Insolvency Law Reform Bill

Part 9 is about cross-border insolvency, and the National Party is in favour of these provisions. Quite interestingly, the commencement date for this part is a date to be appointed by the Governor-General by Order in Council. We were told that the reason for the flexibility through the Order in Council process was that we were waiting for Australia to enact similar legislation.

National sees that in the current environment businesses have become increasingly global. More than that, the mobility of businesspeople, etc., throughout the world has become such a frequent and accepted pattern that New Zealand should implement the model law of cross-border insolvency adopted by the United Nations Commission on International Trade Law on 30 May 1997. The law was also ratified and approved by the United Nations, and we accept that this is a very sensible and forward-looking move.

We support this part, but I wonder whether there will be vigilant implementation of it. Although Parliament may pass legislation, at times one wonders whether the application of that law will be as effective as politicians may think.

I have an example of a recent case in point involving a sad occurrence. Last Monday, in the pouring rain in Auckland, a group of protestors gathered outside the Auckland Central Police Station. Those people, unfortunately, are a group of unsecured creditors who utilised a finance entity known as An Ying, which has many subsidiaries and owns different companies under similar names. An Ying International Financial Ltd has gone into bankruptcy and a lot of the individuals involved used that organisation for transmitting money from China to New Zealand. Some have used the company for foreign currency exchanges.

One person in the group told me that he had just transmitted money but was informed that, because of the large sum involved, the transfer would take about 3 to 5 days. Of course, 5 days later he suddenly found out that the entity was no longer operating. A group of creditors applied to put An Ying International Financial Ltd into bankruptcy. The liquidator put out a statement that the repayment of money involved the ability to find out what overseas assets that company or the people responsible for the company might have. One can only live in hope that an international arrangement of this nature can be enforced effectively.

As I said, because nowadays there are so many transnational businesses, our people can be quite vulnerable when individuals or businesses move to New Zealand and start businesses here. Do we actually know their reputation? That is the first challenge. The second one is whether we can believe that they are being upfront, when they have insolvency problems, as to whether they have assets overseas.

This will be the last call I will take for the evening. I would like to make a few comments about schedule 5, which contains the provisions relating to model law on cross-border insolvency. This was an issue that I had not considered prior to being part of the Commerce Committee, and I would like to acknowledge the officials here today. The work they did in communicating some quite technical concepts and principles to a table full of select committee members who initially were not au fait with insolvency law is to be commended. So we were very thankful that they were able to take some very difficult concepts and explain them to us, and cross-border insolvency was one of those issues.

Cross-border insolvency arises when an insolvent entity is placed in a form of insolvency administration in one country but has assets or debts in another country or countries. So a Kiwi firm might have been dealing with an Australian firm, as just one example, or a firm in the United States. Its bill is not paid and it has to make a decision about where to go to from there. So, of course, one needs laws in common to be able to have some kind of framework to allow some kind of justice on both sides.

So it is timely that we look at this area. As members will be aware, some of this law has not been considered since the 1960s, and other parts have not been considered since the enactment of the Companies Act in 1993. The world has changed a lot since then, so it is time for New Zealand to adopt the provisions of the model law on cross-border insolvency adopted by the United Nations Commission on International Trade Law. The area is often also referred to as UNCITRAL, which sounds like one of those acronyms that do not really roll off the tongue very well.

I have a couple of questions I would like to put to the Minister. During the select committee process, members were told that banks that were subject to statutory management and were under the Reserve Bank of New Zealand Act 1989 were expressly excluded from the operation of the model law on cross-border insolvency. There may be a very simple reason for this, and as I did not have an opportunity during the select committee process to ask about this, I would like to put it to the Minister now.

The second question I ask is why we are embracing this model law only after Australia has done so. The aim of having embracing model law is to ensure that we take part in the international framework so that Kiwi companies are dealing with the United States, the UK, or wherever, and obviously Australia being our closest neighbour. Why are we waiting for Australia to take on board the law before we do? Once again there might be a pretty simple reason for that, and I would be interested in hearing an explanation tonight.

So the aim is to facilitate cross-border insolvencies. It is not easy when firms have to deal with companies that go bust at home. It makes it so much harder when one is dealing with a firm that is offshore. We need to have consistent rules so that Kiwi firms can have greater certainty. Officials argued during the select committee process that by embracing this law the increased certainty would, in fact, add to New Zealand’s economic growth. I think the jury is still out on that. I am unsure whether that will be the case. But certainly on this side of the Chamber we think it is a good thing that we engage in a framework that will provide greater consistency around the world, as long as all the parties are working under the same law. Obviously some Kiwi firms will still continue to deal with some countries that do not. But this looks to be a step forward, and we will see whether there are additional benefits from this point.

Part 9 agreed to.

Schedule 1 agreed to.

Schedule 2

The question was put that the amendments set out on Supplementary Order Paper 62 in the name of the Hon Lianne Dalziel to schedule 2 be agreed to.

Amendments agreed to.

Schedule 2 as amended agreed to.

Schedule 3

The question was put that the amendments set out on Supplementary Order Paper 62 in the name of the Hon Lianne Dalziel to schedule 3 be agreed to.

Amendments agreed to.

Schedule 3 as amended agreed to.

Schedule 4

The question was put that the amendment set out on Supplementary Order Paper 62 in the name of the Hon Lianne Dalziel to schedule 4 be agreed to.

Amendment agreed to.

Schedule 4 as amended agreed to.

Schedule 5 agreed to.

Schedule 6 agreed to.

Clauses 1 and 2