Build governance structures that outlast the family relationships holding them together

A $40 million case study in what informal governance can’t survive

When a business is held together by nothing more than one family member trusting another, it works right up until the moment it doesn’t. The liquidation of two thoroughbred racing companies linked to the prominent Nakhle family is a textbook demonstration of what happens next.

Both Karaka Estate Limited and Bloodstock Partners Limited have been wound up after a bitter dispute between matriarch Henriette Nakhle and her son Daniel, with Henriette alleging he misappropriated more than $40 million. The family built its fortune in South Auckland property before branching into hospitality, education, quarrying and racing, and once featured on the New Zealand Rich List. The drama is entertaining. The lesson underneath it is the useful part.

The court found the companies were never really solvent

In Nakhle v Karaka Estate Limited, decided in November 2025, the High Court accepted expert evidence from chartered accountant Grant Graham, who reviewed four years of financial statements through March 2024 and found both companies insolvent on both balance-sheet and liquidity measures.

These were loss-making operations kept alive by the family holding entity, NTL, through alleged advances to one company exceeding $10 million and distributions exceeding $7 million. Since 2020, Daniel Nakhle had also been personally funding operating costs, building up a related-party loan account without board approval.

Daniel argued the companies were solvent. The court dismissed that in pointed terms, noting his funding simply resulted in the companies incurring further debt to a related party that had not been approved by the boards. In plain English, one person’s willingness to keep writing cheques is not solvency, and the court refused to treat it as such.

The trigger was a governance deadlock, not a market shock

The unravelling began in 2023, when Henriette refused to approve further advances from NTL to either company. With family members as the only directors, there was no independent voice to break the tie, and a facilitation process ran until December 2024 without resolution.

The court’s language left no ambiguity. It found there had been an irretrievable breakdown of trust between Mrs Nakhle and Mr Nakhle and no reasonable prospect of them resolving the deadlock. On the trust structure sitting behind the companies, it held that an insolvent trustee company should, as a general rule, almost invariably be put into liquidation.

Daniel tried to halt proceedings by invoking dispute-resolution clauses in the trust deeds. The court rejected that too. And here is the sharp point for any family business owner: an ADR clause is a governance tool, not a governance structure. It cannot function once the trust between the parties has already collapsed. When that happens, the court becomes the governance, on the court’s terms and timeline, not yours.

The failure points were all preventable

Strip away the surnames and the racing stables, and the Nakhle sequence is one many family firms would recognise. Loss-making subsidiaries propped up by informal, undocumented related-party lending. No independent director to flag the insolvency risk early. A control structure that depended entirely on personal trust, with no institutional fallback when that trust broke.

Each of those is fixable in advance. Related-party lending should be documented, board-approved and on arm’s-length terms. Loss-making units should carry explicit board decisions about how long they will be supported and on what conditions. Independent directors or an advisory board provide a check on family dynamics that no clause in a deed can replicate. And succession and control arrangements need writing down before a dispute, not after.

Why the timing makes this land harder

The Nakhle liquidations arrive in a market where winding up is a live worry for plenty of owners. Companies Office data shows 889 liquidator appointments in the fourth quarter of 2025, up 31.3% on the same quarter a year earlier.

New Zealand’s framework offers little room to manoeuvre once a business reaches this point. Under sections 135 and 136 of the Companies Act, directors face strict duties not to trade in ways that risk serious loss to creditors. A University of Auckland analysis noted the reform argument is not about weakening creditor protection but that the current law may discourage legitimate rescue attempts, and that concerns about legal risk may also deter capable individuals from accepting board roles. Australia, by contrast, offers a statutory safe harbour for directors pursuing credible restructuring.

The Nakhle case is not borderline. It is a clean insolvency dressed up as a family feud. But the underlying pattern, a firm running on personal trust with nothing structural to catch it when that trust fails, is not unusual at all. The families who avoid the courtroom are the ones who built the governance before they needed it.

Sources

• Inside the $40m family feud that liquidated two Nakhle firms – Newsroom (2026-08-10)
• Auckland Nakhle family in $17m court battle; judge clears way for liquidation case – NZ Herald
• Latest company statistics – Companies Office (2026-06)
• Insolvency spikes put company law in spotlight – University of Auckland (2026-03-12)