The government is introducing a licensing system for insolvency practitioners, Commerce and Consumer Affairs Minister Paul Goldsmith announced today.
“Every year hundreds of New Zealand companies go into liquidation, receivership or administration. Outstanding debts can run into many millions of dollars.
“When a company is unable to repay their debts and becomes insolvent it is essential there is a high level of trust and transparency around the process for all parties involved,” says Mr Goldsmith. “Insolvency practitioners play a key role in protecting the interest of creditors but concerning gaps have been identified in standards and ethical behaviour.
“For example earlier this year the High Court found a liquidator had forged a document and not accounted for $540,000 worth of receipts.
“There are insufficient effective sanctions against ‘self-interested’ practitioners who overcharge for their services or carry out unnecessary work in order to obtain larger fees, or against ‘debtor-friendly’ liquidators who fail to comply with their statutory duty to protect the interests of creditors.
“It is my view that the current regime is too loose. For example, a person can be convicted of tax evasion or other serious forms of knowledge-based criminal offending, yet still operate as insolvency practitioner: a position that relies on trust.
“The proposed licencing regime was recommended by the Insolvency Working Group, which I put together last year to conduct an in-depth look into a variety of insolvency law matters.
“Licensing will provide for supervision of conduct in accordance with the public expectation. This will include monitoring compliance with legislative obligations and the code of ethics, professional standards and rules issued by the Chartered Accountants of Australia and New Zealand,” says Mr Goldsmith.
These changes will be advanced through a supplementary order paper to the Insolvency Practitioner’s Bill, which is currently before the House.
More information can be found here.