Insolvency Practitioners Regulation Act 2019

The Insolvency Practitioners Regulation Act 2019 regulates insolvency practitioners and sets up an independent oversight system. Its purpose is to promote quality, expertise and integrity in the profession, and compliance with the statutory duties of insolvency practitioners.

For a business owner, the Act is mainly about formal appointments. It tells you when a person must hold a licence, how licensing bodies are supervised, what the Registrar can do, and what separate rule applies if you are appointing a liquidator for a solvent company.

The Act also includes reporting duties, conduct restrictions, investigation powers, inspection powers, and offence provisions. That means it matters both at the start of an appointment and during the engagement itself.

The Act defines an insolvency practitioner to include an administrator, a deed administrator, an insolvent company liquidator, a receiver, and a trustee or provisional trustee appointed under the relevant part of the Insolvency Act 2006.

That means the law is focused on people taking formal statutory insolvency roles. If your business is appointing someone to one of those roles, this Act should be part of your appointment checklist.

The Act says the main licensing rule in section 8 does not apply to an Official Assignee. It also treats solvent company liquidators separately rather than including them in the main definition of insolvency practitioner.

A consultant, accountant or restructuring adviser who is only giving informal advice is not automatically caught. The trigger is the formal appointment being taken, not the commercial label used in discussions or marketing.

Most businesses only look at this Act when something significant is happening. The common trigger is financial distress and a proposed formal appointment. Another common trigger is a shareholder decision to wind up a solvent company and appoint a liquidator.

The Act also becomes important if the proposed appointee is based overseas, if there is a dispute about whether the person can act, or if concerns arise about conduct, records, independence, or connected-party dealings during the engagement.

Because the licensing rule is tied to the exact insolvency engagement being carried out, businesses should check the role carefully. Experience in restructuring or accounting is not enough by itself if the person is stepping into a regulated statutory role.

Section 8 is the core rule. A person who acts as an insolvency practitioner must be a licensed insolvency practitioner whose licence authorises the person to act in respect of the insolvency engagement being carried out and is recorded in the register.

This is more than a general status check. The licence must match the engagement. If your company is appointing someone, you should check both that the person is licensed and that the licence covers the type of work involved.

Acting in breach of section 8 is an offence. The Act states a maximum fine of $75,000. That makes appointment checks a real compliance step, not just administration.

The Act also allows a natural person to apply to an accredited body for a licence. The accredited body must issue a licence if the person meets the prescribed minimum standards, is otherwise fit and proper, pays the prescribed registration fee, and is either a member of the accredited body or covered by the relevant exemption provision.

Section 10 creates a practical short-term rule for overseas insolvency practitioners. Despite the general licensing requirement, a person who is an overseas insolvency practitioner may be appointed to act as if they were a licensed insolvency practitioner for 10 days from appointment.

During that period, the Act applies to the person as if they were licensed and as if their licence were recorded in the register. The visible text also links the deemed authority to the type of insolvency work the person is entitled to carry out in their home jurisdiction.

For a business, this means an overseas appointment may be possible immediately, but you should not stop there. If the engagement will continue, check promptly what ongoing New Zealand requirements apply.

The Act has a separate rule for solvent company liquidators. The overview provision says a person who acts as a solvent company liquidator must be a licensed insolvency practitioner, a lawyer, a chartered accountant, or a member of a recognised professional body.

The interpretation section also uses the term qualified statutory accountant. In practice, that means businesses should check the current statutory wording that applies at the time of appointment rather than relying on shorthand descriptions.

This matters for shareholder-led wind-ups of companies that can pay their debts. A person may be eligible to act in a solvent liquidation even if they are not relying on an insolvency practitioner licence, but they still need to fit one of the permitted categories.

The Act also creates an offence for acting as a solvent company liquidator without meeting section 68. The maximum fine is $50,000.

The Act does not leave licensing to private bodies without supervision. A person, or 2 or more persons acting jointly together, may apply to the Registrar to become an accredited body. The Registrar must grant accreditation if satisfied about matters including adequate and effective regulatory systems, prescribed minimum standards, and fit and proper status.

Accreditation can be subject to conditions. Those conditions can relate to procedure, the adequacy and effectiveness of regulatory systems, consent before material rule changes, and other prescribed matters.

