Curran Clare: Insolvency Practitioners Bill — First Reading 
Curran Clare: Insolvency Practitioners Bill — First Reading 
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CLARE CURRAN (Labour—Dunedin South) 
: 
 I stand to speak in the first reading of the Insolvency Practitioners Bill. As members have heard Labour supports this bill. I thank the Minister Simon Power for carrying out the work of the fifth Labour Government in strengthening the rights of creditors and I support his assertion that insolvent companies must be handled with integrity. I also commend tonight the work done by my colleague the Hon Lianne Dalziel and her involvement in this issue. 
The bill brings insolvency practitioners up to standard by introducing a negative licensing system that gives the Registrar of Companies the statutory authority to place individuals under supervision in or to prohibit individuals from providing corporate insolvency services for up to 5 years. Insolvency practitioners carry out liquidations voluntary administrations and receiverships. A minority of those practitioners are underperforming; they lack the necessary skills and competence and repeatedly favour debtors at the expense of creditors. 
I think we heard tonight that there are about 100 insolvency practitioners in New Zealand and that a mandatory licensing system would not be cost-effective. This bill aims to make it easier to prohibit or place under supervision practitioners who are unfit to practise rather than to force a creditor or another party to have to go through the rigmarole of applying to the High Court to get a practitioner prohibited from practising. The bill will also give protection against self-interested practitioners who in some cases have put their own interests or the interests of the insolvent company ahead of creditors who may be owed money. 
Labour supports any measure that strengthens and upholds corporate integrity in New Zealand. That is why the previous Labour Government recommended in August 2008 that a negative licensing system be adopted for insolvency practitioners. We are glad to see that the current Minister is carrying on that work. Labour’s concern is that in cases where companies are made insolvent creditors are left wanting; it is the protection of those creditors that is important. The purpose of insolvency law is largely to protect against resource-intensive court proceedings where creditors are forced to compete to recover their debt. We need to ensure that financial failure is dealt with with certainty clarity and a clear set of rules for who gets what and in what order. We believe that this bill goes some way to addressing that. 
As I previously mentioned—and I know that it has been mentioned by my colleague Lianne Dalziel—there are about 100 insolvency practitioners in New Zealand and a lot of trust is put into those few who are charged with carrying out liquidations voluntary administrations and receiverships. Those processes require a practitioner to carry out skilled tasks with sound judgment and integrity and it is important to note that that expectation is mostly upheld. But there are always exceptions and it is the underperformers whom this bill targets. The current law provides minimal restrictions as to who can be appointed as a liquidator administrator or receiver which means that practitioners with very little knowledge of commercial law and of procedures set out in relevant legislation can be appointed to manage or wind up insolvent companies. 
That can lead among other things to the failure of practitioners to discharge their statutory obligations to creditors so this bill establishes a system that targets practitioners who fail to comply with their duties then places them under supervision and/or prohibits them from acting as practitioners for up to 5 years. This negative licensing system is being adopted as a more cost-effective option rather than having it made compulsory for all insolvency practitioners to be registered—a system that if implemented would cost several thousands a year and deplete the funds available to creditors. 
This bill will give the Registrar of Companies the power to take into account failures that have occurred up to 5 years previously and practitioners will be able to appeal to the High Court against a decision of the registrar. This bill amends the Receiverships Act 1993 so that the High Court may make a prohibition order in relation to a receiver for an indefinite period. The registrar is able to fine up to $10000 those practitioners who do not adhere to their terms and conditions under the Companies Act 1993. 
The bill will also require the registrar to maintain a public register of people who are subject to prohibition or supervision which is information about practitioners that will be easily accessible to the public. Last week in the  
New Zealand Herald  
there was the story of Ram Rai a former restaurant owner who got into a dispute with liquidator Gilbert Chapman over the amount he was being charged. Through action in the High Court Mr Rai was successful in reducing the charges from Gilbert Chapman from about $63000 to $25000. In his summary Judge Roger Bell noted the difficulty of the process of challenging a liquidator’s charges saying that most times it is not worthwhile for a creditor to do so which to a certain extent leaves the liquidator in a position of some immunity. So this bill would go some way to resolving that problem by allowing the Registrar of Companies to suspend incompetent or delinquent practitioners from operating in the insolvency industry based on their prior actions or current performance. These reforms will enhance transparency and accountability in the insolvency profession which is important by ensuring that only skilled and competent practitioners are appointed and that returns to creditors are maximised. 
It is important to note that the current lack of regulation means that although the profession plays a crucial role there is no official record of the number of practitioners or of their qualifications. We need to make the financial sector more open and transparent which is what my colleague the Hon Lianne Dalziel strived to do as Minister of Commerce in the last Labour Government and it is good to see that the current Minister is putting partisan politics aside and following in her footsteps. Labour wholeheartedly supports a licensing system that lets creditors know that insolvency practitioners are competent in their specialised areas of work and that they are capable of maximising returns from financially distressed businesses. That is why we are supporting this bill.