THE INSOLVENCY PRACTITIONERS BILL 2010

THE INSOLVENCY PRACTITIONERS BILL 2010 PETER WHITESIDE, CHAIRMAN (Date goes here) AIMS AND IMPLICATIONS INTRODUCTION Following an extensive consultation process as part of its overall review of insolvency law, on 27 April 2010 the Government introduced into Parliament the Insolvency Practitioners Bill which provides for a negative licensing regime for insolvency practitioners. The key provisions of the Bill are: A new power given to the Registrar of Companies to prohibit insolvency practitioners from undertaking insolvency work (liquidations, administrations and receiverships) if the Registrar is satisfied that the person is unfit to act as an insolvency practitioner because of the person's persistent or serious failure in the previous five years to comply with the Companies Act 1993 and Receiverships Act 1993; The establishment of a public register of persons who have been prohibited or restricted from acting as an insolvency practitioner by the Registrar of Companies or by the High Court; An alteration to the provisions of the Companies Act 1993 adding further grounds for disqualification from appointment as a liquidator of a company 1 ; Aligning the grounds of disqualification for appointment as a receiver with the grounds for disqualification for appointment as an a liquidator under the Companies Act 1993; The High Court to have the power to make a prohibition order prohibiting a person acting as a receiver for an indefinite period of time to align the Receiverships Act 1993 and the Companies Act 1993. This Bill has been introduced in response to concerns held by creditors, insolvency practitioners and professional bodies such as the Institute of Chartered Accountants of New Zealand ("ICANZ") and INSOL, that the lack of regulation of insolvency practitioners in New Zealand allowed practitioners without the requisite training or skills, and practitioners who engaged in ethically-questionable practice, to work in the field. In introducing its negative licensing regime, the Government believes it is dealing with the issues that have been identified as to the competency and ethical standards of insolvency practitioners in a cost-effective manner. It is the desire for a cost-effective solution that has led the Government opt for a negative licensing regime, rather than one of the other options which had been discussed during the consultation process. At this stage, the Bill has been introduced to the House but has yet to receive its first reading, and has not been referred to a Select Committee. It was hoped that the new regime would be able to come into force in July 2011, but given the slow progress on the Bill to date, that target is probably unlikely to be met. The implications of the Bill for the majority of insolvency practitioners will be limited as the majority of insolvency practitioners are competent, and are members of bodies such as ICANZ and the New Zealand Law Society, which require certain standards of conduct when acting. However, there will be significant changes for those insolvency practitioners who conduct friendly receiverships, liquidations and administrations, and who also fail to adhere to the requirements set out in the Companies Act 1993 and the Receiverships Act 1993. This paper addresses: The background to this Bill; The key provisions of the Bill; and The implications of the Bill. BACKGROUND 1 The grounds for disqualification of liquidators and administrators under the Companies Act 1993 are the same. In this paper references to liquidators can be taken to include administrators (including deed administrators) unless otherwise stated.

2 In 1999, the New Zealand Government launched a wide ranging review of insolvency law. The aim of the review was to ensure that New Zealand's insolvency laws were adequate for the task, with an aim to improve their effectiveness and modernise them, while taking into account changes in both the domestic and international environments relevant to insolvency law. In 2001, the Law Commission published a study paper "Insolvency Law Reform: Promoting Trust and Confidence". In that paper, the question of regulation of insolvency practitioners was raised. There were two possible options for reform suggested at that time, occupational regulation or an amendment of appointment procedures, particularly for liquidators. As a response to that paper, and as part of the overall insolvency law or review, the Government agreed to amend the Companies Act 1993 to provide that a person should not be able to act as a liquidator if he or she had, within the two years prior to appointment, been the company's accountant or tax advisor, or had a continuing relationship with the company, its majority shareholders or secured creditors. Those requirements were introduced into s280 of the Companies Act 1993 following the passing of the Companies Amendment Act 2006. They can now be found at s280(1)(ca) and (cb) of the Companies Act 1993. In 2004, the Ministry of Economic Development published a draft Insolvency Law Reform Bill Discussion Document. That led to the Insolvency Act 2006, as well as the Companies Act Amendment Act 2006, which included the introduction of the voluntary administration regime and the changes to s280 of the Companies Act 1993 just outlined. In that discussion document, the Ministry of Economic Development highlighted that the issue of regulation of insolvency practitioners was still unresolved. It presented three broad options for reform. The first option was to strengthen the existing statutory measures, in particular by strengthening the Registrar's power of oversight and enforcement, and strengthening remedies against non-compliance, including through the introduction of compensatory