The vast majority of New Zealand firms – roughly two-thirds – are small or medium-sized enterprises. These firms are the backbone of the Kiwi economy. Yet although they are often invoked rhetorically by politicians of all stripes, they do not always receive the protections they need.

A wide range of damaging business practices can cause real problems for small enterprises. This includes the practice known as ‘Phoenixing’, where a company is wound up to avoid paying its creditors but then restarts under a different name. It also includes situations where firms declare bankruptcy, again freeing themselves of obligations to their creditors, but have shifted money to other entities – trusts, for instance – in order to disguise their true financial position. And sometimes larger firms go under while owing large amounts to their subcontractors.

In all these scenarios, companies of different sizes can be harmed – but invariably it is the smallest ones, the subcontractors and other medium-sized firms, that are worst affected. These companies also suffer when supplying to, or buying from, uncompetitive markets dominated by monopolies and duopolies (see our Creating Competition project for more details). They may also be unable to ensure basic norms of treatment, such as payment on time from larger firms.

IDEA’s work will examine how New Zealand’s regulatory settings can be strengthened in ways that provide greater protections to small and medium-sized firms operating in the local economy. This promises benefits for all consumers but especially for Kiwis in the lower and middle parts of the income distribution.