Huo Raymond: Insolvency Practitioners Bill — First Reading 
Huo Raymond: Insolvency Practitioners Bill — First Reading 
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RAYMOND HUO (Labour) 
: 
 I rise to take a call to support the Insolvency Practitioners Bill. The bill follows concern that up to 40 percent of the New Zealand insolvency profession might not be up to scratch. Submissions received on a 2004 Ministry of Economic Development discussion paper entitled  
Draft Insolvency Law Reform Bill 
 suggested there might be as few as 50 insolvency specialists in New Zealand and that up to 20 might not meet adequate standards. There are two apparent problems at the moment. Firstly unlike the situation in many comparable countries insolvency practitioners in New Zealand do not need to have any particular qualifications or licences to be appointed as liquidators and receivers. Secondly the lack of regulation means that although the profession plays a crucial role there is no official record of the number of practitioners or their qualifications. Therefore reform in this area is long overdue. The bill results from work done by the previous Minister of Commerce the Hon Lianne Dalziel. My congratulations go firstly to the Hon Lianne Dalziel for such a great initiative and also to the current Minister the Hon Simon Power for implementing those proposals. 
The bill introduces a negative licensing regime for insolvency practitioners—namely liquidators receivers and voluntary administrators. Insolvency practitioners who do not meet the required standards of competence will be banned or placed under supervision. It also empowers the Registrar of Companies to maintain a publicly accessible electoral register of people who have been banned or placed under supervision. The new system is expected to assure creditors that insolvency practitioners are competent to undertake specialist work and capable of maximising returns from financially troubled businesses. A negative licensing system is designed to achieve that goal while avoiding high compliance costs for businesses. Under the existing criteria any person over 18 years with sound mental health can be appointed as an insolvency practitioner; there are no requirements that insolvency practitioners have any particular qualifications or level of education. There is no way for creditors and others appointing liquidators to assess whether the person has the appropriate skills knowledge or competencies. To avoid delaying the bulk of the insolvency law reform process the previous Labour Government’s work on the regulation of practitioners was split off from the main reform process. 
Aside from negative licensing two other options were considered for the regulation of practitioners. The first one was voluntary accreditation which was rejected because it would not deal with the issue of preventing people with insufficient skill and experience from carrying out insolvency work. The second option was mandatory or competitive licensing linked with New Zealand Institute of Chartered Accountants membership. It was rejected due to its high compliance costs and due to the fact that insolvency practitioners do not all come from the field of accounting. The bill also extends the automatic disqualification criteria in the Companies Act 1993 and the Receiverships Act 1993. The following people are prevented from being appointed from the outset: certain family members of a person who has within the 2 years immediately preceding the commencement of liquidation been a shareholder director auditor or receiver of the company or of a related company; a person who has been banned from taking similar appointments in other specified jurisdictions such as Australia; a person who is a debtor participating in a no-asset procedure or who is subject to a summary instalment order under the Insolvency Act 2006; a lawyer who has been struck off; an accountant whose membership of the New Zealand Institute of Chartered Accountants has been revoked or suspended; and lastly a person who has been convicted of a crime involving dishonesty as defined in the Crimes Act. 
Under the bill the new regime will apply retrospectively in that the Registrar of Companies will be able to take into account failures to comply with the duties of a practitioner that have taken place before the negative licensing regime came into effect but only up to 5 years before the date of notice. These reforms will enhance transparency and accountability in the insolvency profession by ensuring that only skilled and competent practitioners are appointed and that the returns to creditors are maximised. The new system will apply to liquidators administrators and receivers and will target those practitioners who lack the requisite skill and knowledge to undertake insolvency work competently or who perform poorly in this field of work. Supporting this new system will be tighter statutory disqualification criteria and wider court powers to replace a practitioner who has a conflict of interest and lacks independence in a particular insolvency case. 
The reform in this area is long overdue although this is by no means a major reform. Many interested parties including practitioners had hoped that a form of licensing would be introduced which could have been grandfathered in. I note that the Government aims to have this bill passed into law and coming in to force in July 2011. I look forward to more debate on this bill in the near future. Thank you.