With the introduction of the Insolvency Practitioners Regulation Act 2019, from June 2020, insolvency practitioners must be licensed. At Nexia New Zealand, we believe this upcoming scheme will promote integrity and honesty among practitioners, ultimately raising the standards of insolvency practice.
“Under the current law, basically anyone who is over the age of 18, not bankrupt and not associated with the company is entitled to be a liquidator. That’s concerning when people’s money is at stake.” Christine Johnston – Partner and Liquidator at Nexia New Zealand.
The Act is designed to promote better outcomes under the corporate insolvency system by introducing tighter regulations and standards to ensure practitioners act in the best interests of creditors or at least neutrally with minimum harm to all parties. These changes will line New Zealand up with international standards and are consistent with the approach of other professions with licensing requirements.
Key changes under the Act
Among other things, the new regime’s mechanisms for holding practitioners to account include:
- A requirement to be licensed and re-apply for a new licence every five years.
- More rigid disclosure and reporting requirements to ensure no conflicts of interest or disclosure of misinformation.
- An obligation to report ‘serious problems’, including mismanagement contributing to insolvency to the Registrar and other appropriate authorities.
- A requirement to undertake professional development for continual improvement of insolvency practices.
The Act ultimately strengthens creditors’ rights and their ability to control the process of voluntary liquidation. Restrictions will be added to the voluntary appointment of liquidators after service of liquidation proceedings with the applicant creditor’s consent required if the shareholders or board wish to name their liquidator. This will prevent the appointment of a liquidator who may favour the company and its directors over creditors.
Our insight on the changes
As a leader in insolvency, we consider the regulation of liquidators a good thing for the industry. Anyone appointing a liquidator needs to know they’re getting someone trustworthy who will remain neutral and carry out their duties in line with the legislation. As Nexia New Zealand Partner and Liquidator Christine Johnston puts it, “The regulation of the industry and the requirement for practitioners to be licensed will ensure that all liquidators uphold the utmost integrity in completing their work and are qualified and experienced in taking on these duties.”
Under the new co-regulatory licensing regime, it is expected the majority of practitioners will carry on as usual, but some will not meet the new standards.
“It will be interesting to see what the minimum requirements for a liquidator will be when the new regulations come into force, and whether they are similar to the current requirements for accreditation through RITANZ. With the current market, and numbers of liquidations being down across the country, many practitioners may find it difficult to meet the required number of hours of experience” says Johnston.
Why choose the Nexia New Zealand insolvency team?
As the introduction of this new act indicates, insolvency and restructuring are increasingly viewed as specialised services, with a need for maintaining a high level of ethics and standards. Our wide range of specialist skills and experience across a variety of industries allows us to provide a full range of services in insolvency and recovery, assisting both creditors and debtors. We have a depth of experience and a team of practitioners we believe will meet the expected criteria when the regulations are formally implemented in June 2020.
We are also members of RITANZ (Recovery Insolvency and Turnaround Association of New Zealand Inc) abiding by that Code of Professional Conduct.
Should you wish to discuss any Insolvency or Recovery related matters, please do not hesitate to contact us.