Insolvency Practitioners: Regulation is Coming!
The insolvency industry has sought regulation for more than 30 years. Finally, the current government is doing something about it.
Nearly nine years after its introduction, the Insolvency Practitioners Bill 2010 has moved up the priority list. Following input from the Restructuring Insolvency and Turnaround Association of NZ (‘RITANZ’), a government appointed industry working group, various rounds of submissions and the hearing process, it looks like the Bill may be enacted within the next few months. If so, the Act will introduce mandatory licensing and regulation of insolvency practitioners taking on formal (insolvent) liquidation, receivership and voluntary administration appointments.
Under current law, there are few barriers to being appointed a liquidator. You must be:
- Over 18
- Not an undischarged bankrupt
- Not certified under the mental health legislation
- Not be a banned director
- As well, the liquidator cannot:
- Be a creditor, director, auditor or receiver of the company
- Or have had a continuous business relationship with the insolvent.
At least two insolvency practitioners in New Zealand have criminal convictions for fraud yet are regularly appointed as liquidators or receivers. In some cases, appointors don’t know the history or qualifications of their chosen insolvency practitioner, in other cases they are looking for a “debtor-friendly” option.
While the new legislation doesn’t specifically ban those with convictions for fraud or dishonesty, it will be the job of the new regulator, most likely CAANZ, to determine what will be required for practitioners to pass the “character” test. For the past couple of years, RITANZ has run a voluntary registration scheme. RITANZ members must be assessed a fit and proper person and are governed by the RITANZ Code of Conduct.
As a RITANZ Accredited Insolvency Practitioners (‘AIP’) and member of the RITANZ Board, I have been a firm advocate for industry regulation. It will be interesting to see how the profession changes once the Bill is enacted. Watch this space.
PKF Corporate Recovery and Insolvency