In April 2010, back when New Zealand had only one Rugby World Cup title and the Warriors had yet to win a NRL Premiership, the Hon Judith Collins introduced the Insolvency Practitioners Bill to Parliament. Ms Collins brought to Parliament’s attention a great problem.
Hon Judith Collins: “Almost anybody, as long as they are not disqualified by limited criteria set out in the Companies Act or the Receivership’s Act, can—and do—set themselves up as an insolvency practitioner. This has resulted in the situation where there is a small minority of individuals practicing as insolvency practitioners who simply should not be.”
The initial proposal was to grant the Companies Office the power to ban people who were acting as liquidators; in a similar manner as the Companies Office can ban people from being company directors. This proposal was met with considerable hostility by the industry who wanted insolvency practitioners to be regulated in the same way lawyers and surgeons are. After all, are you really a professional if you don’t have a certificate from a government department validating your existence?
After nearly a decade the industry has got its wish and liquidators are about to be subject to regulation. Parliament has set-up a ‘co-regulatory’ regime where private bodies can seek permission from the Ministry of Business, Innovation and Employment (MBIE) to issue licences to those wanting to be liquidators.
Practically, only one such organisation is going to be approved, at least initially. RITANZ, an arm of the Institute of Chartered Accountants, will be issuing licences and supervising the conduct of insolvency practitioners.
The bill is back before the house and is tantalizingly close to getting its third reading. Once passed it will obtain Royal Assent and then we enter a twilight period when the law is active, but not in-force. The Crown has twelve months to pass an order-in-council to activate the legislation, presumably once MBIE has its regulatory house in order.
Once that has occurred those wishing to continue to act as insolvency practitioners have four months to become licensed. If they fail they will be unable to take on new appointments, but will be able to keep their existing files.
Most consumers of insolvency services can expect to see little change. Prices will go up as the cost of the new regime is passed on and there will be a very small number of existing players will decide to leave.
Waterstone has declined to join Ritanz; primarily due to the libertarian bent of its founder, Damien Grant. Grant made submissions to the select committee and has written several articles in the NBR criticizing the regulatory regime.
Historically, regulation has been used as a means of restricting the number of people who can act in an industry and has resulted in higher incomes for those who are regulated without a compensating increase in the quality of work.
However, once the new rules come into place Waterstone shall, reluctantly, take her place among the regulated.