Issues of Insolvency

In February 2003, the Minister of Commerce announced several key changes to New Zealand's insolvency laws based on the its review on the Commission's guidance (Insolvency Law Review ("Law Changes"), 2003). Perhaps the most crucial change announced by the Minister of Commerce is that New Zealand will enact legislation that introduces a company rehabilitation method similar to that available in Australia (Insolvency Law Review ("Law Changes"), 2003).

The impetus behind this adjust was the belief that this kind of a technique could decrease the variety of insolvent corporations that go into liquidation (Insolvency Law Review ("Law Changes"), 2003). For example, Minister Dalziel mentioned that, in Australia, the quantity of organizations that go into rehabilitation instead of liquidation has elevated from 20 percent to 64 percent under their scheme. The proposed adjust to New Zealand law, therefore, is an attempt to address the reality that most insolvent businesses in New Zealand end up in liquidation. Increasing the number of businesses that rehabilitate instead of liquidate is an attempt to reduce the economic damage caused by layoffs though increasing creditor recovery.

However, the Ministry did not select to follow the Australian scheme to the extent of imposing moratoriums on claims by secured creditors during rehabilitation. In its review from the Law Commission's report, the Ministry disagreed that this kind of a moratorium was required in New Zeal Ministry of Economic Development. "Insolvency Law Changes Announced: Media Statement by Hon Lianne Dalziel, Minister of Commerce." Insolvency Law Review (18 February 2003). Accessed on the net 30 October 2003. WWW: <"http://www.med.govt.nz/ri/insolvency/minister_20030218.html">. Finally, 1 in the difficulties with New Zealand's insolvency law has been the rise of "phoenix companies," which bear the same name being a company that has undergone insolvency proceedings. For example, from the case with the insolvency of New Zealand Stevedoring Limited, 3 corporations had been sold to a related business and the proceeds of the sale were insufficient to pay all employee claims.

Though the Registrar of Firms discovered no wrongdoing, the situation raised the question with the priority of employee redundancy payments under New Zealand's insolvency laws. Although the Ministry of Economic Development has recently decided that redundancy payments shall not be granted increased priority under the laws, this difficulty remains volatile. On the other hand, in the recent announcement of proposed changes, the Ministry announced elevated criminal penalties for your damaging faith use of phoenix firms and restrictions on the re-use of company names after insolvency proceedings (Insolvency Law Review ("Law Changes"), 2003).

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