Accredited bodies must have rules covering investigation of complaints, disciplinary hearings, appeals, the kinds of conduct for which members or former members may be disciplined, available actions and penalties, eligibility to carry out insolvency engagements, and a code of conduct or ethics.

If an accredited body amends or replaces its rules, it must provide a copy of the new or amended rules to the Registrar for registration within 5 working days.

Accredited bodies must also supply a report and an annual confirmation to the Registrar as specified by the Registrar. The report must cover performance of regulatory functions and material changes to regulatory systems. The annual confirmation must confirm or update licence information held by the Registrar. Failure to supply the report and annual confirmation in accordance with section 37 is an offence with a maximum fine of $50,000.

The Registrar must publish plans and policies, monitor regulatory systems, and may give directions. The Act also allows the Registrar to suspend or cancel accreditation or censure an accredited body in some circumstances.

The Registrar may start an investigation, take over an investigation started by an accredited body, or investigate jointly with an accredited body if satisfied on reasonable grounds that it is in the public interest to do so.

There are limits. The Registrar must not investigate the conduct of a member of an accredited body in respect of an insolvency engagement unless the accredited body has decided not to investigate, is not investigating promptly or reasonably, or has asked the Registrar to act. The Registrar also may not act under this subpart if the conduct is, or has been, the subject of proceedings before a disciplinary body.

An accredited body must give all reasonable assistance to the Registrar for an investigation involving one of its members. The Registrar may require information, documents, reproduction of stored information in usable form, and attendance to give evidence.

An accredited body commits an offence if it fails to comply with its assistance duty or a notice, or otherwise hinders, obstructs or delays the Registrar in carrying out an investigation. The maximum fine is $30,000.

The Act also contains direct restrictions on insolvency practitioners, including restrictions on purchase of assets and on purchase of goods or services from a person connected with the practitioner. Those provisions matter where independence or connected-party dealings are in issue.

There is also a duty on insolvency practitioners to report serious problems, along with provisions on further assistance, confidentiality, publication or disclosure conditions, and protection for people who report serious problems.

Before appointing anyone, keep a simple file showing what you checked and why you were satisfied. This is especially important when the company is distressed and decisions are being made quickly.

If the appointment is challenged later, a clear record can help show that directors or shareholders took sensible steps to verify the appointee's authority and suitability. It can also help your lawyer or adviser respond faster if concerns are raised by creditors, shareholders or the Registrar.

Schedule 1 can materially affect whether the Act applies to an appointment. The key date is the date on which section 8 came into force, because the schedule defines that as the commencement date for these transitional rules.

The Act does not apply to listed insolvency engagements already underway before that commencement date. That includes a company liquidation where the liquidator was appointed before the commencement date, a company administration already underway, a deed of company arrangement already executed, a receivership already underway, and certain trustee or provisional trustee appointments already made.

Schedule 1 also created a transitional licensing rule. A person who was an accredited insolvency practitioner on the commencement date and satisfied any transitional requirements was treated from that date as a licensed insolvency practitioner holding a transitional licence recorded in the register.

That transitional treatment ended in the situations listed in clause 3. These include where the practitioner failed to apply for a licence before the end of the 4-month date, where the application was refused, where a licence was issued, or where no decision had been made by the end of the first anniversary.

There is also a special rule for some pre-commencement company liquidations. If, on the first anniversary, the liquidator was not a licensed insolvency practitioner, the liquidator had to resign on the first anniversary unless the stated exception applied. If that rule applied, the amended Companies Act provisions and this Act applied to the liquidation from the first anniversary.

The Act received Royal assent on 17 June 2019. Some provisions came into force on 18 June 2019, including the preliminary provisions, the Registrar's power to prescribe licensing and other matters, accreditation provisions, certain policy and direction provisions, the exemption framework for certain overseas practitioners and others, and miscellaneous provisions.

The rest of the Act was brought into force on 1 September 2020 by the Insolvency Practitioners Regulation Act Commencement Order 2020. The legislation identifies the Act as in force.

Before acting for an operational decision, businesses should still check the current version of the Act and any related rules, notices or directions that affect licensing, accreditation, reporting or register details.