What’s wrong with this picture, Christchurch? By Tristam Price

The photo above is of a fast food business called Dumpling Master in Barrington Mall, Christchurch, pictured in 2018. Records indicate that the following year the owner(s) sold the business.

Under new ownership the business failed quickly (nothing to do with Covid). Sadly that’s not unusual, especially given the low margins associated with takeaway food, and the high percentage of owners who are inexperienced at running a business. This came to our attention because the owners were found by the Employment Relations Authority to be personally liable for a small amount of unpaid wages. Limited liability does not necessarily protect its owners from the consequences of breaches of the Minimum Wage or Holidays Acts.

When a company goes into liquidation, the liquidator is required to publicise a notice of liquidation, six monthly reports and a final report before applying to have the company removed from the register.

The first and only six monthly report blew us away. Somehow this tiny fast food company incurred debts of $3,846,240.36, owed to 174 creditors.

And that’s just the creditors that registered their claims. The true total would probably be around $5 million owed to 200 creditors. From the reported figures each creditor had to write off an average of $22,000. Some a lot more, some a lot less. Based on these figures we would expect that several small businesses that supplied goods or services to the company trading as Dumpling Master, unable to bear the burden of the bad debts of this particular customer, went on to fail themselves.

According the liquidator’s report, the only activity of the company was a single takeaway shop, and almost everything was leased.

Turnover from “normal” operation would probably been under $400,000 per year – that’s less than 10% of the total bad debts incurred in that time. It’s bad enough that roughly 200 businesses that supplied goods and services in good faith and were never paid, but these figures suggest that Dumpling Master was a front for something more sinister.

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