Insolvency Practitioners Bill

The Insolvency Practitioners Bill has been through the Commerce Committee and is now here in its second reading, and I am very pleased to stand and speak on it. Insolvency practitioners are very important to our world of commerce, especially when a company hits the skids and things turn belly up. It is important that we have qualified, competent, trustworthy people of integrity who are going to work with that company and with the creditors to ensure that everything that can be recovered is recovered, especially for the sake of the creditors, who have money or stock, or whatever, owed to them by the company that gets into difficulty. In spite of their important role, insolvency practitioners are presently not required to be licensed or registered by a regulatory body, nor are they required to meet minimum qualifications, and we see this as something that needs to be changed.

We know, of course, that the National-led Government has been focusing on boosting growth, creating jobs, building our economy, and bringing confidence back into the area of commerce and capital markets. It is important that we have the right regulation, and good-quality regulation, for these particular areas. It is important in this area that when companies become insolvent, when they get into trouble and they need to bring in an insolvency practitioner—a liquidator—this person is somebody who meets the standard. They should work in the interests not of the debtors, company directors, shareholders, or themselves but of the creditors, whom insolvency laws exist to serve, so they can recover as much money as possible.

I want to just briefly touch on a couple of areas that the Commerce Committee looked at. One of them is around the appointment of family members. You would think that this is a very strange thing, but it has happened in the past that a family member is appointed as the liquidator. That seems to be such an apparent conflict of interest that we have put in this bill an amendment that would disqualify from appointment as a liquidator a relative of a person who has been a shareholder, director, promoter, auditor, or receiver of the company or a related company within the 2 years immediately before the commencement of a liquidation. The term “relative” would cover family members as defined by section 2 of the principal Act, the Companies Act, including in-laws and siblings. A similar amendment in the Receiverships Act would impose the same restrictions on receivers. There are other things, of course, in the bill that the Commerce Committee and members here today will speak on, but I think I have just touched on the points that I would like to today. Thank you. I commend this bill to the House.

There is no doubt that everyone in this House would agree that it is important to have people providing corporate insolvency services who can be trusted. We have provisions and legislation to ensure that the appointment of people who are providing other important services—such as legal services, accountancy services, and certain financial services—has a body of legislation underpinning it. So it is with those people who provide insolvency services. We need to ensure that we have measures in place and not act as the ambulance at the bottom of the cliff, trying to patch up a situation that has gone bad. We need to actually have some preventative measures in place to ensure that the people providing these services are of good character and of the appropriate skills, and that there are regulations and rules in place to ensure that this happens.

That is what the Insolvency Practitioners Bill is about, and it is critical legislation. One of the reasons it is critical legislation is that there are so many insolvencies happening in this country. I think that is another point that is worth noting as context to this piece of legislation, because the supposedly wonderful economic environment in which we are operating is actually exposed as somewhat of a fallacy when you look at the number of insolvencies in New Zealand since 2008. They have actually increased dramatically under this Government. Therefore, having a piece of legislation in place to ensure that we have got an appropriate insolvency regime is even more critical.

Before I get into the substance of this bill and actually what changed in the Commerce Committee, it is important to note how long it has taken for this piece of legislation to get to this point in the House. It is another example of important legislation, particularly in the commerce area, that has been languishing on our books for far too long.

This bill was first introduced on 27 April 2010. Its first reading was on 24 August 2010. The select committee reported back, after doing very good work, on 9 May 2011. But the bill’s second reading was first started on 26 September 2013. Today it is—what is it? The seventh?

💬 Dr Rajen Prasad: 7 November.

It is 7 November, and we are back into the second reading. That is 3 years. That is an extraordinary amount of time for a piece of legislation like this—particularly, as I said, in that environment where there have been so many insolvencies—to come back to the House.

Our view is that this is just one of many bills that have not made it through all of their readings in the House in this commerce area, particularly bills around consumer legislation, of which this is one. This fits in with the stable of consumer protection laws that are just not being taken seriously enough by this Government. I do want to make that point in a very serious manner. I do hope that those on the other side of the House are paying attention to that.

