Date posted: 25/03/2021

Proposed NZ Insolvency Services Standard – invitation to comment

The NZ Regulatory Board proposes to update the NZ Insolvency Engagement Standard (IES) to reflect the new insolvency practitioners’ regime and changes made to the Code of Ethics.

In Brief

  • Proposed IS: Insolvency Services will update existing IES to reflect the new insolvency practitioners’ regime and the NZICA Code of Ethics.
  • Members are invited to comment on proposed IS. Your views should be provided to us by 1 June 2021.
  • The proposed standard will apply to all members of CA ANZ in New Zealand and all insolvency practitioners licensed by NZICA who provide insolvency services from 1 September 2021.

The New Zealand Regulatory Board of New Zealand Institute of Chartered Accountants (NZICA) is seeking comments on proposed NZICA professional and ethical standard IS: Insolvency Services (proposed IS)1.

Proposed IS updates existing IES: Insolvency Engagement Standard (existing IES):

  • to be consistent with recent amendments to the NZICA Code of Ethics
  • to be consistent with New Zealand laws and regulations including the Insolvency Practitioners’ Regulation Act 2019 and the Insolvency Practitioners Regulation (Amendments) Act 2019 (effective 1 September 2020)2;
  • to be consistent, as appropriate, with standards that apply to CA ANZ members resident outside New Zealand3.
  1. NZICA regulates the conduct of CA ANZ members that reside in New Zealand. This includes maintaining, monitoring compliance with and enforcing professional and ethical standards as required by the NZICA Act 1996.
  2. A new licensed insolvency practitioners’ regime took effect in New Zealand on 1 September 2020. This new regime is contained in the Insolvency Practitioners Regulation Act 2019 (IPRA).
    Under this new regime, all individuals who take new statutory insolvency appointments from 1 September 2020 must have a licence. It is an offence to take new statutory insolvency appointments without a licence.
    Solvent company liquidations are not statutory insolvency appointments. However, these appointments can only be undertaken by individuals who are a licensed insolvency practitioner, lawyer or a qualified statutory accountant (QSA). A QSA includes a member who is a chartered accountant and holds a certificate of public practice.
    Members should refer to the IPRA and/or the CA ANZ website for further information.
    Amendments to the Companies Act 1993 and Receivership Act 1993 accompanied the new licensed insolvency practitioners’ regime in the form of the Insolvency Practitioners Regulation (Amendments) Act 2019.
  3. CA ANZ members in Australia are required to comply with APES 330 Insolvency Services issued by the Australian Professional and Ethical Standards Board (APESB). All CA ANZ members, regardless of country of residence, should be held to the same standards of professional behaviour (as far as practicable).

Restructured and re-written

Proposed IS is a complete revision of existing IES as the proposed standard has been drafted using a new structure and format that is designed to be more consistent with the structure and format of the NZICA Code of Ethics.

However, many of the core issues addressed in existing IES remain in proposed IS - merely in a different form - including:

  • The application of the standard to both formal and informal insolvency services;
  • The focus on ethical and professional requirements as distinct from any responsibilities that are imposed by laws and regulations;
  • The application of the NZICA Code of Ethics and, in particular, the fundamental principles to insolvency services;
  • The requirements and guidance material regarding performance of insolvency services.

Overview of key changes

The key changes result primarily from a review of recent changes to the NZICA Code of Ethics and laws and regulations pertaining to insolvency services. The changes include:

  • New requirements that reflect members’ responsibility to act in the public interest including a requirement for members to decline to advise an insolvent entity on how to structure its affairs to cause assets to be unavailable to creditors or to otherwise avoid the consequences of the insolvency;
  • New requirements to assist with the transitioning of appointments;
  • New requirements regarding statutory advertising;
  • A new overarching requirement to consider whether there are any reasons for not accepting an insolvency appointment or engagement;
  • Updated requirements and application material in respect of a members’ ability to charge or claim fair and reasonable fees and expenses;
  • A new requirement that prohibits members from claiming professional fees for communicating with NZICA or other regulators regarding complaints, monitoring activities such as practice reviews, or alleged matters before the Courts;
  • A new requirement containing additional factors to consider when determining the appropriateness of a contingent fee arrangement;
  • New requirements to prohibit a member from accepting commissions, referral fees and other types of inducements;
  • New requirements and guidance material to improve consistency of practice and transparency in respect to fees and expenses information and fees and expenses claims;
  • A new requirement and guidance material in respect to client monies;
  • Rewritten and updated requirements and guidance material regarding independence including material on the interests and relationships that members must consider in determining their independence, and appointments where threats cannot be eliminated or reduced to an acceptable level (and, therefore, the appointment cannot be accepted);
  • A new requirement and guidance material to specify a member’s responsibility in respect of joint appointments;
  • A new requirement to emphasis the importance of a member documenting and adhering to policies and procedures that are designed to ensure compliance with statutory timeframes.

NOTE: The requirements above also apply to all insolvency practitioners licensed by NZICA regardless of whether they are a member of CA ANZ

Submissions / Approval process

25 March 2021
Invitation for submissions on exposure draft issued.

1 June 2021
Submissions on exposure draft are due. Information on how to submit is included on page 4 of the Invitation to Comment.

7 July 2021*
NZRB meet to consider submissions and management’s report. The NZRB will finalise revised IS (or decide on an amended timetable if further work is required).

15 July 2021*
Anticipated date for issue of revised IS. Revised IS will be published on CA ANZ website, together with a copy of management’s report.

1 September 2021*
Effective date of revised IS

* Timing subject to volume of submissions received

 

New Zealand regulations

NZICA Act, Rules, Code of Ethics, Professional and Engagement Standards.

Read more