With the Insolvency Practitioners Bill currently before the New Zealand Parliament, the nation’s insolvency laws are set to undergo a significant transformation.

The bill was first introduced to parliament in April 2010, and sought to introduce a ‘negative licensing system’ for insolvency practitioners. In doing so, the initial bill afforded the Registrar of Companies power to ban people from acting as a liquidator or receiver, and endeavoured to strengthen existing provisions relating to the automatic disqualification of insolvency practitioners. However, the bill was put on hold following its second reading in November 2013.

In June, the government revived the Bill, introducing a Supplementary Order Paper and making significant revisions to the original proposal. Submissions on the proposed changes closed on 24 August 2018 and the Bill is now listed before the Economic Development, Science and Innovation Committee of Parliament on 6 September 2018.

If adopted, the reform will:

  • Introduce a coregulatory licensing framework whereby insolvency practitioners would need to be licenced by an accredited body under a new stand-alone Insolvency Practitioners Act;
  • Extend the circumstances in which an insolvency practitioner will be disqualified from acting by reason of the practitioner’s association with the affected company or entity;
  • Impose obligations on insolvency practitioners to provide detailed reports on insolvency engagements;
  • Provide that, at a meeting of creditors of a company or an entity in liquidation or administration, the vote of a related creditor will be disregarded unless the court orders otherwise;
  • Require insolvency practitioners to provide information and assistance to an insolvency practitioner that replaces them;
  • Empower the court to make orders:
    • Compensating any person who has suffered loss as a result of an insolvency practitioner’s failure to comply with any relevant enactment, rule of law or court order; and
    • Sanctioning insolvency practitioners who fail to comply with any relevant enactment, rule of law or court order.

The reform will see the New Zealand system resemble that of the UK, whose insolvency laws are also under major review. It comes after New Zealand rejected the Australian model, where regulation is governed by ASIC and ASFA, with limited statutory regulation by the industry bodies.