orders to allow the Court to order a liquidator to make payment to a company which had been negatively affected by a liquidator's breach of duty. The second option for reform was to introduce a mandatory licensing regime which would require minimum standards of education and experience before a licence to practice is granted, a requirement that practitioners adhere to set ethical standards and on-going requirements as to supervision as well as enforcement. The third option for reform identified was a voluntary accreditation scheme which would divide insolvency practitioners into those who were accredited, and adhering to certain minimum standards of education and experience, as well as ethical guidelines and requirements, in contrast to those who were not accredited and did not have the same "seal of approval". In proposing these options for reform, the Ministry of Economic Development highlighted that it was attempting to reduce the damage that can be caused by practitioners who do not have the requisite skill or experience to undertake insolvency work, and those who do not have an appropriate standard of ethics in their practice, including liquidators who do not investigate voidable transactions, or actions against directors because of an association with or interest in the company in liquidation. There were two harms identified with allowing such practitioners to continue to practise in New Zealand. The first is that it can adversely affect the recovery and rights of creditors, and in particular the amount that is realised through a liquidation or voluntary administration or receivership. That occurs particularly where an insolvency practitioner does not have the requisite skills to effectively identify assets or areas of value in a business, or quickly get to grips with the financial circumstances a business finds itself in. The less tangible harm identified is the damage done to confidence in the credit market by allowing such practitioners to operate. It is difficult to identify and measure credit market perceptions of the New Zealand regulatory regime in relation to insolvency practitioners, but it was noted that there was "an identifiable risk that negative perceptions would act as a barrier to both domestic and cross-border credit capital." 2 It was acknowledged that there was an inconsistency between the approach adopted by Australia and the United Kingdom, which both have licensing systems for insolvency practitioners, and the laissez faire approach taken in New Zealand. It was also noted that the absence of a registration regime for insolvency practitioners in New Zealand affected the ability of New Zealand practitioners to operate in Australia, as the provisions of the Trans- Tasman Mutual Recognition Acts did not apply. In October 2006, the Ministry of Economic Development published Insolvency Practitioner Regulation: Options for Change - a Discussion Document which dealt with proposed changes to the regime in more detail. A particular issue highlighted in that Discussion Document was the comparatively small nature of the insolvency industry. There is only a small number of people actually practising insolvency work as a full-time part of their job, and of those only a small sub-set would be considered as either lacking the requisite skills or not adhering to appropriate ethical standards when conducting the work. 2 Ministry of Economic Development, April 2004 Draft Insolvency Law Reform Bill Discussion Document at page 5

3 The small number of practitioners in the industry affected the feasibility of a mandatory licensing regime, given that the costs associated with it would potentially be quite significant. It was felt that the costs of implementing such a scheme may not, in fact, out-weigh the economic costs associated with allowing inexperienced, unqualified or dishonest practitioners to continue in the industry. That Discussion Document proposed a variant on the licensing regime, by suggesting that a competitive licensing regime be established. A competitive licensing regime involved a Government-appointed approval body, in this case the Registrar of Companies, approving professional bodies that would undertake the admission of insolvency practitioners. In order to qualify as a body allowed to undertake the admission of insolvency practitioners, the body in question would have to establish rules governing members and their admission, and have procedures in place for the investigation of complaints and the undertaking of disciplinary action against members. It was thought that a body such as ICANZ would be able to qualify under such a regime. Notwithstanding the preliminary view in favour of a competitive licensing regime, in June 2008, a consultation paper was circulated to specialist insolvency practitioners stakeholder bodies, such as INSOL and the Joint Insolvency Committee comprising representatives of the New Zealand Law Society and ICANZ. That consultation paper detailed a proposed negative licensing regime. It was agreed at that point that a negative licensing regime would be the most cost-effective way to ensure regulation in light of: The small size of the industry; The likely harm that results from an unregulated industry; The need to ensure that barriers to entry are not set too high; and The need to ensure that regulation did not see a significant reduction in the size of the market of insolvency practitioners after its introduction. The proposal went before Cabinet early in 2010, and the Insolvency Practitioners Bill was introduced into the House of Representatives on 27 April 2010. It has not yet had its first reading. PROVISIONS OF THE INSOLVENCY PRACTITIONERS BILL The explanatory note to the Bill accurately sums up the key purpose behind