While corporate and personal insolvencies may be at a six year low, there is still plenty going on for insolvency practitioners.
- Traditional retailers will continue to experience a challenging market, while the construction sector is suffering from capacity restraints. There are signs that the economy may be coming off the boil and business confidence is lower this year. Insolvency practitioners can expect to be busier over the next 12 months.
- Behind the scenes, considerable effort has been put into the regulation of insolvency practitioners. RITANZ’s Code of Conduct came into force on 1 July and sets new standards for members, particularly those accepting appointments. Among other things, practitioners will now need to provide more information on appointment about who referred them work and their remuneration.
- The Insolvency Practitioners Bill is also back on track, promising licensing of insolvency practitioners and likely to take effect in 2020. The Bill also looks to make a host of changes to corporate insolvency law following recommendations made by the Insolvency Working Group.
- MBIE has also been looking into a new regime for unravelling Ponzi schemes. A discussion paper was released earlier this year which proposed that a liquidator should be able to recover from investors any withdrawals made in a four year window (whether of principal or profit), after an investment scheme became a Ponzi scheme. Such a proposal, if adopted by Parliament, would overturn the Supreme Court’s decision in McIntosh v Fisk, where the investor was allowed to keep his original investment.
- This year has also seen the introduction of the Farm Debt Mediation Bill, which proposes that lenders and farmers must attend mediation before the appointment of receivers. The Bill has been referred to select committee, and submissions close on 3 August. While Australia has a mediation regime, there is a question mark about whether such a system is needed in New Zealand, where the banks have generally supported the rural sector through recent difficulties in the kiwifruit and dairy sectors.
- Looking to Australia, there has been significant recent insolvency law reform, including:
- a safe harbour for directors from personal liability for insolvent trading while a company undertakes a restructure outside of a formal insolvency process; and
- ipso facto clauses becoming unenforceable while a company is restructuring under certain formal insolvency processes.
- New Zealand is yet to consider these reforms, but their impact in Australia will be closely watched.
By James McMillan, partner in the Restructuring and Insolvency team at Kensington Swan.
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