The other point that needs to be made is that the bill that has come back to this House is quite different from the bill that was actually originally introduced. There are some very good reasons for that. It is important to just outline what the reasons were. The bill, when it was originally introduced, proposed a negative licensing regime for insolvency practitioners—essentially a blacklist. So if you were a dodgy insolvency practitioner—never you, Mr Deputy Speaker. That was a much wider sort of concept of the—

💬 Carol Beaumont: More like Jonathan Young was, perhaps.

No, no, no—I would not like to cast aspersions on anyone in this House, and certainly not you, Mr Deputy Speaker, being a person of high integrity and all that. But, hypothetically speaking, if there did happen to be a dodgy practitioner in the area of insolvency, then this bill would have created what is called a negative licensing regime for liquidators, receivers, and voluntary administrators who did not meet the required standard of competence. They then would have been banned or placed under supervision. That sounds like a sensible set of measures. That would have empowered the Registrar of Companies to maintain a publicly accessible electronic register of people who have been banned or placed under supervision.

On the face of it that seemed like the sensible approach to take but as soon as this Insolvency Practitioners Bill got before the Commerce Committee there was a range of submissions and in-depth discussion, which both sides of that committee took part in. There was robust discussion, and it was constructive discussion. Ultimately that report has come back, and this is where the legislation is at. It has been found that it would be much more preferable to prevent practitioners. So “prevent” is the important word here, Mr Deputy Speaker, just in case you are interested. It would prevent those practitioners who would be restricted or prohibited from providing a corporate solvency service before they undertake those insolvency duties. So they actually have to be certified as being of good character, as having the required skills, and as being appropriate to act and to provide insolvency services before they actually offer those services, instead of waiting for the damage to be done.

So it is a proactive set of measures, as opposed to a reactive set of measures. That makes a lot more sense, and I think everybody, pretty much, agreed with that. That is why Labour is supporting this bill. But I want to make the point that that work—and it is important to make this point because a lot of the good work of this Parliament does go on in select committees. There are times when much better laws get made because there is robust and constructive discussion amongst all parties. It would be great if those sorts of processes were on display more to the public. I note that there is a trial being undertaken at the moment in our Parliament in two of our select committees, where the workings of those select committees are being webcast to the public.

I fully support that, as one of the members who has advocated for that, along with, actually, my Green counterpart Gareth Hughes and National counterpart Nikki Kaye. We advocated for there to be more public viewing of select committee processes. This is one that may not seem to be a sexy piece of legislation that is being negotiated, but this is one example where the public would have been able to see how some of that good work is being done in the select committee.

We certainly support this legislation. We note that it has been rewritten, pretty much, at the select committee. We also note, and criticise quite strongly, the length of time that it has taken to come back to this House, and hope that it will proceed with some rapidity through its final stages. We certainly think that the legislation has merit, that it needs to get passed into law, and that it needs to be put into practice.

I would just like to begin by echoing our Labour colleague Clare Curran’s comments about the rather leisurely progress of this bill, the Insolvency Practitioners Bill, through the House. Some 3½ years ago it was introduced and had its first reading. I was on the Commerce Committee at the time. I have to say that there was a sense of urgency in that this was one of a raft of pieces of legislation that were seen as being important and needing to be passed.

I think that credit for this bill belongs to the former Minister of Commerce, Mr Power—he has now left this Chamber, of course—and, if my memory serves, it is one of a series of bills that Simon Power put in place to put some regulation around the finance sector generally. We saw what happens when finance sectors remain unregulated. We all paid an enormous cost—some more than others. Lots of people lost money when they ought not to have done.

Mr Power, to his credit, put in place a raft of bills to put some reins onto the finance sector. I think it is fair to say that this is one of those bills, so one would hope that we will see this bill through all its readings and passed before its fourth birthday. It will become enacted into law and enable a sensible regime to go into place around this reasonably important, albeit small-scale, area of finance—the insolvency practitioners.

