Comparing NZ insolvency law with Australia’s, in preparation for the BFSLA conference this week on 1 September 2017, the day that Australia’s new insolvency laws commence, reveals some interesting comparisons in how practitioners are respectively regulated, and at what cost. For example, NZ proposes a NZ$2 levy on companies to fund the cost of regulation, compared with Australia’s $$$ levy on practitioners.
Where did Australia go wrong?
We have slipped to number 21 in the World bank ratings, behind Puerto Rico, Iceland, Cyprus and Spain.
New Zealand’s Insolvency Practitioners Bill still sits in the long list of Bills in the NZ parliament. It has been foreshadowed to introduce a licensing regime for the country’s 100 or so insolvency practitioners, overseen by the Registrar of Companies and conducted by the professional bodies, CAANZ and RITANZ.
On 1 January 2016, rather than waiting for the NZ government to act, those two bodies set up a process of registration and regulation of insolvency practitioners. There are now around 100 accredited practitioners. There are minimum entry and ongoing qualifications requirements and a complaints and discipline regime underpinned by a code of professional conduct.
This is the English model of insolvency practitioner regulation.
Australia considered this option but rejected it. Instead we have the main regulation conducted by ASIC and AFSA, with what are now nominated as fourteen ‘industry’ bodies – ARITA, CAANZ, CPA, IPA and others – having some co-regulatory and whistleblowing role.
It is perhaps indicative of the level of acceptance of the reforms that none of these industry bodies has made any announcement or issued any guidance about their new regulatory roles which commenced on 1 March 2017.
With the final set of the new laws commencing on 1 September, it is no news to many to say that much of these Australian reforms, and in particular those concerning insolvency practitioner regulation, are a sad populist outcome of much political, regulatory and newspaper pap, although stronger views have been expressed.
Meanwhile, Australia has slipped to number 21 in the World Bank’s international insolvency rankings, behind Puerto Rico, Iceland, Cyprus and Spain.
Regulation costs in NZ – $2 per company; Au$tralia?
In New Zealand, a released NZ government cabinet document gives a reasoned basis for its proposal to fund the cost of regulation. The method of funding the Registrar for its regulatory oversight is explained:
87 Experience of independent oversight by the Financial Markets Authority under the Auditor Regulation Act 2011 suggests that independent oversight by the Registrar of Companies would cost $750,000 to $1 million a year. I propose that this amount be funded through the annual return fee for companies. This would amount to less than $2 per company a year.
88 There would be no need to increase the current annual return fee
89 I also considered the possibility of funding independent oversight by way of a levy on insolvency practitioners. This option is infeasible because the annual levy would need to be about $7,500 to $10,000 per practitioner. It is very likely that a levy at these levels would cause serious harm by driving practitioners who take fewer appointments out of the market.
Compare this thinking to the outcome in Australia, from ASIC and Treasury.
Insolvency Law Journal article
A good coverage of the state of play in NZ is given by Associate Professor Lynne Taylor of the University of Canterbury in the latest Insolvency Law Journal: (2017) 25 Insolv LJ 98. One item to note is that overseas practitioners are to be excluded from the NZ regime,
“although the Registrar of Companies will have the power to recognize practitioners from yet to be specified overseas jurisdictions”.
Will Australian practitioners be recognised?
Harmonisation?
Some ten years ago, the Australian and New Zealand governments appointed a consultation group to advise on and promote harmonisation between Australian and New Zealand insolvency law. I was a member of that group.
It was abandoned a year or two later.
Pity.
BFSLA conference
Australia and New Zealand, safe harbour, ipso facto, ARITA and RITANZ will all be the subject of the debate at the conference.
As well, senior appeal Judges from each jurisdiction are giving a case law update from their respective jurisdictions.
