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Insolvency practitioners to be licensed

NZ Newswire logoNZ Newswire 29/11/2016 Fiona Rotherham

The government is introducing a long-awaited licensing regime for insolvency practitioners after finding the current system "too loose" and enabling dishonesty and incompetence.

Commerce and Consumer Affairs Minister Paul Goldsmith said hundreds of New Zealand companies go into liquidation, receivership or administration each year with outstanding debts running into many millions of dollars and it was essential there is a high level of trust and transparency around the process.

The minister set up an Insolvency Working Group last year to investigate problems with voluntary company liquidations, including the use of phoenix companies where assets are transferred to a near-identical entity to dodge liabilities.

It recommended law changes after finding too many insolvency practitioners fell well short of the standards the public should expect by overcharging or failing to protect creditors' interests.

The group identified two primary causes - that it was too easy for people to become an insolvency practitioner and a lack of accountability for poor behaviour.

"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," the minister said.

Under existing rules a person can be convicted of tax evasion or other serious knowledge-based criminal behaviour, yet still operate as an insolvency practitioner.

Goldsmith said the new co-regulation regime includes monitoring compliance with legislative obligations and the code of ethics, professional standards and rules issued by the Chartered Accountants of Australia and New Zealand.

The changes will be made through a supplementary order paper to the Insolvency Practitioner's Bill which is currently before the House.

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