Smith Nick: Insolvency Practitioners Bill — First Reading 
Smith Nick: Insolvency Practitioners Bill — First Reading 
[Volume:666;Page:13551] 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 First I commend the Minister of Commerce for the work that has gone into introducing the Insolvency Practitioners Bill to the House. I also acknowledge the work that the previous Government did in this area and its recognition of the real need for a more robust framework for regulating insolvency practitioners. I particularly wanted to make a contribution to the debate in the context of my own Nelson constituency where there has been considerable angst about insolvency practice and where the need for this reform is well illustrated. Insolvency work is not top of the popularity charts. Just as there are not many doctors lining up to be undertakers most chartered accountants would much rather have the work of building successful businesses than being involved in the winding up of unsuccessful companies. There are all sorts of tensions that fly around insolvency. Success has many fathers but failure is often an orphan. There are often issues over who specifically owns what relative to directors of a company and what they own personally. There are arguments over valuations and what is fair value and debate over which creditors are owed how much. 
Those problems are compounded by the practical reality that the companies that are in liquidation will commonly have real problems over the accuracy of their records and in their management. The issue of insolvency practices has caused a considerable amount of press attention in Nelson and I have received a considerable number of concerns about a number of insolvencies involving a new practitioner trading as Norris Management Services or NMS. I want to illustrate the examples to the House so that as the bill goes to the select committee we can be sure that we get the detail of this bill right. The first part that causes me concern is that when this practitioner started up in Nelson he advertised himself as being a “highly experienced insolvency practitioner” but it has worked out that he had no previous experience. He had no professional qualifications; he was trained as an auto-electrician. Prior to coming to Nelson his only experience in liquidations was his own spray-painting business in Hamilton which went into liquidation and left over $150000 of debts to unpaid creditors. 
I am further concerned that this particular practitioner was convicted of fraud in Hamilton in May 1999 and was more recently convicted this year in the courts for illegal filming in a private residence. There has been some quite inappropriate goings-on. In the most recent liquidation of Murchison Buses the liquidator effectively sold a bus to his own company for nil value. There are also accusations that his partner is now the owner of one of the other vehicles that was owned by that company. When I met the insolvency practitioner and raised those issues with him on behalf of some of the creditors the practitioner admitted that his company had acquired the bus for nothing and most worryingly could not see that there was anything particularly wrong with that. That is not the only liquidation involving Norris Management Services where there are real concerns over the conduct of the insolvency. 
In responding to constituency concerns about those goings-on I have been quite perturbed about how little protection or checks and balances there are where there are problems over an insolvency. I raise these issues quite deliberately in the House because a number of the parties have come to me incredibly fearful that any attempt to raise issues would simply involve them in more litigation or threats. My greatest frustration with these issues is how little can be done. There are no checks or balances under the current law and an insolvency practitioner is in a very powerful position. We need to be realistic that the directors of companies or businesses concerned will often be broke and they will be in no position either emotionally or financially to be able to legally challenge a decision of an insolvency practitioner. Most creditors take the attitude that they are unlikely to get much; they cut their losses and simply move on. My worry is that disreputable operators are able to burn up most of a company’s assets in their own fees effectively transferring the creditor’s assets to themselves. 
In the case I have looked at in Nelson the insolvency practitioner—and I remind the House that this is a person with no qualifications—is charging himself out at $200 per hour which is $8000 per week and the largest share of the company’s assets end up in the hands of that insolvency practitioner. I also believe there are real issues over the reporting timetables. I have had numerous complaints of creditors and debtors waiting for 6 months 9 months and 12 months to get any idea on the totalling up of the final position in a company. Although I respect the fact that we all want to ensure we do not over-regulate we all have an interest in ensuring integrity in the way business creditors are treated and to ensure the affairs of companies are wound up fairly. 
This bill provides sensible improvements. I particularly welcome clause 5 which disqualifies a person from being an insolvency practitioner where they have a conviction for a dishonesty offence. People convicted of dishonesty should not be allowed to work in this area. I also welcome the provisions that enable the Registrar of Companies to prohibit individuals from providing corporate insolvency services. Those are welcome measures that alongside many of the other changes being made in the area of financial and investment affairs by the Minister provide an increased level of integrity from which all New Zealanders will benefit. This bill will be welcome news to those in Nelson who feel powerless to deal with problems over inappropriate practitioners. I support its first reading and I encourage the Commerce Committee to debate its provisions vigorously so that we can have a fairer and better system of solvency practitioners in New Zealand.