Copeland Gordon: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
Copeland Gordon: Insolvency Bill Companies Amendment Bill Insolvency (Cross-border) Bill — Third Readings 
[Volume:634;Page:6180] 
GORDON COPELAND (United Future) 
: 
 I am pleased on behalf of United Future to take a call on the third reading of these three bills: the Insolvency Bill the Companies Amendment Bill and the Insolvency (Cross-border) Bill. They are significant third readings because the original bill was some 328 pages—one of the larger bills that has come before Parliament this year. 
As is well known this legislation sets out really to rewrite and update the law in New Zealand around issues of personal failure through bankruptcy and company failure through insolvency receivership and liquidation. It is timely that we are bringing that law up to date because as other speakers have mentioned it is important for the sake of the prosperity of New Zealand that we do all we can both to limit the occasions on which businesses come under stress and failure and to ensure that those that do are given a reasonable chance to get back on their feet quickly to carry on and to become successful companies. 
The history of entrepreneurship in the international business community is resplendent with examples of people who have gone through a personal bankruptcy or a personal company failure have learnt—the hard way—through that experience and have gone on to be very successful business people later on. So that is the spirit I think that underlies the Insolvency Bill in particular—that we recognise that very often if people are able to be given a second chance they can go on and be successful long term. And to the extent that those people are successful long term of course our country itself becomes more successful in terms of its economy. 
I want to mention a few things at this third reading debate. First of all voluntary administration provisions have been introduced. As others have said this legislation marks a new path that New Zealand is following. It is a path that has also been introduced in Australia and it is a path that we think can usefully contribute to those goals I have already outlined in terms of making our businesses successful long term. 
In the course of examining the original bill the Commerce Committee looked at the Chapter 11 arrangements that apply in the United States of America. We have of course seen some famous examples of companies going into Chapter 11 situations and coming out the other side. I remember the Chrysler resurrection story and the famous television photograph of Lee Iacona— 
Craig Foss 
: Iacocca. 
GORDON COPELAND 
: —yes I will get the pronunciation right thanks to the member Craig Foss—handing over a cheque to the US Government for I think about $385 million and saying: “Chrysler is an old-fashioned borrower; we actually repay our debts.” We looked at Chapter 11 arrangements and concluded that they are actually designed for large corporations. New Zealand on the other hand is a country of small businesses with something over 90 percent of our businesses employing fewer than 20 people and I think about 84 percent employing fewer than five. So we really are a country of small businesses. For that reality we felt that the voluntary administration approach is a better one to take given our circumstances. 
The hope of course is that through this new law people will be able to recognise problems quite early. In response to the member Hone Harawira I say that I do not see any practical way in which the Crown can get involved in businesses coming under stress. I do not think that is a practical reality. I do not think that is something the Crown should do; it is something rather that the directors of a company under stress and the owners themselves should take some action on as early as possible. One of the aims of this legislation is for people to identify problems early go into voluntary administration and hopefully go through that and come out the other side stronger and go on to have successful companies. 
I think the answer to Hone Harawira’s statistics about the failure of Maori businesses—their very high failure rate after 3 years—is actually the United Future policy which the Maori Party might join us on of giving business start-ups a conditional tax holiday for the first 2 years of their operation. Very often it is the cash-flow impost of that first 2 years of taxation that actually tips a company over the edge into failure. I think that would be a much more positive way of addressing the problem rather than looking for the Crown to get involved. The Crown fundamentally should not be involved in trying to run businesses or anything of that sort. We have the whole history of the 20th century to prove that fact unambiguously. Indeed if United Future had its way we would also apply that policy to our State-owned enterprises. 
However I diverge from the insolvency legislation and I will come back to it. I want to touch on the question of Crown priority. I do not know whether there is much more to say about that except that as others have said the Commerce Committee gave this whole matter very very serious consideration. We had to do that because virtually every experienced insolvency practitioner in the country came to us and said that that provision had to go. We therefore went back to the Inland Revenue Department time after time after time. I think we had about four reports from the Inland Revenue Department in trying to get round the problem. But as Maryan Street has advised the House in the end we really thought that no it would not work. To remove Crown priority would be to attack the basis of entrepreneurship in this country. Entrepreneurship depends on our encouraging people to become directors of companies. That is what drives company growth. 
As well limited liability means exactly that for directors—they have limited liability. To give them unlimited liability or to impose on them unlimited liability in respect of unpaid taxes would simply be to scare them away. We would put our business growth backwards which is contrary to the intent of the legislation. We also asked in our report back to Parliament why target just companies if we are going to go down that road. We would probably see the growth of trading trusts trading cooperatives and other structures if we were to single out just companies for special treatment and to hold their directors liable for unpaid taxes. 
 However in our report back to the House we suggested that the Inland Revenue Department itself should intervene once two consecutive payment periods in respect of PAYE GST or child support have passed. There are different timings for the payment of those taxes in different organisations but when two periods have passed in which the taxes have not been paid at that point the Inland Revenue Department should be obliged to notify company directors that those taxes have not been paid. We sought—and received—assurances from the Inland Revenue Department that it will adopt those procedures. It is important that it does and Parliament needs to monitor that. We need to look at this again to see whether it is actually happening because it was part of the balance that we put into this whole mix. 
The majority of us were saying that yes the Crown priority should be retained but we want it balanced by Inland Revenue Department intervention to notify directors. I personally know of situations where taxes were not paid and the directors of the company did not know that that was the position. If they were to be advised of that position which we are suggesting should happen then at that stage they would have the opportunity to intervene to sort out the problem or go into voluntary liquidation. That was part of the balance we came to. 
It is similar with so-called phoenix companies. I wonder where that terminology came from. “Phoenix” means something that rises from the ashes. These companies are not designed to rise from the ashes; they are designed to go out of business deliberately through voluntary liquidation at the expense of all the creditors. That is what a phoenix company is. It is a rort. It needs to be brought to an end and this legislation is an advance from that point of view. 
Overall in conclusion I just want to say that I think the select committee and this legislation have struck a fair and balanced approach between a number of competing interests. I think it is a job well done and United Future intends to support it through to enactment. Thank you.