it. It says: Insolvency practitioners carry out liquidations, voluntary administrations and receiverships. These processes require a practitioner to carry out skilled tasks with sound judgment and integrity. There is general consensus among insolvency practitioners that a very small number of practitioners are continuously under-performing. The law currently provides minimal restrictions as to who can be appointed as a liquidator, administrator or receiver the negative licensing system in the Bill whereby practitioners who fail to comply with their duties can be placed under supervision or prohibited from acting as a practitioner, will achieve much of the same outcome as an annual registration or licensing system would, but at a fraction of the cost. Negative Licensing The first major change in the Bill is the introduction of a negative licensing regime for insolvency practitioners. This is done by the insertion of a new s386g of the Companies Act 1993. That section allows a Registrar to prohibit or restrict persons from acting as insolvency practitioners because the Registrar is satisfied that person is unfit to act as an insolvency practitioner because of persistent 'failures to comply', or the seriousness of a 'failure to comply'. The restrictions take the form of requiring supervision of a practitioner by a person, specified by the Registrar, eligible to be appointed as an insolvency practitioner. The prohibition or restrictions can last for up to five years. Insolvency practitioners are defined to include an administrator, a deed administrator, a liquidator and a receiver. Failure to comply is defined in the new s386g and it means: In relation to an administrator or deed administrator, the same as in s239adv(5) of the Companies Act 1993; In relation to a liquidator the same as in s285 of the Companies Act 1993; and In relation to a receiver, the same as in s36 of the Receiverships Act 1993. Notice must be given in writing to the insolvency practitioner concerned before a decision under the new s386g is made. The notice must state: - The period of the prohibition of supervision, which must not exceed five years; and - If supervision is required, the name of the supervisor and the terms of the condition of the supervision.

4 The notice must also be published in The Gazette 3. When considering whether to prohibit or restrict an insolvency practitioner, the Registrar is allowed to take into account a failure to comply that occurred before the commencement of the section. But, the Registrar cannot take into account a failure to comply that occurred more than five years before the date the notice is given 4. Acting in contravention of a notice of prohibition or restriction will constitute an offence under s373(2) of the Act, with a maximum fine of $10,000.00 payable. There is a requirement placed on the Registrar by way of a new s386h to notify an insolvency practitioner before giving a notice under s386g. The Registrar must: at least 20 working days' before giving a s386g notice give written notice of the Registrar's intention to give a s386g notice to the insolvency practitioner, including details of the nature and terms of the proposed s386g notice and the reasons for it; advise of the right to appeal the Registrar's decision, pursuant to s370 of the Companies Act 1993; invite the person to make representations within 20 working days of receipt of the first notice; and consider any representations made by the insolvency practitioner in question. There will be an ability for the Registrar to vary or revoke a notice given under s386g, provided that the procedure in s386h is followed, unless the insolvency practitioner concerned waives the requirement by giving written notice to the Registrar to that effect. Any variation or revocation of a s386g notice must be published in The Gazette. When the Registrar imposes on an insolvency practitioner a requirement for supervision, then the person who is subject to the supervision notice will be liable to pay the fees and expenses associated with the provision of the supervision, which must be reasonable 5. The Bill also imposes an obligation on the Registrar to establish and maintain a register of persons who are prohibited or restricted from acting as an insolvency practitioner by: A prohibition or supervision notice given by the Registrar under s386g(1); or A prohibition order made by the Court, after the commencement of the section, under s239adv or 286(5) of the Companies Act 1993, or s37(6) of the Receiverships Act 1993 6. The register may, but need not, include details of any prohibition order made by the Court prior to the commencement of the new section. The register must be available for access and searching by members of the public at all times, and it is intended that it will be an electronic register 7. The purpose of the register is set out in a new s366m, and it is to enable members of the public to find out whether an insolvency practitioner is prohibited or restricted from acting as such, as well as to facilitate the administrative, disciplinary and other functions of the Registrar under the Companies Act 1993. The register will need to contain information such as the insolvency practitioner's full name and business address, as well as the details of any prohibition or restriction that the practitioner is subject to, including the date any order came into effect 8. The Registrar has an ability to amend the register for the purposes of updating or correcting the information in it. The Registrar can also omit, remove or restrict access to information in the register he or she is satisfied that disclosure of the information through the register would be prejudicial to the safety of an individual or his or her family 9. It is intended that the register should be searched by the full or part name of any person, or by reference to information such as the date on which a prohibition order took effect. In order to ensure compliance with the Privacy Act 1993, the proposed s386q sets out that the register can only be searched by a person other than the Registrar where it is an individual seeking information about him or herself in accordance with the Privacy Act 1993; to assist a member of the public to find out whether a person is prohibited or restricted from acting as an insolvency practitioner; or otherwise to fulfil the purposes for which the register was established. 