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Business Law Reform Bill Submission
6 July 2001
Marian Kljakovic
Competition and Enterprise Branch
Ministry of Economic Development
P O Box 1473
WELLINGTON
Dear Ms. Kljakovic
BUSINESS LAW REFORM BILL 2001
I am pleased to submit the comments of INSOL New Zealand, on the Business Law Reform Bill 2001. INSOL is the New Zealand Chapter of INSOL International, the professional organisation of insolvency practitioners.
While we applaud the Ministry's intention to undertake the necessary housekeeping to smooth legal procedures relating to business, we have reservations concerning some of the proposals:
Disclosure of Directors Addresses
The discussion paper proposes the abolition of the requirement to record the residential addresses of company directors, on the grounds of personal privacy.
As insolvency practitioners, we are often faced with the need to communicate with directors of companies who may not wish to be contacted. The need to serve documents for example, can easily be frustrated where a company does not have its own office, relying instead on the office of a professional firm. Also, in the case of a liquidator appointed by the Court, it is essential that the liquidator can make early contact with the directors of the company, in order to protect assets and comply with the tight constraints of the reporting regime under Section 255 of the Act.
We suggest that the right of limited liability granted by the Act, requires that the persons responsible for the governance of companies must be accessible, if the protection of creditors rights is not to be frustrated. The provision of a post box address for directors is not consistent with this obligation.
Recommendation:
That Directors continue to be required to record their private address on the register of companies.
Automatic Prohibition on Being a Director
The discussion paper proposes the removal of Section 382, which provides for automatic prohibition on being a director in certain circumstances involving conviction for offences, or judgement being granted under the Securities Amendment Act 1998. It leaves in place the rights to prohibit directors under Sections 383 and 385.
In our view there would appear to be no valid reason for repealing Section 382. The provisions of section 383 and 385 require that a Court or the Registrar determine that an action should be taken, whereas Section 382 comes into effect without the requirement for independent determination, or legal action.
With the increasing cost of litigation, as evidenced by the recent proposal to increase Court fees, many of the actions contemplated by Section 382 may never come to the courts. This is because creditors or affected investors, may judge the cost of proceedings as being excessive, when measured against their possible recoveries from the action.
Recommendation:
We strongly urge that Section 382 not be appealed
Distress and Replevin Act 1908
The discussion paper proposes to elevate the rights of a landlord in respect of personal property, to prevail over a security interest under the Personal Property Securities Act.
Our understanding was that the Personal Property Securities Act, was enacted in order to provide a clear means of determining the rights of persons, based on their registration under the Act.
To now grant preference to an interest under the Distress and Replevin Act 1908, will merely serve to undermine the certainty which the Personal Property Securities Act attempts to introduce into this area. We cannot support this attempt to interfere with a system of clear priorities established by electronic registration. If landlords wish to seek preference over other creditors, they should be encouraged to register their interests under the Personal Property Securities Act.
Recommendation:
We do not support any change to grant preference to a landlord's rights of distress, over creditors having registered interests in property under the Personal Property Securities Act.
The writer can be contacted at 09 377 3099, if you require clarification on any of the points raised in our submission.
Yours faithfully
Paul Sargison
Chairman INSOL New Zealand
DISCLAIMER
This article is intended to provide general information and should not be construed as legal advice. Parties who require clarification on issues raised in this article should take their own legal advice.