Street Maryan: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
Street Maryan: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
[Volume:634;Page:6177] 
MARYAN STREET (Labour) 
: 
 I rise to speak to the third reading of the insolvency law reform legislation with pleasure. It has been good to watch this legislation go through the select committee process in the Commerce Committee and emerge in the way that it has. I congratulate Katherine Rich the chair of the committee on her expert handling of the legislation despite the fact that in the end the National Opposition has chosen to oppose the legislation. In fact National takes exception to only two measures. The first is the no-asset procedure in Part 5 of the Insolvency Bill. The second is new Part 15A “Voluntary administration” in the Companies Amendment Bill. 
I wish to respond to some points that Katherine Rich has just made. The first is on the no-asset procedure. Indeed more than one National Opposition speaker has been concerned about the kinds of messages that a no-asset procedure may send to people by forgiving debts of up to $40000. They have said it could be open to abuse and is not a good signal to send out to the market. But I want to reiterate that debtors will be required to meet stringent criteria for entry into the no-asset procedure. Those criteria include the debtor having no realisable assets the debtor not having previously been admitted to the no-asset procedure—in other words it is a once and once only procedure—the debtor not previously having been adjudicated bankrupt and the debtor having total debts excluding student loans of between $1000 and $40000 and also under the prescribed means test the debtor having no means of repaying any amount towards those debts. So with the debtor having no realisable assets with which to pay his or her debts the creditors do not have anything to gain if he or she were to be made bankrupt. 
It is important to note also—because some of the concerns have been that this measure sends out the wrong signals to young people—that student loan debt is not included in the calculation of the $40000 threshold. It is not written off under the no-asset procedure. That is because it is assumed that a no-asset procedure debtor has no cash assets or ability to earn. If he or she did have cash assets or earning ability that person would not be considered for this procedure to begin with. In addition to those eligibility criteria the official assignee has the overall discretion to allow a debtor entry into the no-asset procedure. Similarly if the debtor has misled the official assignee or concealed assets the official assignee can immediately terminate the no-asset procedure and apply for a preservation order over the assets which would be in force until the debtor was adjudicated bankrupt. We consider those provisions to be perfectly satisfactory for the particular circumstances where the outstanding debts are not the kinds of debt that are incurred by multinationals or corporate clients in any way. 
The second issue that the National Opposition members have taken exception to is the process of voluntary administration set out in the Companies Amendment Bill. In particular they take exception to the preferential creditor status of the Inland Revenue Department. There is an important principle here and at the risk of repeating something that the Minister said in her third reading speech I do want to reiterate this important principle: the Inland Revenue Department is an involuntary creditor. It does not have a choice about whom it deals with. Firstly it cannot secure its interest in any other way than through preference and secondly PAYE GST and all of the other things that are extracted by the Inland Revenue Department on behalf of the people of New Zealand like child support payments and student loan payments are collected on behalf of the Inland Revenue Department. 
One of the things that Opposition members have not said when they have talked about their opposition to the Inland Revenue Department’s preferential status is that the alternatives in the UK and in Australia were as I understand it to make directors personally liable for all debts including debts to their equivalents of the Inland Revenue Department. If the paripassu principle were to be applied without the Inland Revenue Department having priority creditor status then the Inland Revenue Department would be lining up along with everybody else but in the meantime the directors of companies would be made personally liable for that liability. 
It may be that in Australia and in the UK there is a large enough pool of director talent for that not to be an issue of concern but in New Zealand we struggle to find capable and competent directors of companies without simply recycling the same people over and over through the corporate structures. If our small pool of director talent was suddenly to be made personally liable for Inland Revenue Department takings as well then I think fewer and fewer people of ability and insight would put themselves forward for directorships in New Zealand. That would not be to anybody’s benefit because what we are trying to avoid here is companies going into bankruptcy and into liquidation. We are trying to apply a process that allows them through voluntary administration to work their way out of their current predicament and in fact to get back into a trading arrangement that allows them to continue to pay tax and therefore meet Inland Revenue Department liabilities. 
In fact the Opposition had no amendments to make to this part of the legislation. It is reported in the select committee’s commentary on the Insolvency Law Reform Bill at the front of the bill that the majority considered it appropriate to retain the Crown priority and recommended no amendment to the legislation. The fact that no cogent alternative has come from Opposition members leads me to think that their opposition on the grounds of the voluntary administration procedure and the Inland Revenue Department’s preferential creditor status is simply a hollow gesture and not one that they seriously wish to take up. Without mentioning in detail the law that covers Inland Revenue Department activity I say there are critical principles about the payment of dues on behalf of New Zealand people that need to be maintained in the voluntary system. We have heard of methods by which the Inland Revenue Department could improve its performance and those were registered by the department which was only too willing to mention them in the course of the select committee’s consideration of submissions. 
The voluntary administration system is a very good system. We have modified it unlike Australia and the UK to fit our own circumstances in New Zealand and I commend this legislation to the House.