounds’ liquidation illustrates two of the more significant impacts on the successful operation of businesses – their ability to trade during the uncertainty of the pandemic, and rental costs. Both issues have garnered significant attention and policy responses from the government in response to Covid-19. Recognising the unique circumstances of the Showgrounds’ arrangements, the government support packages in play were evidently not sufficient to prevent Showgrounds’ current predicament. Showgrounds’ liquidation has a wider impact on its creditors, and on planned future events at the venue which drive a significant volume of domestic tourism for Auckland. The liquidator has indicated a reluctance to continue to trade on account of the potential personal liability that a liquidator could face in such circumstances. However, it appears that at least the Food Show scheduled for 29 July to 1 August will be going ahead. Any rescue plan for Showgrounds to ensure the ongoing viability of the venue is keenly awaited.
Venues are already well-versed in health and safety and have provided the government with detailed plans of implementing temperature checks, compulsory mask-wearing and contactless ticketing services. The tension between the events industry and the government has been increasing since the outbreak of the pandemic, yet the industry’s petition in March 2021 seeking to continue its operation with safety measures under alert levels yielded no policy change. With the ongoing risk of alert level changes, the government will want to carefully consider additional measures to ease the impacts on alert level changes on the events industry.
Please get in touch if your business has been affected by Showgrounds’ liquidation or if you have concerns about the solvency of your own business. We have experts well versed in advising entities through difficult trading circumstances, both before and during formal insolvency processes.
If you have any questions about liquidations, please get in touch with our insolvency team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.