Tremain Chris: Insolvency Law Reform Bill — In Committee 
Tremain Chris: Insolvency Law Reform Bill — In Committee 
[Volume:634;Page:5739] 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak to Part 1 of the Insolvency Law Reform Bill but before I do that I will just outline the legislation that is the key reason why National is not supporting the voluntary administration regime. It is section 6A of the Taxation Administration Act which makes it clear that it is the Commissioner of Inland Revenue’s statutory duty to “… collect over time the highest net revenue that is practicable within the law …”—and Mr Woolerton might want to listen to that little clause again because he obviously was not listening. It is section 6A of the Taxation Administration Act which he probably has not taken much time to read during his time in Parliament. That is a very important point because it sets the Inland Revenue Department’s priority to collect above all others what is owed to it in terms of PAYE GST and various other things. Section 6A of that Act outlines the department’s statutory obligations which lie at the very heart of why National will vote against this bill. 
Voluntary administration lies at the very heart of this bill. In fact voluntary administration has been introduced under this bill in accordance with New Zealand’s obligations—and this may be news to Mr Cosgrove as well—under the 2000 Memorandum of Understanding on Coordination of Business Law. In a nutshell National believes that voluntary administration has significant merit but only under the right conditions because it is only with the Inland Revenue Department having it on a level playing field with non-secured creditors that voluntary administration will work. 
 National believes that the retention of the Inland Revenue Department’s priority status above unsecured creditors coupled with the responsibility to collect over time the highest net revenue that is practicable within the law will ensure that the department will be in favour of liquidation and recovery for itself as opposed to supporting voluntary administration. We believe that without the department’s support voluntary administration is doomed from the start which is why we do not support this bill. 
The minority view from National states: “All the submitters on [the voluntary administration] provision were unanimous in their view that unless the Government addresses the issue of the priority status for IRD the voluntary administration scheme will be severely compromised.” It goes on to state: “We do not believe that Parliament should pass another piece of redundant legislation when there is a groundswell of opinion from practitioners who believe that it will not work without the removal of the Inland Revenue’s priority status.” 
Let us review some of the merits of voluntary administration. As I said to Mr Cosgrove when I enlightened him on this legislation voluntary administration was introduced under the 2000 Memorandum of Understanding on Coordination of Business Law. It aimed to replace the seldom-used compromise scheme already available to companies in financial distress. A lack of incentives to get a majority of creditors to consent to a compromise has been the reason for the lack of use of that part of the older legislation. 
Voluntary administration was introduced in Australia in the early 1990s. It has had some degree of success there largely because the Australian office of taxation has had its priority status reduced—and we will talk about the reasons why that was able to happen over there later on. Many other jurisdictions have now introduced it. I think that is one of the reasons why we did not look at some of the other jurisdictions such as the United Kingdom where voluntary administration had been introduced without increasing director responsibility or liability which is what happened in the Australian model. 
Voluntary administration allows an insolvent company the court or secured creditors to put a company into voluntary administration and to appoint a voluntary administrator. While the company is under voluntary administration there is a stay on creditor enforcement. I think that is a key point because the voluntary administration process allows a business to trade out of a difficult position and gives it time to review its profitability and its ability to trade out and to restructure its balance sheet and move on. The administrator manages the company calls meetings of creditors and develops a structuring plan on which creditors are able to vote. A majority of creditors determines whether the company is restructured—