Insolvency Practitioners Bill — Second ReadingText is incorporated into the Bound VolumeInsolvency Practitioners Bill — Second Reading[Sitting date: 26 September 2013. Volume:693;Page:13820. Text is incorporated into the Bound Volume.]Insolvency Practitioners BillSecond ReadingHon CRAIG FOSS (Minister of Commerce): I moveThat the Insolvency Practitioners Bill be now read a second time. Insolvency practitioners carry out a number of different insolvency processes including liquidations voluntary administrations and receiverships. These processes require a practitioner to carry out skilled tasks with sound judgment and integrity in order to protect and promote an efficient and effective corporate insolvency system. There is general consensus amongst reputable insolvency practitioners that there is a small number of practitioners who are continually underperforming and imposing significant costs upon creditors and failing to discharge their statutory obligations. These problems revolve around competency unethical behaviour and insufficient monitoring.The Insolvency Practitioners Bill was drafted in 2008 under the previous Government to create a negative licensing regime to regulate insolvency practitioners. Negative licensing would enable any person to practise as an insolvency practitioner unless they were prohibited. It was seen as a low-cost light-handed regulatory approach to strengthen an enforcement void: the ability to remove incompetent and dishonest insolvency practitioners from the market.The Commerce Committee considered the bill at the end of 2010 and in the first part of 2011. I would like to thank the committee for the constructive time spent undertaking a thorough examination of the bill. The bill received 11 submissions and most submitters did not think the bill went far enough to address the problems in the insolvency market. Submitters argued that in the intervening time the global financial crisis had meant that there was an increase in insolvency work and an increase in the number of insolvency practitioners taking appointments. This meant that the magnitude of the problems had become more evident. The select committee carefully considered options for regulating insolvency practitioners and reported back to the House on 9 May 2011 its recommendation to adopt a registration model instead of a negative licensing regime.Under the bill as reported back all insolvency practitioners will now be required to be registered in order to accept insolvency appointments. The Registrar of Companies will have enhanced oversight and enforcement mechanisms including the power to deregister substandard or delinquent individuals. I support this recommendation. It is important that corporate insolvencies are carried out professionally and efficiently. This bill is part of the Government’s focus on improving the integrity of our financial systems. It is important that we boost investor confidence and that investors have the confidence in our markets. It is especially important that investors know that if an insolvency practitioner is going to look into the affairs of a company they can have confidence that it can be done and will be done with integrity and that the insolvency practitioner has the minimum skills for the job.A register held by the company’s office will give the public access to basic and standardised information about practitioners who are registered. Through the register the Registrar of Companies will be able to collect information and regulate practitioners more effectively. The bill is set to come into force 9 months after the date on which itreceives the Royal assent. Insolvency practitioners have up to 3 months after this to register. The operation of the registration regime will be reviewed no later than 4 years after the legislation comes into force to recommend whether any further amendments to the regime would be necessary or desirable. More specifically the bill as reported back will amend the Companies Act 1993 and the Receiverships Act 1993 to make clear how the appointment of insolvency practitioners to and the removal of insolvency practitioners from the register will work. There will be new provisions including the eligibility criteria enhanced duties and criteria for disqualification and an appropriate range of penalties for failure to comply with statutory obligations. Under the amendments a person can apply for a court order to override any removal from the register.One important amendment is greater transparency so that creditors must be provided with relevant information by insolvency practitioners at the earliest opportunity. This includes a statement of interest by the insolvency practitioner and an additional report to the registrar that summarises the insolvency. This new regime will be a significant improvement and will help with the recognition and detection of incompetent and unethical persons who will either be prevented from registering or have their registration cancelled.A substantial amount of work has been going on behind the scenes since the bill was reported back from the select committee. I am pleased that this bill is now continuing its progression through the House. At the appropriate time I will introduce a Supplementary Order Paper that proposes further amendments to the bill to better align requirements for the different types of practitioners and clarify the obligations of practitioners. I commend this bill to the House.Hon CLAYTON COSGROVE (Labour): It is an interesting fact that the number of insolvencies since 2008 has increased dramatically under this Government. One could probably point without getting off the mark too much to many in the export sector who because of the high dollar and the lack of any sort of initiative over monetary policy have been forced to the wall not because of their own negligence but because of the environment they face and the lack of a supportive Government to stand alongside them.However putting that aside we support this bill the Insolvency Practitioners Bill. But it is also interesting to note the gestation period for this piece of legislation which had its genesis way back in a 2004 Ministry of Economic Development report that was produced under the last Government. That report raised some serious concerns in respect of a minority of practitioners who it was alleged were—bluntly—incompetent or lacked the skills that were required to carry out insolvency work. There were submitters to the report who talked about dishonesty negligence and an inability to carry out the principal duties that were required.If you look at the history it is also interesting to note that the existing criteria