Dalziel Lianne: Insolvency Practitioners Bill — First Reading 
Dalziel Lianne: Insolvency Practitioners Bill — First Reading 
[Volume:666;Page:13545] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am happy to follow on from the Minister and to say that the Labour Party will be supporting the Insolvency Practitioners Bill. In fact I welcome the first reading of the bill. I was involved in the Insolvency Law Review at various stages of its progress. I think it began in 1999 and there were a number of different aspects to it as it traversed its way through the different processes involving a number of discussion documents. The initial discussion document was produced in 2004 and there was a subsequent one in 2006. On both of those we actually sought to address the issue of insolvency practitioners and it was something that I personally wanted to have addressed. I cannot say that I found particular support for the proposition from certain officials within the Ministry of Economic Development but I did think that it was important. What was really pushing back from the officials was the fact that there were such a small number of people involved in this profession that it did seem to be potentially a sledgehammer to crack a nut. I had some sympathy with that point of view but I felt that it was important that we try to consult those who were interested in insolvency law reform generally around this issue of whether we should have some sort of regulatory regime on quality control as it were for insolvency practitioners. 
The two discussion documents that actually raised this as an issue failed to produce a consensus and that left me somewhat red-faced because of course the officials said: “There you go; we were right and you were wrong.” which happened from time to time as it happens to any Minister I guess. I still was very keen to see something tried and we have the same issue around auditors and again it is the numbers the coverage and our relationship with other jurisdictions. It is also about our best practice and where we stand internationally and where we might look with the principles of the International Organisation of Securities Commissions for example in respect of insolvency practitioners. 
The negative licensing option which had not been promoted in either of the discussion documents was my last-ditch attempt to get some traction on the issue and this was the one that we went out and did a targeted consultation on. This did not go out for another discussion document; the consultation paper was sent to the specialist insolvency practitioner stakeholder bodies and they were INSOL New Zealand and the joint insolvency committee which involved representatives from the New Zealand Law Society and the New Zealand Institute of Chartered Accountants. That was back in June 2008 and of course we were coming up against a general election at that stage so it was a relatively tough order to put to people in the lead-up to a general election. But agreement was reached and I think that what really sold the particular model the Government is now adopting by way of the legislation was that it was a cost-effective form of regulation. It was not going to break the bank as it were; it was not going to impose unnecessary compliance costs on a very very small sector but it recognised that there were a small number of people out there who essentially were causing a major problem. The well-respected insolvency practitioners whom we have in this country were the first ones to tell us that they existed and that there was sufficient concern to do something. It was not sufficient to go that step further and bring in a positive licensing regime but the negative licensing regime enabled action to be taken where it was needed to be taken. 
As I say I think the number of insolvency practitioners drove what I saw as a pragmatic response to the issue. They say there are around 50 involved in full-time insolvency practice and around 50 others who take referrals from time to time; so we are not talking about a huge amount of people. I also want to give some public reassurance that this is not an indication of any great crisis in the sector or that we think that the vast majority of insolvency practitioners have issues; it is an absolute minority. But because we are dealing with people who have great responsibility at a time that is very distressing for shareholders for creditors for company management often and for all of those different individuals who have concerns around the insolvency of a company in voluntary administration in liquidation or in receivership I believe we have an absolute obligation to make sure that we have the power to take action should it be required. 
I took the opportunity of the bill’s introduction to grab a copy of the original Cabinet paper that I took through which of course the Ministry of Economic Development helpfully put on its website on a regular basis. This enabled me to look at the regulatory impact statement and refresh my memory around that. I know that I have said this all this year but I will not miss any opportunity to repeat it: it is a huge mistake to take the regulatory impact statement out of bills. It really is much better to have the regulatory impact statement printed with the bills. If that is not done then one has to print them out separately as they contain the information we need to debate these issues in the House. 
I have made the point to the Minister for Regulatory Reform and I know that he has an issue with this. The issue is that the regulatory impact statement is part of the Cabinet paper and by including it in the bill it may not reflect the changes that have been made in Cabinet. Well I think we could have some tweaking here. There is probably a germ of an idea where we could get that resolved. But anyway this regulatory impact statement which I can take some credit for because I was the Minister who signed it off is excellent. I think that everyone would be proud to have a regulatory impact statement of this nature. The reason is that it states the problem. It talks about the status quo and the problem. It talks about the size of the industry. It talks about the objectives. It also talks about the alternative options which were completely missing from the bill that we dealt with before. There were no other options included in that paper because the Government had gone straight to the decision without setting out the options. This paper sets out the first option of voluntary accreditation the second option of mandatory licensing the third option of competitive licensing and then finally the option of negative licensing. 
I think that is absolutely the way that all regulatory impact statements should proceed. We have to state the problem and then set out the different options for addressing that problem while also addressing the status quo. We have to ask ourselves what the cost-benefit analysis is and what the risks and opportunities are in respect of the different options that exist. We then come up with a recommended option and we justify it in the regulatory impact statement. That is why this particular bill is one that I fully support. It will make a difference. 
I make the point that it occurs not just in the instance of a shareholder-friendly appointee. The Minister used that example and it is a very good example of what can go wrong. But I also put it to the House that money has to be left in the company in order to pay the liquidator’s fees. If the liquidator thinks that chasing some money which does not have a certain outcome may not leave enough for the fees to be paid then that may drive a totally inappropriate outcome for the individuals who are relying on the receiver or the liquidator to do the best for the interests of the creditors and the shareholders. I think this is something that we will enjoy looking at in the select committee. I am very confident that in relatively short order we will be able to report back a bill that will gain the full support of the House.