Government needs to shake up insolvency practice

The NBR had a great article on the weekend about the slow burning?Insolvency Practitioners Bill. Written by?Murray Tingey, David Friar and Wayne Hofer from Bell Gully it highlights why there needs to be some controls and licensing around insolvency practitioners.

More than two years after the Commerce Committee reported back on the Insolvency Practitioners Bill, Parliament took up the second reading of the Bill on September 26 ? the next step in what has been a long and protracted process.

Under the current law, the restrictions on who can be an insolvency practitioner (such as a liquidator or receiver) are limited.? You must be over 18, not bankrupt or subject to the Mental Health Act, not related to the company, and not have a dishonesty conviction in the past 5 years.

There is no requirement that the practitioner have any minimum skills, qualification or experience, or even any requirement that the practitioner live in New Zealand.? There are also difficulties in enforcing the requirements as to who can be an insolvency practitioner. ?

Since last year I have a great many stories about the dodgy practices of some so called insolvency specialists…they stories involve blackmail, stand over, threats, and general ratbag behaviour where even bankrupts, former bankrupts and convicted fraudsters are operating in and around insolvency. They are ratbags to a man.

I know of one whose favourite technique is to arrive on the doorstep of victims, announce he has found a great many inconsistencies and is about to go to the Police with the file, but if they pay $20,000 it can all go away…they invariably pay and the liquidation is completed reports filed and the liquidator trousers the blackmail cash. They work hand in hand with other ratbags to subvert bankruptcy requirements and hide assets.

The Commerce Committee reported back on the Bill in May 2011.

It considered that a negative licensing system was not appropriate, for three reasons.? It said that some practitioners do not have the skills to recognise whether a business was viable or not, and which strategy to put in place.

In addition, practitioners may misinform creditors and take advantage of the process for their own benefit.? Further, there would be no systematic monitoring of whether practitioners are acting incompetently and/or dishonestly.

It recommended changing the negative licensing to a registration system, under which all insolvency practitioners would need to be registered.

Many people are unsuspecting when they go see the so-called specialists who they think are going to advise them on how to dig themselves out of the financial trouble besetting them.

Instead these insolvency ratbags take control, raid the assets, sell them back to themselves or associated parties and generally cause a wake of destruction where no one is happy except the ratbag insolvency specialists. Some of these specialists even form a cosy relationship with other ratbags who masquerade as business consultants and they then operate together in order to extort monies from other unsuspecting people working them over in the process.

There are too many stories for these to be happenstance. A clean up is long overdue.

One day soon I am going to start shining some light on these ratbags, very bright lights.