The Greens opposed this legislation at its first reading because it created a negative licensing system. It was the classic example of parking an ambulance squarely at the bottom of a cliff, the idea being that we would wait until people offended, until they failed to provide good service, inevitably at some considerable cost to the stakeholders in an insolvency, be they the creditors, the owners, or whomever. The idea was that when they were proven to be incompetent, dishonest, or whatever it might be, they would go on a blacklist and would be either obliged to practise under supervision or banned from practising for some longer or shorter period of time. We, frankly, did not see the sense in that. The argument was that a negative licence system was appropriate, because to create a positive registration model would be inappropriate, given that at the time it was believed that there were fewer than 100 practitioners, and that there would be costs involved in creating and managing a register and all of these things.

We saw then that the notion of short-term cost savings certainly did not compensate for the long-term risk that it would impose on people needing the service of these practitioners; the almost inevitability that at least some of them would lack the experience, the competence, and the integrity to do a good job for their client, for their customer. So we opposed this legislation in the belief that what we actually needed was an upfront and positive accreditation or registration system.

I am very pleased to say that in the course of the Commerce Committee’s consideration of the bill the logic of that position became acknowledged by all parties. What we see now is a piece of legislation that does establish an upfront accreditation model, where people will be obliged to demonstrate their skills, and the correct attitude, the competency, and the integrity that really we need to see. I mean, it would be odd if we allowed auditors or accountants, or even real estate agents or tradespeople, to operate without some form of accreditation, and we saw no reason why insolvency practitioners should be any different.

So I am pleased to say that given the almost 180-degree shift that has occurred in the drafting of the model that is now proposed in this bill, the Greens, from now on, will be quite happy to support this legislation. We will oppose what we think is bad legislation. As I said, the select committee did a good job. It listened to the overwhelming majority of submitters who said: “Hey, why are we doing it this way? Why not do a positive accreditation model?”. We have gone to that, and for that reason the Greens are very happy to support the bill from here on in, through later readings.

In terms of the substance of the bill, I probably need not dwell too long on that this late on a Thursday. It is a fairly straightforward piece of legislation now, and it does create a process for accreditation, for recognition, of practitioners. It also creates a process for removing the accreditation of those people if there is malpractice, or a lack of integrity or honesty, or whatever it might be. Their registration can be cancelled, and, of course, that is entirely appropriate. There are appropriate penalties put in place. So without dwelling on that any further, I am pleased to say that the Greens will support this bill, and I commend it to the House. Kia ora.

I will take a short call on the Insolvency Practitioners Bill, another piece of legislation that is helping the business community’s confidence. It is the intention of the Government to progress this bill as soon as possible. I commend this bill to the House.

I am going to take just a very brief call on the Insolvency Practitioners Bill, to echo the comments made by my colleague Clare Curran, firstly to make the point that there has been very slow and sluggish progress from the Government in terms of putting this bill through its stages. As David Clendon has just said, the Commerce Committee did a very good job with the bill, and the Government could have got on and passed this significantly more quickly than it has, and it is unfortunate that it did not.

More broadly, on the substance of the bill we do support the initiatives to tidy up issues in the insolvency area. Nobody likes to see the kinds of dodgy practices that have bedevilled the finance industry in recent times, particularly regarding people whose life-savings have gone down the gurgler as a result of the actions of people who do behave outside the law. Anything we can do to improve practice in that area and ensure that people know that their finances are secure is something that we should all support. I also commend the bill to the House.

I am keen to speak to the Insolvency Practitioners Bill because it goes back to the brilliant work done by Lianne Dalziel when she was Minister of Commerce. She is, of course, now in another office. She finds herself down in Christchurch sorting out some of the mess down there. The unfortunate thing, I guess, about this bill is that we find ourselves in a position where 2 years, 4 months, and 18 days, I am told, after the bill was reported back, it is receiving its second reading.

💬 Dr Rajen Prasad: How many hours and minutes?