3 This is required by a new s386g(2) of the Companies Act 1993 4 Proposed s386g(3) 5 Proposed s386j of the Companies Act 1993 6 Proposed s386k of the Companies Act 1993 7 Proposed s386l of the Companies Act 1993 8 Proposed s386n of the Companies Act 1993 9 Proposed s386o of the Companies Act 1993

5 If a person searches the register for personal information for a purpose that is not one of those set out in s386q then that person must be treated as having breached an information privacy principle under s66(1)(a)(i) of the Privacy Act 1993 10. The negative licensing regime is to be funded from the Liquidation Surplus Account (the "LSA"). The LSA is a statutory fund administered by the Public Trust, and it is primarily contributed to by monies that are not claimed a year after a liquidation has been completed. The Government considered that LSA funds were best to fund the new regime, because the primary purpose of the new regulatory system is to improve and strengthen the competence of corporate insolvency processes, and it seems more appropriate for the general body of creditors to pay for the new system than taxpayers. 11 It is anticipated that the cost of the regime will be sufficiently low that it will be able to be fully funded from the LSA. The Bill amends s316(4) of the Companies Act 1993 to allow for funds in the LSA to be paid to the Registrar to meet, or assist in meeting, the reasonable costs and expenses incurred in exercising powers, performing functions and duties, or providing services under the new sections relating to persons prohibited or restricted from acting as insolvency practitioners. Disqualification Criteria The Bill also alters the disqualification criteria for the appointment of a liquidator, administration and receiver. The grounds for disqualification are the same between the three, with the exception of some specific qualifications in s5(c) and (d) of the Receiverships Act 1993. The first change to the automatic disqualification criteria is the addition of the following categories to s280(1) of the Companies Act 1993 and s5(1) of the Receiverships Act 1993: A person who is the spouse, civil union partner, de facto partner, child or parent of a person who has been a shareholder, director, auditor or receiver of the company or a related company within the two years immediately preceding the commencement of the liquidation; A person who is prohibited from acting as an insolvency practitioner by a notice given under s386g(1)(a); A person who is restricted in any way from being concerned or taking part, whether directly or indirectly, in the insolvency of an overseas company and an order made, or by a notice given, under a law of a prescribed country, state or territory outside New Zealand; A person who is a debtor participating in a no-asset procedure under sub-part 4 of Part 5 of the Insolvency Act 2006; A person who is the subject of a summary instalment order made under s343 of the Insolvency Act 2006; A person who is a lawyer and whose name has been struck off the roll of barristers and solicitors under s242(1)(c) of the Lawyers and Conveyancers Act 2006; A person who is an accountant and whose membership of the Institute of Chartered Accountants of New Zealand has been revoked or suspended by that Institute's Disciplinary Tribunal; A person who has been convicted of a crime involving dishonesty (as defined in s2(1) of the Crimes Act 1961). In relation to the Receiverships Act 1993, s5(1) sets out that a person who is the spouse, civil union partner, de facto partner, child or parent of a person specified in paragraph (b), (c) or (d) of sub-section 1 of s5 will also be disqualified. That accounts for the slight differences between appointments of liquidators and receivers as set out in the two Acts. There has also been an amendment to s281(cb) of the Companies Act 1993. As it currently stands, a person is disqualified from acting as a liquidator if that person or that person's firm, has within the two years before the commencement of liquidation had a continuing business relationship with, amongst others, the directors of the company or any of its secured creditors. That sub-section is amended by removing the reference to secured creditors, which was felt to be too onerous a ground for disqualification in New Zealand's circumstances. The Bill introduces a new sub-section to s395(1), allowing the prescribing of countries, states or territories outside New Zealand for the purposes of the new sub-section of s280(1) which disqualifies people from acting as liquidators if they are restricted from taking part in the insolvency of an overseas company under an order made or a notice given under the law of the prescribed country. It is anticipated that the United Kingdom and Australia will be the first countries prescribed. Amendments to s286 of the Companies Act 1993 10 Proposed s386r of the Companies Act 1993 11 Regulation of Insolvency Practitioners Cabinet Paper, 2010, page 10

