The practice of insolvency in New Zealand is remarkably unregulated. The Companies Act stipulates that a person only be over the age of 18, not currently bankrupt or under the control of the Mental Health Act in order to be a liquidator.
There are some requirements around people associated with a particular company taking an appointment as that firm’s liquidator but other than that it’s a pretty wild environment out there.
In response to constant petitioning by the industry, Parliament is inching towards introducing a regulatory regime. The current law allows for co-regulation, where the Crown will authorize an organisation to act as a regulator for insolvency practitioners. This is a model similar to the Law Society and the Institute of Chartered Accounts.
Whilst the industry is, mostly, strongly behind this bill those who use insolvency, the banks, IRD and other creditors, seem remarkably relaxed. None of them made any submissions on the proposed legislation.
Earlier this month Waterstone principal, Damien Grant, made an oral submission to the Select Committee overseeing the bill to back up his written submission that the industry was too small to adequately regulate itself and that a better approach would be to have a Crown agency, either the Companies Office or the FMA should act as the regulator.
In addition, Waterstone petitioned the Select Committee to relax the onerous requirements around sacking a liquidator. At the moment a resolution to fire a liquidator requires a motion at a creditor’s meeting passing with both the number of creditors representing over half the total dollar value.
It is common to see a vote fail at a creditors’ meeting where the vast majority of creditors by dollar value want a new liquidator but a large number of ‘rats and mice’ creditors, usually associated in some way to the director, (his lawyer, accountant, life-coach) all vote to keep the liquidator in office.
At Waterstone, we would like to see this reformed where, if a simple majority of creditors by dollar value want a new liquidator then, unless a super-majority of 75% by number are opposed, then there is a change of liquidator.
