Public consultation in New Zealand is now open on a discussion paper on the minimum standards and standard conditions for the accreditation of professional bodies[1] to conduct what will be a co-regulatory regime over corporate insolvency practitioners.[2]
It is expected that RITANZ will apply to be a recognised body, ARITA’s NZ equivalent.
‘Carrying out the frontline regulation of insolvency practitioners’
Accredited bodies will be responsible for ‘carrying out the frontline regulation of insolvency practitioners’ including licensing their entry and regulating ongoing competence, investigating complaints about them, and taking disciplinary action where appropriate. The Registrar of Companies will oversight the accredited bodies. This is the same regulatory structure that has applied in the UK since 1986.
The Registrar generally considers that the accreditation regime should closely match the accreditation regime under the NZ Auditor Regulation Act.
Hence the paper set out what is expected of an accredited body taking on this role from several perspectives – its governance, conflicts management, processes of assessment of applications for registration, and for handling complaints and pursuing disciplinary processes, its appropriately qualified personnel, and the views of other regulators. Concerns for ensuring natural justice for members are raised, and the importance of independent members on the board of the accredited body.
Importantly, practitioners need not belong to an accountancy professional body to be licensed.
Overseas, including Australian, practitioners
Sections 57 to 59 of the Act provide a mechanism for accredited bodies to license insolvency practitioners who are not members of the accredited body in certain circumstances. These include overseas insolvency practitioners.
Licences may only be issued where the accredited body is satisfied that the insolvency practitioner is qualified and competent and is a fit and proper person.
In addition, the overseas insolvency practitioner must enter into a commitment to abide by the rules of the accredited body.
Overseas insolvency practitioners [and some others] are to be treated as if they were members of the accredited body for regulatory purposes.
That may raise an issue of conflict of the respective professional codes.
There is also the prospect of an Australian bankruptcy trustee seeking registration in a jurisdiction where, with the Official Assignee handling all bankruptcies, there may be no experience or capacity of the accredited body to oversee the conduct of the Australian trustee.
The Australian comparison
Australian practitioners are directly regulated by the two government regulators. Hence there is no accreditation of ARITA, AIIP, CAANZ or any other of the relevant bodies in Australia. Their governance and processes are between them and their members.
While conceding that self-regulatory schemes like those of NZ and the UK tend to be more flexible and impose lower compliance costs on industry participants than direct government regulation, the Australian government takes the view that there is no professional body or industry association in Australia that is resourced or structured to undertake that type of a role.
The government considers that the small size of the industry (600-700 practitioner) would mean that the cost per industry participant of maintaining the infrastructure needed for effective co-regulation might be prohibitive[3] – [perhaps in the order of the amount of the annual fee imposed on practitioners to fund their regulation by ASIC].
Whether any Australian body would qualify according to the accreditation criteria in NZ is another matter.
This government view should not however affect the regulation of Australian practitioners to work in New Zealand.
Submissions
Submissions on the NZ discussion paper are required by 7 February 2020.
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[1] Under the NZ Insolvency Practitioners Regulation Act 2019.
[2] The government Official Assignee is appointed to all bankruptcies in NZ.
[3] Explanatory Memorandum to the Insolvency Law Reform Bill 2015 at [9.150-9.151].