6 The Bill amends s286 of the Companies Act 1993 by adding the Registrar to the list of those who can apply to the High Court under that section for an order to enforce a liquidator's duties. This addition is seen as significant in light of the desire that the Bill allow the Court to replace a liquidator, administrator or receiver who is not independent or who has a conflict of interest. It gives the Registrar the same power that he or she currently has in relation to administrators and receivers. It should be noted that in the Cabinet paper presented with the draft Bill, it was said that it was proposed that: The Registrar, creditors and other interested parties will be able to apply to the Court to replace a liquidator, administrator or receiver who is not independent and who has a conflict of interest. 12 This does not appear to have been specifically carried forth into the Bill, which suggests that the existing provisions in s286 of the Companies Act 1993 are actually considered sufficient, particularly with the addition of the Registrar as a party that can make such an application to the Court. Prohibition Orders under Receiverships Act 1993 s37(6) of the Receiverships Act 1993 is amended by the Bill to give the Court the power to make a prohibition order in relation to a receiver for an indefinite period. That alters the current provisions, which only give the Court an ability to prevent a person from acting as a receiver for a maximum of five years. That ensures consistency between the Receiverships Act 1993 and the Companies Act 1993 where the Courts are able to make prohibition orders in relation to liquidators for an indefinite period. IMPLICATIONS OF THE BILL For the vast majority of insolvency practitioners, the Bill will actually have minimal effect. One of the more significant implications will be the ability to accept appointment as a liquidator in circumstances where the practitioner's firm has an unrelated relationship with a secured creditor of the company to be liquidated. The removal of that ground of disqualification from s280 of the Companies Act 1993 can only be described as sensible in light of the small nature of the New Zealand business community, and the ability for a firm in which an insolvency practitioner works to have unrelated business dealings with a secured creditor, which would not affect the carrying out of liquidation in accordance with the duties set out in the Companies Act 1993. Where there is a clear conflict, then practitioners would be advised not to take the appointment, notwithstanding the amendment to s280. The introduction of the negative licensing regime will, it is hoped, lead to insolvency practitioners not currently meeting the standards required for practice to depart prior to the regime coming into effect. However, it is unclear if that will take place, and the practical application of this negative licensing regime will be interesting to see. First, there will need to be a significant increase in resourcing of the Registrar to ensure that complaints regarding the behaviour of insolvency practitioners are properly investigated in light of the fact that such complaints can now lead to restrictions being placed on that practitioner's ability to practise. In current economic circumstances, the Registrar has a significant workload, not just in relation to complaints about insolvency practitioners, but also in relation to other statutory functions such as complaints about the conduct of company directors. The intent of the Bill will ultimately be defeated if the Registrar is unable to investigate complaints and actually exercise the new powers he or she is to be given. Second, in that regard, the provision of funding from the LSA should assist in the resourcing. It also economically makes more sense to have the general pool of creditors pay for this negative licensing regime than to have a mandatory licensing regime where insolvency practitioners have to bear the cost. That is because, ultimately, such costs would end up becoming costs of liquidations or receiverships which would be paid from the companies in liquidation or receivership, and would ultimately see a reduction in the pool of funds available for distribution to creditors. Third, only those who consciously do not comply with provisions of the Companies Act 1993, the Receiverships Act 1993 and associated regulations, are likely to do so. It is unlikely this negative licensing regime will lead to any immediate change in the behaviour of practitioners who undertake work outside their field of competence. For example, an accountant practising in a rural area will likely still accept receiverships despite not having skills in managing a going-concern. Because there are no competency requirements before practice commences (rather you are removed from practice for incompetence, for example), that scenario can still occur under this negative licensing regime and will likely only stop if practitioners who do so have s386g notices issued against them. However, the focus of the Registrar is likely to be on questions of ethical conduct rather than competence, particularly given, in some circumstances, it is difficult to objectively quantify whether a liquidation or receivership has been incompetently handled. Accordingly, the issue of s386g notices to practitioners taking appointments 12 Regulation of Insolvency Practitioners Cabinet Paper, 2010, page 3

