Auchinvole Chris: Insolvency Law Reform Bill — In Committee 
Auchinvole Chris: Insolvency Law Reform Bill — In Committee 
[Volume:634;Page:6056] 
CHRIS AUCHINVOLE (National) 
: 
 The Government is showing again its double-handedness as it comes to light in Part 8. There was a glimmer of this as we were discussing Part 5 in relation to the no-asset register. Then we spoke of the Government seeming to have a double standard in that it will not extend the opportunity of joining a no-asset register to those with a student loan but any old debtor to a small business who qualifies can join up. The Government seems to be in the business of forgiving the debts of those who owe to commerce but not to the Government. 
Part 8 is a case of “here we go again”. The Government will not relinquish the Inland Revenue Department’s pre-emptive or priority status for the Inland Revenue Department. That will severely compromise in our view the effectiveness of the voluntary administration scheme. Let us remember it is a voluntary administration scheme. I felt compelled during one of the Commerce Committee meetings to say that the difficulty that the Government seems to have with “voluntary” is that everything is voluntary until such time as one does not want to do it then it becomes compulsory. If we are going to have voluntary then the “voluntary” bit has to go right through to the very end otherwise it becomes a bitter end. 
No one could have doubted the sincerity of the submitters who came before the Commerce Committee. These people for the most part insolvency practitioners are people with a tough job. They are constantly being exposed to the stress of others and I would guess in every case having to deal with something that is in every way a mess. For about a decade I worked in a little office in Albert Street in Auckland. It was in the same building as I think two or three insolvency practitioners. I used to see their clients going up in the lift and I used to see their clients going down in the lift. The difference in the journeys was that they clearly looked relieved—and in many ways saddened but none the less relieved—that their immediate responsibility had been handed over to the insolvency practitioners. 
From my memory of it at the select committee every insolvency practitioner who appeared before it insisted beseeched asked the committee to ensure that the reduction in the Inland Revenue Department’s priority in insolvency matters be adopted as part of the bill as it is in Australia. I wonder whether that is the memory of other members of the committee. I can see them nodding in agreement. It was. They did not do this on the basis of not liking the Inland Revenue Department. These are real people and they are in the commercial financial world. It is that by having the priority—and most creditors are not aware very often that there is a problem—when the problem begins the department can be aware of it and it is not seen as being overly energetic in taking a company into insolvency. I am not suggesting that is a good thing or a bad thing but the reality is the department is the creditor that takes people into insolvency eventually and this allows poorly organised businesses to use moneys that should be paid to the department to extend their commercial credit extension beyond redemption and recovery. That is one of the key practical bits. 
 The purpose of voluntary administration is at the heart of the bill. We hear of the early failure of new businesses in New Zealand. It is an oft-repeated statistic. New business has a very high rate of failure. But the reality is that while the individual business might fail the activity that it started with often continues. 
This has been a fascinating bill to be part of in the discussion process because I personally believe in it. In my own commercial experience I have engaged in this sort of thing without it being part of the legislation. The creditors got together and worked with a debtor to see whether we could put something together because we knew that if we did not we were not going to get much out of it. The voluntary system of administration is a good one in my mind. It works but it works only if there is an incentive for all. The object is to save companies but by being weak-kneed I think the Government has lost the opportunity.