Twyford PhilParts 1 to 14 Schedules 1 to 5 and clauses 1 and 2Hon PHIL TWYFORD (Minister for Economic Development): Thank you Mr Chairman. Let me just make some opening remarks to kick off this committee stage for this the first of the three regulatory systems amendment No. 2 bills.The bill that we're debating now makes amendments to 14 different Acts. Among these are the Companies Act 1993 the Credit Contracts and Consumer Finance Act 2003 the Insolvency Act 2006 and the Trade Marks Act 2002. Of the 14 Acts in this bill 13 fall within the commerce and consumer affairs portfolio and the Continental Shelf Act 1964 falls within the energy and resources portfolio.Let me just briefly mention two of the more significant amendments in this bill. The first is an extension to the offences listed in the Companies Act which automatically prohibit a person from directing or managing a company for five years. The bill seeks to add two additional types of offence to this list—namely evasions or similar offences under section 143A and 143B of the Tax Administration Act 1994 for evasion and similar actions along with aiding abetting inciting or conspiring with another person to commit such offences as set out in section 148 of that Act.The second amendment is to the Insolvency Act. Currently that Act prohibits an undischarged bankrupt from either directly or indirectly managing or controlling a business being employed by a relative or being employed by an entity such as a company or a trust that is owned or controlled by a relative. Now the purpose of this provision is to prevent a bankrupt from having significant control over the finances of a business during their bankruptcy. However an undischarged bankrupt who works for a relative with no remuneration is not considered as employed under the existing law and can therefore avoid these restrictions. What this bill does is that it seeks to extend the restrictions on employment to include working for a relative without remuneration or for an entity owned or controlled by a relative.Now if I may let me just speak to Supplementary Order Paper (SOP) 388 that is on the Table for this bill. The purpose of the SOP is to address two sets of issues that are identified in Part 8 of the bill which contains amendments to the Insolvency Act. The issues are technical in nature and need to be addressed before the bill is enacted.The first issue relates to clauses 55 and 56 of the bill along with a related provision in Schedule 3. These clauses deal with any creditor of a bankrupt person that submits a claim form after the deadline imposed by the Official Assignee. Submitting a claim form allows creditors to receive a share of any distributions from the bankrupt's assets made by the assignee. Currently the Insolvency Act does not allow late claim forms to be admitted. Clause 56 in the SOP changes this by allowing late claim forms to be admitted and late creditors to benefit from distributions. Clause 55 and 12 in Schedule 3 make a related change. It's important to provide for the flexibility to deal with late claims because distributions from a bankrupt's assets are often made much later than the deadline for submitting claim forms and without this provision late creditors would not be able to receive distributions that they are otherwise entitled to.However clause 56 as it currently stands is potentially inconsistent with fundamental principles of insolvency law. There's a lack of clarity about how distributions should be made to late creditors where distributions have already been made to other creditors. For example it's unclear from the current provisions in the bill whether the Official Assignee would be required to claw back money paid out to other creditors in order to pay a late creditor. It's also unclear how two or more late claimants would be paid when there are insufficient funds to cover both of their claims and where one late creditor submits a claim earlier than another late creditor. These issues have implications for principles of insolvency law such as pari passu whereby all creditors of a same class are entitled to equal distributions in proportion to the debts they are owed. It's important that any amendments to provisions affecting how creditors are treated are carefully considered to identify any unintended consequences and to avoid inconsistencies with these fundamental principles. For that reason the SOP removes clauses 55 and 56 along with clause 12 in Schedule 3 and this is necessary so that further work can be carried out to address the inconsistencies that I've mentioned and also to identify and mitigate any other unintended consequences. Once these issues have been resolved I intend to introduce revised provisions into a future bill.The second issue which the SOP seeks to address is in clause 78. This clause clarifies the consequences of a debtor being discharged at the end of a debt repayment order. It provides among other things that the debtor is not discharged from any debts that they incurred through fraud. The SOP introduces an additional provision into clause 78 clarifying that related parties are not released from their debts or liabilities when a debtor is discharged at the end of a debt repayment order. Examples of related parties are business partners guarantors or persons jointly holding debts with the debtor. There are equivalent existing provisions in the Insolvency Act for debtors who have been released from other insolvency processes such as bankruptcy. The new provisions provide greater clarity and also ensure greater consistency with other insolvency processes.This SOP addresses technical issues in the bill and it provides some small but useful improvements to ensure that the Insolvency Act remains fit for purpose.