14 April 2004 Media Statement

Insolvency Law Reform Bill released

Today's release of the draft Insolvency Law Reform Bill marks a major milestone in the Government’s review of insolvency law reform, says Commerce Minister Margaret Wilson.

In an unusual move, she has released the draft bill for public consultation.

"Bills are often released for targeted consultation with key experts or stakeholders. In this case, the bill covers such a broad spectrum of issues we wanted to be sure we reached a wide range of interested parties.

“The introduction of a voluntary administration procedure for companies that can be rehabilitated will bring New Zealand into line with other OECD countries. The procedure will be closely modelled on Australia’s voluntary administration regime, making it easier to conduct business rehabilitation involving trans-tasman businesses.”

“The new no-asset procedure reflects a concern that some of the more punitive restrictions of bankruptcy are not appropriate for individuals that have few or no assets and may have become insolvent through no fault of their own. The no asset procedure will provide them with a better opportunity for a fresh start.”

The Government is also releasing a public discussion document seeking feedback on two remaining policy issues - regulating insolvency practitioners and the priority of employee entitlements to wages in lieu of notice.

“I am aware that some liquidators may not have the necessary skills and experience to do this work. At the same time, the pool of liquidators is possibly too small to adapt to significantly increased regulation. We need to get the balance of regulation right so that all stakeholders affected by insolvency have confidence in the process.”

The review began in 1999 with the release of Law Commission Reports on priority debts and cross-border insolvency. The government has also considered ways to facilitate business rehabilitation, the need for alternatives to bankruptcy for debtors with few or no assets, and the role of the State in insolvencies.

The Bill will also implement the Government’s decision to introduce voluntary administration for business, a no-asset procedure for insolvent individuals.

“The Bill is a very comprehensive piece of law reform, which reflects the Government’s commitment to facilitating economic growth through innovation and closer co-ordination with Australian business law.”

The draft Bill and discussion document are available on the Ministry of Economic Development website www.med.govt.nz. The closing date for submission is Friday, June 11 2004.

ENDS

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