Commerce and Consumer Affairs Minister Kris Faafoi has put licensing insolvency practitioners back on the legislative agenda with a view for it to be it up and running next year.
Last night the Insolvency Practitioners Bill, which was first introduced in 2010, was sent back to select committee to consider a supplementary order paper introducing a licensing regime for liquidators, administrators and receivers of failed companies. The changes pick up a working group's recommendations and replace a registration regime, which was itself a step up from an initial proposal to exclude incompetent and dishonest practitioners via a negative licensing system.
"To protect the interests of those who may be owed money, and ensure the right actions are taken we are going to act," Faafoi said in a statement. "Licensing is needed to make it much more difficult for unqualified or unprofessional individuals to enter the industry and provide a fully effective means for removing practitioners who are not up to the required standard."
The insolvency regime was cited among the Ministry of Business, Innovation and Employment's focus areas under corporate law and governance in its briefing to Faafoi last year after the previous administration changed its stance in 2016 after tasking a group of experts to investigate whether the then-proposed negative licensing regime would be fit for purpose.
Faafoi's proposed amendments would impose a duty on practitioners to help their replacements, give the court power to order compensation for anyone who suffered from shonky insolvency work and sanction poor practitioners, give the Companies Registrar greater powers of investigation, expands the grounds for disqualification and clarifies practitioners responsibilities.
MBIE's 2016 regulatory impact statement estimated the annual cost for a government regulator would be $750,000-to-$1 million, and in the bill's general policy statement published this month, the ministry said "the benefits of licensing insolvency practitioners are only likely to be achieved in full if the frontline regulators effectively monitor compliance and use their enforcement powers where necessary and the Registrar is diligent in carrying out the accreditation and oversight function".
Faafoi has focused on protecting consumer interests since taking up the ministerial portfolio, this week calling for submissions on plans to tighten consumer lending protections, and has also targeted insurance contract terms as needing closer scrutiny.
The 2016 MBIE paper said it's hard to distinguish between incompetence, dishonesty, and a practitioner being debtor-friendly, and estimated there were "10 to 20 such practitioners at any one time, including up to five who are grossly dishonest".
Insolvency practitioners "must be honest, competent, have a good understanding of the principles and practices of corporate insolvency law and the professional judgment to make high-quality decisions," he said. "There is no place in the industry for dishonest, unprofessional and incompetent people."