basically say if you are over 18 breathing walking upright and without any particular educational or tertiary qualifications or skills in the area it is possible for you to engage in insolvency work. That is a deficiency. I have got to say that if you look at the legislative history of this—the bill was introduced under I think the Minister’s predecessor Simon Power. He nods—indeed. He was a good Minister. He used to chug things through. It is a pity he is not here because it has slowed down somewhat now. The bill was introduced on 27 April 2010 had its first reading on 21 August 2010 and went before the Commerce Committee on 9 May 2011—and hey presto here we are a few years later and suddenly this bill has become a high priority. Maybe the Minister is trying to fill up his day—I do not know. Maybe the diary is a bit light—I am not sure—but this is an important piece of legislation that should indeed have been given a higher degree of priority.We support this bill because it builds on a variety of if you like consumer protection legislation but it also builds in protections for those creditors who are on the receiving end of insolvencies. One that comes to mind I have got to say is the collapse of Mainzeal Property and Construction where many many people lost their jobs. Many subcontractors for instance were caught in a situation where they could not get their tools of trade. They could not move on. They were not the negligent parties. They could not move on and get into other jobs and get other income. They were caught between a rock and a hard place. That was a high-profile collapse.I do note just in passing for the record that the Rt Hon Dame Jenny Shipley was a key director of that company and also I think a key director of Genesis Energy one of our State-owned enterprises. To date we have had no explanation—no explanation—as to why that collapse happened who was implicated and who was responsible. It even came before—I see Mr Young the chair of the Commerce Committee here—the Commerce Committee almost a year ago to the day. Given that Mrs Shipley heads up one of our State-owned enterprises we tried to pose some questions—because it goes to the credibility and integrity of other work that she may do for the Crown—and to ask what the problem was. I think her comment was “I will not offend the Standing Orders by answering that question.” or words to that effect. So it is interesting that for those in lofty places—those who have been in senior positions in Government who know the rules and who are now in the private sector—suddenly there is a lack of accountability. It does not flow straight through.We support the legislation. We believe this is appropriate legislation. I know that Mr Young as chair of the Commerce Committee is desperate to get up and talk about it. It is necessary. I am reminded of a story in respect of the head of Tait Electronics the late Sir Angus Tait. He said at a speech I was at many years ago that one of the greatest learning periods—and I am characterising what he said—in his life in terms of business was when that business almost hit the wall and he had the receiver looking over his shoulder and that great man managed to get the business back into being the wonderful enterprise it is. But he made the point that he learnt so much during that stressful period about business.This bill is about protecting creditors. This is also about ensuring that people who have to manage and action insolvencies are actually qualified are robust and are people of good character and not sharks. So it would be unusual if any party in this House did not support the legislation but I say in conclusion that it has taken a long time—a long time—for this Government to give it some priority. It should have had a higher priority than it has at the present time and I hope that the Minister will act with a higher degree of efficiency when it comes to other just as important legislation.JONATHAN YOUNG (National—New Plymouth): I am pleased to stand in support of the Insolvency Practitioners Bill in its second reading. It came before the Commerce Committee on 24 August 2010. During that time we received and considered 11 submissions from interested groups and individuals and we heard only one submission from that period of time. So essentially it is not a large sector but it is very important as the previous speaker the Hon Clayton Cosgrove said. When it comes to a company that has gone into difficulty and insolvency it is very important that the person who oversees that has not only the skills but the credibility because there are lots of people—creditors obviously—who are dependent upon the good work of that person to recover as much as possible. We know that it is important for our economy that when things do go AWOL when things do turn upside down that we can recover as much as possible. We live in a very interconnected economy obviously and so thisbill in particular is ensuring that we do have some very robust measures around those people who are appointed as insolvency practitioners.This bill is actually part of the National-led Government’s focus on improving the integrity of our financial system. The previous speaker the Hon Clayton Cosgrove talked about the number of companies that have gone through difficulty since 2008. I think that we need to be reminded again that the global financial crisis in 2008 and 2009 was the worst financial crisis that has affected this economy and the economies of the world in over 60 years. Yes it brought incredible stresses upon companies in New Zealand for a variety of reasons. Obviously during those times of pressure the system is tested and the integrity of our financial system in many regards stood up far far better than those in other jurisdictions around the world—our banking system in particular.The overriding focus of the commerce portfolio is to restore the confidence of investors and people who participate in our economy and to bring confidence to our capital markets especially after the very very difficult time when we saw so many finance companies collapse. We are focused on boosting growth and creating jobs. Only a strong economy can provide financial security for families real opportunities for young people safer communities and the higher education and health services that all New Zealanders need. This bill is a further measure in that process.One of the things I want to talk about through that process that the committee looked at is the appointment of family members. We considered clause 5 of the bill as introduced—Mr SPEAKER: I am sorry to interrupt the member but the time has come for me to leave the Chair.Debate interrupted.