Insolvency bill 'woefully short'

Shaun Adams. Photo / Supplied

An insolvency industry leader is "peeved" his recommendations for regulating liquidators have not been picked up.

Late last year the Insolvency Practitioners Bill was sent back to the drawing board after the industry told politicians it didn't go far enough.

Liquidators are currently not required to be registered, and the bill proposed a negative licensing system whereby rogue practitioners would be blacklisted.

But most submissions to the select committee considering the new law said New Zealand needed positive licensing, as happens in Australia where practitioners must be licensed before they can operate.

The bill has now come back including such a system.

But it does not set out any "fit and proper" test that liquidators must undergo before they get their licence.

Shaun Adams, head of restructuring and insolvency at KPMG and a member of the industry committee INSOL, said the second draft fell "woefully short".

The loopholes meant that anyone could become an insolvency practitioner as long as he or she was over 18 and not mentally incapacitated.

"The concern we've got is that if we go this route, then people will be using it as a means of saying, 'Well I'm a registered insolvency practitioner'."

KPMG believed individuals should have to demonstrate that they had the relevant training, experience and competence, and there should be a third-party test to validate the person, Adams said.

The industry had told the Government there needed to be harmonisation with the rigorous Australian regime, but he believed the new draft did nothing for mutual recognition.

The proposed law also still allowed for non-resident practitioners to take on appointments here.

"At the end of the day it could be someone from Hong Kong or the United Kingdom or whatever who is or isn't a registered practitioner over there.

"Any man and his dog effectively could take an overseas appointment in respect of a New Zealand company and how do you actually enforce anything against those individuals?" To register an overseas company here there had to be a New Zealand resident director, he said.

"Why shouldn't the same apply to an insolvency practitioner who's tidying up the mess?"

He believed the Government did not want to put a stiffer test in place because of the cost of implementing the regime.

In its latest commentary on the bill, the commerce select committee said it was "mindful of the cost of such a scheme and of the need to strike a balance between the incidence of poor practice, and limiting for small-scale businesses the extent of compliance costs involved in doing so".

"We see advantages in retaining a range of practitioners within the profession who could service a wide variety of insolvency proceedings, and therefore consider that eligibility requirements for registration should be minimal."

Formal qualifications wouldn't be required, but the criteria would prevent those who weren't fit and proper from registering.

It said changes would be made to the Companies and Receiverships Acts clearly specifying eligibility to undertake insolvency work, enhancing the duties of insolvency practitioners, and strengthening the criteria for disqualification from appointments.

The register of insolvency practitioners would be publicly available.