The SOP makes seven key changes to the Bill:
1. Introduces a co-regulatory licensing framework (as recommended by the Insolvency Working Group last year – please click here to see our earlier article on the Group’s report and click here for our submission on the report. Under the revised Bill, insolvency practitioners will be required to be licensed by an accredited body (like RITANZ) under a new stand-alone Act.
2. Imposes a duty on insolvency practitioners to provide information and assistance to any practitioners that replace them.
3. Enables the court to order compensation for anyone who has suffered loss as a result of an insolvency practitioner’s failure to comply with any legal requirement.
4. Enables the court to sanction insolvency practitioners who fail to comply with legal requirements.
5. Requires related party votes to be disregarded at a creditors’ meeting.
6. Extends the circumstances in which an insolvency practitioner will be disqualified from acting (bearing in mind, however, that the Bill already removes the troublesome “secured creditor” prohibition in the current s280(1)(cb)).
7. Imposes more detailed reporting obligations on insolvency practitioners.
The SOP adopts many of the changes proposed by the Insolvency Working Group and approved by Cabinet in late 2016. The original negative licensing system proposed by the Bill has now been discarded.
In a press release today, the Commerce and Consumer Affairs Minister Kris Faafoi has said that insolvency practitioners “…must be honest, competent, have a good understanding of the principles and practices of corporate insolvency law and the professional judgement to make high quality decisions. There is no place in the industry for dishonest, unprofessional and incompetent people. Licensing will also provide for general standards of insolvency practice to improve over time.”