Rich Katherine: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
Rich Katherine: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
[Volume:634;Page:6175] 
KATHERINE RICH (National) 
: 
 As I rise to make a contribution to these third readings I would first like to thank the officials who I think worked very studiously and thoroughly with the Commerce Committee. As chairperson of the select committee I thank all the members who partook in the process. We are very fortunate that there are no duds on the Commerce Committee and that all its members are very thoughtful capable people. 
I would like to make a few comments about some of the changes that the select committee was not able to make. One of the aims of this legislation was to look at different ways of encouraging business rehabilitation—to hopefully save more businesses from difficult times and to allow for situations where businesses have run into problems of failure. The select committee spent quite a lot of its time working on the voluntary administration regime which we have virtually adopted from Australia and of course which we also took some guidance on from the United Kingdom. I have real concerns about the implementation of a voluntary administration procedure because I believe for two reasons that it has been nobbled before it has been implemented. 
The first reason is that because of ideology the Government has refused to reconsider the issue of preferential treatment for the Inland Revenue Department. We heard some very good arguments from submitters who came along to the select committee and said that the voluntary administration regime would be hampered if that issue were not dealt with because the Inland Revenue Department would have no motivation to agree to a deed of company arrangement. In fact submitters said that the Inland Revenue Department would be motivated to vote against a deed of company arrangement because it would be likely to get more money as a result of its preferential creditor status than if it were part of a deed of company arrangement where it would have no special treatment and in fact would be lined up with everybody else. 
When we looked at the Australian and the UK models we found that both those models had given away the Crown preferential status and had seen no ill effect. In fact in Australia in particular the voluntary administration regime has been successful and very little money has been put at risk on behalf of the Crown. When we asked officials who came to talk to us how much money was actually at stake they told us that the figure was $5 million. I do not think that that is a large amount of funding when we weigh up the issue of trying to save some businesses from liquidation and moving them into an alternative regime where they can hopefully trade out of their difficulties. So that issue could potentially affect the success of this regime and we will be watching very closely to see whether that is the case. 
The second issue relates to some concerns about the qualifications of liquidators. This concern has not been addressed properly at the select committee level or during the Committee stage. One of the major accountancy firms put in a submission that said that if a firm satisfied the definition for being a liquidator as written in this bill that would basically lock out the major firms from undertaking some of the more complex and large liquidations in New Zealand. The bill is worded in such a way that the definition relating to firms having an ongoing business relationship with any of the secured creditors is so vague that many of our best larger firms would not be able to undertake that work. 
 One of the firms argued a recent case—that of Feltex. The major secured creditor for Feltex as we all know was the ANZ. If we look at all the major accounting firms—like Deloittes PricewaterhouseCoopers etc.; I am sure members know the list—we will see that very few will not have some kind of continuing business relationship with the ANZ. We are a country of 4 million people. We have only a small number of banks and a small number of accountancy firms. They work together very closely in a continuing business relationship but by the way this bill is worded potentially they will be locked out from taking on the role of liquidator in some of our larger and more complex cases. As a country we cannot afford to have that situation because we suffer from a skill shortage as it is without making the pool of talent even smaller. 
I understand that accountancy firms will be watching very carefully the interpretation of this definition and those firms have an intention of challenging some of the law in the event that they are precluded from undertaking that work. It is quite a serious omission and could undermine the voluntary administration regime. The last thing I think the Government wants as we enter into a voluntary administration regime is for there to be some high-profile court cases and challenges and for the regime not to be successful. So the Government has taken a real risk by refusing to listen to what was good reasonable common-sense advice from the sector—that is from those involved in undertaking this kind of work on a day-to-day basis as opposed to some of those who advised us and who look at it from a less practical point of view. That is something we should be concerned about. 
The second area and it relates to the Insolvency Bill is the introduction of the no-asset procedure. Although I can understand why the Government sees this procedure as a method of tidying away some of the administratively burdensome cases where New Zealanders have racked up huge amounts of debt but have no ability to repay—no money coming in and no prospect of ever delivering any payment to those to whom they owe money—we think this bill sends exactly the wrong message to New Zealanders who put themselves in that situation. This bill actually says that if someone wants to enter into a hire purchase agreement or some kind of debt arrangement up to $40000 that person can potentially get a “get out of jail free” card or a “get off the hook” card. We think that that sends entirely the wrong message. 
But it is a message we are also seeing delivered from this Government in a number of other areas. The child support area is just such a one. The grand solution for dealing with child support debt being well over $1 billion was not to get the money but to let people off the liability. We are seeing a version of that approach in this bill. 
So I think there will be teething problems with this legislation and certainly we will be watching very carefully the behaviour of the Inland Revenue Department because it has the power and the ability to undermine totally the success of the voluntary administration regime. If the department is to vote continually against a deed of company arrangement so that companies cannot enter into that kind of regime and instead just send companies to liquidation where the department thinks it can get more money then basically it cuts out from underneath the regime its potential for success before it even starts. So we will be watching that matter very carefully. 
We will also be watching the interpretation of the provisions relating to the qualifications of liquidators because the last thing that National wants is for major accountancy firms—firms that have the skills and the understanding to do the complex liquidation work and take on larger cases—to be locked out of working in some liquidations simply because they have ongoing business relationships with banks. I think that the Minister would be being naive if she did not think that some people will question the position of some liquidators in any way they can and this might be a provision in the legislation that causes all sorts of difficulties for those firms engaged in that area of work. It is a major omission and one that could potentially undermine the success of the whole regime. In terms of the National Party’s position I say that we of course will not be supporting this bill given there are so many unanswered questions.