Associate Commerce Minister, Laila Harre, has announced the second stage of review of insolvency law with a focus on the Government's role.
The key decisions from the tier one review, which were reported in our
November Bulletin, were:
creation of a new priority for creditors who assist liquidatorsincreasing the maximum priority for employees from $6,000 to $15,000 and the inclusion of this priority of redundancy pay as well as wagesremoval of priorities under the Fisheries Act and Radio Communications Actretention of the current priorities for PAYE, GST, withholding tax and custom dutiesremoval of the ordinary course of business exemption from the voidable preference testadoption of the UNCITRAL model law on cross border insolvency.In the tier two review the Government has considered the states role in insolvency law. The Government has decided to:
change the appointment procedure for liquidators by requiring that there be no continuing relationship between the debtor company and the liquidatorchange the law around the liquidator's right to sue, allowing the statutory right to be assigned or soldretain the states monopoly in bankruptcy administration.Further details of their proposals will be included in a Bill to appear before Parliament. However, there are still some issues remaining as part of the tier two insolvency law review. The most significant of these issues is the question of whether to implement a business rehabilitation regime similar to the Australian administration scheme, where viable businesses can continue trading while a rehabilitation proposal to creditors is formulated as an alternative to liquidation. Creditors are prevented from taking any debt recovery action by a moratorium or a stay of proceedings while the proposal is put together.
The Ministry of Economic Development is considering a number of arguments for and against implementing the regime and will release a public discussion document that will canvass the benefits and costs this month.
This is a general summary only and should not be taken as a substitute for specific advice.
For further information, please contact Michael Bos:
michael.bos@phillipsfox.com
Web site:
Phillips Fox