Banking & Finance
18 May 2011
Insolvency Practitioners Bill: Progress Report
This FYI outlines the things you need to know about the Insolvency Practitioners Bill in its latest form. You can follow this link to access the Bill on the New Zealand legislation website.
The Bill is new legislation that seeks to improve the regulation of administrators, liquidators, and receivers. It proposes amendments to the Companies Act 1993 and the Receiverships Act 1993.
Instead of negative licensing, the Bill now provides for the establishment of a register of insolvency practitioners (Register). The Register will give the public access to basic information about liquidators and receivers. The Registrar of Companies will oversee and maintain the register.To become a registered insolvency practitioner, no formal qualifications will be necessary. The criteria for becoming registered are not set at a high level. In addition to current requirements, persons will be ineligible for registration if they have been:
- prohibited from practising by the court;
- expelled from legal or accounting professional bodies;
- declared personally insolvent;
- banned from being a director of companies; or
- convicted of fraud (or a crime involving dishonesty).
Importantly, enhanced information about practitioners will be provided to creditors at the outset of an insolvency and during its course, and conflicts of interest must be disclosed. Family members will be disqualified from acting as liquidators.
The Registrar will have the power to cancel an individual's registration if the practitioner fails to meet relevant requirements. Practising without registration will incur penalties (the maximum proposed fines under the Bill are $50,000 and 2 years' imprisonment).
The legislation, when passed into law, will come into force nine months after it receives the Royal assent. This extra time is to allow the transition period to run smoothly.
The Bill in its current form is a more convincing overhaul of the insolvency industry than the original draft. Many still consider that the proposed changes do not go far enough, however. The Bill provides for a review of the regime four years after commencement. Regulation will certainly be strengthened, but it remains to be seen what impact the Register will have in practice.