Insolvency and restructuring

New Zealand

In November 2016, Cabinet agreed to amend the Insolvency Practitioners Bill to introduce a co-regulatory licensing regime for insolvency practitioners, as well as a number of additional amendments aimed at further raising the practice standards of insolvency practitioners and ensuring they act in accordance with their statutory duties. The co-regulatory regime will build on the self-regulatory regime introduced by CA ANZ and RITANZ in 2015.

Under the new regime, professional bodies, including CA ANZ and RITANZ, will carry out the frontline regulation and the Registrar of Companies (Registrar) will monitor and report on the adequacy and effectiveness of the frontline regulators’ regulatory systems and processes.

As well as introducing a co-regulatory licensing regime for insolvency practitioners, Cabinet also agreed to amend the Companies Act 1993 and Receiverships Act to:

• Improve the list of automatic practitioner disqualifications;
• Provide the High Court with an effective means to disqualify practitioners;
• Increase the difficulty in which debtor friendly liquidators can be appointed; and
• Void the transfer of a company's assets once a liquidation application has been filed.

Under the proposals, solvent liquidations will be excluded from the licensing regime however they will only be able to be undertaken by lawyers and accountants who are members of a professional body.

The Government proposes to advance these changes via a supplementary order paper to the Insolvency Practitioner’s Bill, which is currently in the House.

MBIE and Insolvency Working Group Report

The Ministry for Business, Innovation and Employment (MBIE) set up the Insolvency Working Group (IWG) which investigated how to improve New Zealand’s corporate insolvency laws. The IWG Report, Consultation document: Report No.1 - Review of corporate insolvency law, produced in August 2016, proposed a mandatory licensing system for New Zealand insolvency practitioners.

Australia

The Australian government is also reviewing Australia’s current insolvency laws. It’s expected they’ll present their proposed reforms in the Insolvency Law Reform Bill (ILRB) in Parliament late 2016.

The reforms aim to reduce insolvencies by more flexible options to turnaround businesses in crisis. They represent the most significant set of reforms to apply to Australia’s corporate and personal insolvency laws in the last 20 years.

Key points include:

• Reducing the bankruptcy period from three years to one
• Introducing a safe harbour for directors so they aren’t personally liable for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company
• Making certain ipso facto clauses unenforceable so contracts can be terminated in instances of insolvency, when a company is restructuring

The changes are likely to increase business risk-taking and provide real opportunity for companies in financial distress to restructure. This, in turn, is likely to increase opportunities for international investors in the distressed debt market in Australia.

Engagement standards

Members who carry out insolvency and restructuring engagements must follow prescribed standards. These are for New Zealand, IES: Insolvency Engagements. For Australia, APES 330: Insolvency Services

Insolvency Management Committee

We provide a forum for members interested in insolvency through our Insolvency Management Committee. It offers an opportunity to engage in all forms of insolvency regulation, be part of discussions around best practice, and hear about useful tools and resources. It also provides opportunities to collaborate with other relevant professional bodies.

The committee members are as follows: