27 October 2006

Law provides new insolvency options for companies

Creditors and directors of failing companies will in future have more flexible and effective methods to deal with financial distress under changes to New Zealand's insolvency laws passed by Parliament today, Commerce Minister Lianne Dalziel says.

"A key feature of the Bill is the adoption of a voluntary administration regime for companies in financial distress, as a potential alternative to liquidation. The new process will provide a 'breathing space' for administrators to assess the company's viability to continue trading before deciding whether to rehabilitate the company by entering into a deed of company arrangement with the creditors, or enter into liquidation," Lianne Dalziel said.

Lianne Dalziel said that the Australian model had seen increased returns to creditors and she was confident that similar benefits would occur here.

Other major provisions restrict the abuse of phoenix company structures by directors of failed companies intending to defeat the legitimate interests of creditors, and improve mechanisms for dealing with cross-border insolvencies.

The Bill repeals and replaces the Insolvency Act 1967, amends insolvency provisions of the Companies Act 1993 and creates new legislation on cross-border insolvency. The legislation will be implemented later next year once the regulations are in place.

Earlier this month Lianne Dalziel also released a discussion document to further explore industry attitudes to regulation of insolvency practitioners after submissions to the Bill overwhelmingly supported the establishment of a regulatory framework. Submissions close 2 February 2007.

ENDS

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