I am not clear on the number of hours and minutes, which my colleague is asking about. The current Minister of Commerce has five bills on the Order Paper that were introduced before 2012, and here we are, again doing something that we will support because we think it is good progress, but it is very slow progress. That is a sign, I think, of a Government that is distracted. It is busy worrying about scandals in the police, it is worrying about the Chorus copper pricing, it is worrying about Skycity deals, and it is worrying about getting the Government Communications Security Bureau legislation and the Telecommunications (Interception Capability and Security) Bill through.

💬 Dr Rajen Prasad: Simon Bridges.

It may well be worried about Simon Bridges and his media appearances. That is probably beyond the scope of this bill, but only slightly—only slightly. It is only slightly beyond the scope of this bill.

💬 Grant Robertson: He’s nearly insolvent.

My colleague suggests he might nearly be insolvent. This bill is to restrict or prohibit certain individuals from providing corporate insolvency services. We would support appropriate measures in that area. These are common-sense steps, and obviously this legislation has a long history in coming to this point. The new system will apply to liquidators, administrators, and receivers, and will target those practitioners who lack the requisite skills and knowledge to undertake insolvency work competently or who perform badly in this field of work. It is very hard to disagree with that proposition. Why would you want these people operating in this area?

Supporting the new system, there will be tighter statutory disqualification criteria and wider court powers to replace a practitioner who has a conflict of interest and lacks independence in a particular insolvency case. The reforms will enhance transparency and accountability. Those are values that we on this side of the House take very seriously. We do question whether these values could not be applied perhaps a little more consistently by the other side of the House. I am reminded of the recent debate on the New Zealand International Convention Centre Bill, where transparency was very much a secondary consideration in that tender process, and we have seen a very poor outcome for taxpayers. I am sure that we will see more than one or two insolvencies result from that legislation, in which the burden of the Skycity Casino rebuild is paid for off the back of problem gambling. That is something that many of us on this side of the House opposed—in fact, I think all of us did. It was a conscience vote, but, as far as I am aware, people on this side of the House opposed it universally, because we believe that decisions made in that way and decisions around funding new initiatives—convention centres, be what they will—should be done in a transparent way. They should not be deals done behind closed doors, and they should be done transparently and with accountability.

We do praise the Government for undertaking reforms that are aligned with transparency and accountability in this respect. It should be praised when it gets things right. Goodness knows, on this side of the House, we see that there are rich pickings for a Government that wants to do deals with the likes of Chorus, Skycity, and other big interests. We on this side of the House prefer transparency and accountability, and we will continue to fight for that.

💬 Simon O’Connor: You do deals with the unions, Dr Clark.

The member opposite suggests deals with the unions. That is really getting off track. It has nothing to do with this particular bill. I am sure the member is coming from somewhere, but just where that is, is a mystery to those of us over here—his own special place.

The investigation and enforcement of the new Register of Insolvency Practitioners will be managed by the Registrar of Companies. Again, that is a sensible step. The Registrar of Companies will also be able to take action against an insolvency practitioner who has not behaved appropriately. Again, there is little to disagree with in that.

The bill as originally introduced proposed a negative licensing regime for insolvency practitioners, liquidators, receivers, and voluntary administrators. Insolvency practitioners who did not meet the required standard of competence would have been banned or placed under supervision. It would have empowered the Registrar of Companies to maintain a publicly accessible electronic register of people who had been banned or placed under supervision. The Commerce Committee report found that it would be preferable to prevent practitioners who would be restricted or prohibited from providing corporate insolvency services before undertaking insolvency duties, instead of waiting until the damage is done. Effectively, then, the bill was completely rewritten in the select committee. The bill that we have before us does seem to achieve those basic aims.

I return to the point, though, that it is a long time since it was introduced. It does not seem to be a priority for this Government to address these measures, which are about accountability and transparency. Indeed, on this side of the House we would strongly favour decisions that were a little more often taken in line with accountability and transparency. So with those concluding comments, I wish to say that Labour will support this bill through its second reading, and wish you a very good weekend, Mr Deputy Speaker, when you get there.

💬 Mr DEPUTY SPEAKER: Thank you.

Bill read a second time.