7 outside their expertise will probably be limited. This may be acceptable in the short to medium term, given the small nature of the industry, but it will need reviewing as the New Zealand economy develops and the industry becomes larger and more sophisticated. Fourth, the additional grounds of disqualification added into s280 of the Companies Act 1993 and s5 of the Receiverships Act 1993 should go someway to ensuring that unsuitable persons are not appointed as liquidators or receivers. Those additional grounds should be welcomed for that reason. One negative implication that this Bill may have for insolvency practitioners is an increase in compliance costs, particularly if there is a surge of complaints to the Registrar about the behaviour of practitioners and an increasing number of investigations of them. That can occur from vexatious and distressed directors and shareholders, and also from disgruntled creditors. It may well be that practitioners end up spending an increasing amount of their time fending off allegations that they have failed to comply. The increasing alignment between the provisions of the Companies Act 1993 and the Receiverships Act 1993 can only be regarded as sensible. That is notwithstanding the fact that there can be different skills required of an insolvency practitioner in a receivership as opposed to a liquidation. However, the same commitment to adequate professional standards needs to be maintained regardless of the type of insolvency work that is being carried out. Allowing the Court to prohibit an individual from acting as a receiver indefinitely, in line with the Companies Act 1993, is a move in the right direction. From the perspective of the public, the introduction of a public register listing those who are subject to prohibition and restriction orders will help give members of the public confidence they are dealing with reputable insolvency practitioners. Interestingly, notwithstanding the increasing convergence of New Zealand and Australian insolvency law, we have still opted to adopt a very different approach when it comes to the regulation of the insolvency industry compared with Australia. In Australia there are registered liquidators and official liquidators. The licensing regime is managed by the Australian Securities and Investment Commission ("ASIC") which considers applications to become a liquidator. Any applicant to become a liquidator must be: A member of the Institute of Chartered Accountants in Australian, the Australian Society of Certified Practising Accountants, or one of a number of comparable bodies in New Zealand, the United Kingdom and the United States; Hold tertiary qualifications in accounting and commercial law; or Have other qualifications and experience that in the opinion of ASIC are equivalent to the above qualifications; and ASIC must also be satisfied: As to the experience of the applicant in connection with company insolvency work; and That the applicant is capable of performing the duties of a liquidator and is otherwise a fit and proper person to be registered as a liquidator 13. Liquidators must also demonstrate they hold appropriate professional indemnity and fidelity insurance before ASIC will register them, so that any claims against liquidators arising from their misconduct, or their staffs' misconduct, will be able to be covered. There is no separate criteria for becoming an official liquidator, but a person needs to be a registered liquidator before becoming an official liquidator, and also official liquidators are able to undertake court ordered liquidations. There are on-going requirements for registered liquidators, including the need to perform adequately and properly the duties of a liquidator, or other functions carried out by the registered liquidator which can only be performed by a registered liquidator. There is also a need to file reports every three years, with a registered liquidator expected to update ASIC on whether he or she is still practising, and also what continuing education has been undertaken 14. Clearly, the Australian regime is far stricter than New Zealand. As mentioned earlier, because New Zealand does not have a licensing regime similar to that of Australia then the provisions of the Trans-Tasman Mutual Recognition Acts do not apply, and practitioners will have to meet the separate requirements of the Australian regime if intending to practise in that country. 13 Summary taken from Ministry of Economic Development, April 2004 Draft Insolvency Law Reform Bill Discussion Document at Appendix Two 14 For more information on the Australian regime, visit www.asic.gov.au

8 In light of the small size of the New Zealand industry, the negative licensing regime adopted by the Government is perhaps the most economically effective one. However, it should be kept under review. As insolvency work and the number of insolvency practitioners continues to grow, it will be seen as increasingly important that there is an appropriate framework in place in ensure that insolvency work is only carried out by those with appropriate qualifications and skills, and who adhere to appropriate standards of professional practice. It is important not just for the creditors who are the primary winners and losers in an insolvency situation, but also for international confidence in the New Zealand credit markets. Overall, the impact of this Bill will be limited although there is a distinct possibility that there will be a reduction in the size of the insolvency practitioners market in the near future once this is introduced. That will hopefully occur through the voluntary leaving from the industry of those who lack the skills or appropriate standards of professional practice. CONCLUSION In summary, the Insolvency Practitioners Bill introduces light-handed regulation of insolvency practitioners. The negative licensing system is seen as a cost effective way to restrict or prohibit the operation of practitioners lacking the requisite skills and experience, or who do not adhere to appropriate ethical standards while practising. Whether it is effective in doing so will depend on how vigorous the Registrar is in investigating complaints and issuing s386g notices.