Legislation passed last night means liquidators will need to be licenced and meet basic standards of honesty and competence - moves enacted to protect creditors and the public, Commerce and Consumer Affairs Minister Kris Faafoi says.
The Third Reading of the Insolvency Practitioners Regulation Bill and the Insolvency Practitioners Regulation (Amendments) Bill address some failings of the previous system, and shut down the ability of liquidators who fell short on skills and integrity.
"One of the main aims of corporate insolvency law is for businesses to be turned around if they are viable but if they are not, they should be wound up, the assets realised and distributed to creditors in accordance with clear rules and with a minimum of harm to both the insolvent party and their creditors.
"Unfortunately, what has happened in some cases is that liquidators fail to protect the interests of creditors, for example, by turning a blind eye when directors have taken assets out of the company under value prior to liquidation.
"The public is entitled to expect insolvency practitioners to meet basic standards of honesty and competence but this is not always the case.
"I hope other historical reports of practitioners being convicted of dishonesty offences with regards to the performance of their role, charging excessive fees, carrying out unnecessary work in order to generate extra fees, or treating some creditors preferentially will become just that - historical."
The Insolvency Practitioners Regulation Bill:
- introduces a robust regime that will include rigorous competence, honesty and integrity criteria in relation to obtaining and retaining a licence to act as an insolvency practitioner (this will come into effect 12 months after the Bill receives royal assent)
- provides effective ways for holding practitioners to account
The Insolvency Practitioners Regulation (Amendments) Bill makes other amendments to the Companies Act and Receiverships Act. This Bill is aimed at updating these pieces of legislation to make sure they are still fit for purpose and reflect the new Insolvency Practitioners Regulation Bill. The amendments:
- update these Acts to reflect new requirements for the licensing of insolvency practitioners
- increase the transparency of practitioner appointments
- improve practitioner reporting requirements.
"I would like to thank the members of the Insolvency Working Group and all of the people who submitted on the Insolvency Practitioners Bill," says Mr Faafoi. "Together we have made another step towards ensuring consumers and creditors interests are protected."
