Wagner Nicky: Insolvency Law Reform Bill — In Committee 
Wagner Nicky: Insolvency Law Reform Bill — In Committee 
[Volume:634;Page:6055] 
NICKY WAGNER (National) 
: 
 It was Charles Dickens in  
David Copperfield 
 who stated: “Annual income twenty pounds annual expenditure nineteen nineteen six result happiness. Annual income twenty pounds annual expenditure twenty pounds ought and six result misery.” That is absolutely true of the 3000-plus people or companies who file for bankruptcy in New Zealand every year. It does not matter what has driven them to bankruptcy—although the public tends to have more sympathy for those who have poor health or unemployment than those who have got there through extravagance or gambling—it all ends in misery. 
This legislation covers both company and personal insolvency. I will consider Part 8 from the point of view of small business and the voluntary administration regime. New Zealand is a country of small businesses; over 300000 New Zealanders are sole traders or owner-operators. We rely on those businesses for much of the economic health of this country but by its very nature small business is risky. It is risky because resources are limited. It is risky because profits are small. It is risky because the business environment is very volatile for small companies. Small businesses are particularly vulnerable because it takes only a small hiccup to go from being profitable to making a loss; and going from a loss to bankruptcy can be frighteningly quick. 
One of the biggest vulnerabilities of small businesses is their tendency to trade with other small companies. A case of insolvency in one business can trigger a domino effect and a series of small businesses can be unwittingly drawn into a financial disaster. Sole traders and small owner-operators are often undercapitalised. To finance business growth they often borrow against personal assets—more often than not the family home. They also perhaps unwisely offer personal guarantees to secure business lending. It is a risk that big business and corporates would never countenance but one that small-business owners are forced to accept and take for granted. Mostly of course there is no problem but occasionally things turn sour and that is where this legislation comes into play. 
To help small businesses survive difficult times National supports a voluntary administration regime for companies with financial problems similar to a scheme being used very successfully in Australia. It makes sense to allow administrators to assess the viability of a company and if possible allow it to have a voluntary plan to trade its way out of trouble while managing its debts. This seems a sensible and mature approach to company difficulties and any way to avoid a bankruptcy and all its destructive side effects should be considered very seriously. 
As noted by Chris Tremain the system is working well in Australia but we have already heard that the major difference between Australia’s legislation and the bill we are debating tonight is that Australia’s tax department waits in line along with other creditors involved in liquidation. The Labour Government is not prepared to accept this as a reasonable option and I understand all its arguments but it seems to me that a voluntary administration will come into being only if there is a good chance of that company trading out of its problems. If it is good enough for creditors to be prepared to take the risk then it should be good enough for the Inland Revenue Department to take that risk too particularly in light of the difficulties that small businesses face and the domino effect within companies that trade with each other. 
It is a reality that from time to time businesses falter and stumble into failure. Small businesses are especially vulnerable. It would be good if the House could introduce legislation that would support innovation and responsible risk-taking and entrepreneurialism by giving a viable company a second chance and with time the opportunity to make good.