Changes Announced To Insolvency Law Regime
Changes to New Zealand’s insolvency laws will give employees better protection and improve the options open to individuals facing bankruptcy, Associate Commerce Minister Laila Harré announced today.
Speaking at a Business Law Forum in Wellington, Laila Harré outlined the government’s policy decisions relating to the first stage of a comprehensive review of New Zealand’s personal and corporate insolvency laws.
Approved by cabinet last month, the tier one decisions include changes to the insolvency regime covering cross border insolvency, bankruptcy, voidable transactions and priority debts.
Decisions on tier two will be made early next year. These will include business rehabilitation, the role of the state in insolvency, statutory management, phoenix companies and whether all corporate and personal insolvency law should be contained in one statute. The package will then go before the House.
Laila Harré said many of the tier one changes are part of a long overdue technical tidy up of New Zealand’s insolvency laws.
“Personal insolvency has not been reviewed since the 1960s and the need for a review of the laws relating to corporate insolvency was identified more than a decade ago.
“The tier one change of most public interest is the increase in the amount of money that employees will be legally entitled to if their employer becomes insolvent.”
This will increase from $6000 to $15000, and can be made up of any combination of unpaid wages, salary, holiday pay or redundancy payments for the four month period prior to liquidation.
At present employees have no priority for any redundancy monies owed if their employer becomes insolvent.
“This means if an employee is owed $5000 in unpaid wages and is due $20,000 in redundancy payments they are a preferred creditor for only $5000, and stand in line with all other unsecured creditors for the rest of the money owed to them,” Laila Harré said.
“Under the new regime, that same employee will receive a priority for a total payment of $15,000.”
In the case of personal insolvency, debtors will now have to provide greater information when they initiate bankruptcy, and will be offered more advice on alternatives to bankruptcy.
The cap for Summary Instalment Orders is also being increased from $12,000 to $40,000.