The New Zealand government has released a discussion paper on proposed regulations concerning fees and other arrangements in preparation for the commencement of the co-regulatory scheme for insolvency practitioners in June 2020.
Excluding the accredited bodies’ fees, proposed government fees payable by each insolvency practitioner are a new registration fee of $170, and an annual fee of $105, with the costs of regulation of the profession proposed to be recovered by a levy on all companies of $1.15 (all in NZD).
Under the co-regulatory scheme of the Insolvency Practitioners Regulation Act 2019
- 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; and
- the Registrar of Companies will be responsible for oversight of the accredited bodies. Oversight includes accreditation of bodies, ongoing monitoring and reporting, and corrective action to ensure the quality and effectiveness of the accredited bodies’ regulatory systems and processes. The Registrar will also maintain a register of insolvency practitioners, which will be publicly searchable.
The paper explains that the co-regulatory approach leverages off an existing voluntary non-statutory occupational regulation scheme that is jointly operated by CAANZ and RITANZ whose joint existing scheme has around 110 “accredited” insolvency practitioners. This is understood to be the majority of insolvency practitioners practising in New Zealand.
The co-regulatory scheme is modelled on that under the Auditor Regulation Act 2011, under which responsibility is split between CAANZ and CPA Australia as the frontline regulators and the Financial Markets Authority (FMA) as the oversight body.
Regulations are required to prescribe certain aspects of the new scheme. Those concerning fees are of particular interest in Australia.
Fee and levy proposals
Costs of accredited bodies
The co-regulatory scheme will be funded through the accredited bodies which would be responsible for the costs of frontline regulation. These costs are likely to be passed onto practitioners by those bodies but the nature and amount of these costs is not yet known.
Recovery of the Registrar’s costs
The costs of performing or exercising the Registrar’s functions would be recovered through fees and levies set by regulations. The estimated annual cost to the Registrar is NZ$718,824, excluding set-up costs.
The government says that the primary direct beneficiaries of the scheme are determined to be insolvency practitioners and companies.
Therefore, it is proposed that the Registrar’s operational costs be fully recovered through fees to be paid by all licensed practitioners.
“But recovering these costs ($702,000) with an annual levy of about $7,000 per practitioner would not be feasible as a levy of this level would drive some practitioners out of the market, reducing access to insolvency services, or be passed on to businesses and creditors”.
In the end, it is proposed to recover only the cost of the Registrar maintaining the register through two fees charged to insolvency practitioners, a new licence registration fee of $170, and a subsequent annual licence registration confirmation fee of $105.
The remainder, being the cost of oversight of the profession, is proposed to be recovered by a levy on all companies of $1.15 in addition to new company registration fee of $105 and an annual return fee of $36 for all companies. This is based on an estimate of 560,000 companies filing annual returns and 55,000 new company registrations per annum.
Approval of the accredited bodies
The paper also examines the conditions that the Registrar may impose when approving accredited bodies – as to their resources and financial stability, and their governance and organisational structure. Accredited bodies will be required to provide an annual report including details on the number and nature of licence applications, complaints, and disciplinary processes.
Content of the Register
As to the Register, the paper says it should include details of the practitioner’s home jurisdiction.
“Australian insolvency practitioners may carry out insolvency work in accordance with the Act, and practitioners from other jurisdictions could be recognised in the future. The home jurisdiction is that country, state, or territory in which the practitioner ordinarily resides and is entitled to operate. This information will allow users of the register to know if a particular practitioner is regulated in an overseas jurisdiction”.
Submissions close on 15 October 2019.
- NZ’s Official Assignee administers all personal insolvencies in NZ, and can and does administer corporate insolvencies; hence this scheme applies to corporate practitioners only. However RITANZ reports on a recent Members Bill that seeks to bring NZ into line with Australia and the UK by allowing creditors direct appointment of private sector insolvency practitioners, rather than the Official Assignee.
- While this scheme is modelled on the existing auditor registration scheme in New Zealand, it closely resembles the co-regulatory scheme for insolvency practitioners, personal and corporate, applying in the UK, since 1986.
- While the fees of the accredited bodies are yet to be determined, those plus the nominal government fees ($105, $170) would not be in the thousands of dollars imposed on liquidators in Australia by the ASIC Funding Model.
- Professional co-regulatory arrangements are generally less costly and have several other benefits.
- In contrast, Australia maintains a direct government regulator oversight if its insolvency practitioners, separately, by ASIC and AFSA, with the professional bodies of limited consequence under the respective statutory regimes.
- CAANZ explains its side of the NZ proposal here.
For more NZ related comment on this website, search ‘New Zealand‘.