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Graeme McDonald and John Vague attended a Business Law Reform seminar in Wellington on Thursday, 22 November 2001. At that seminar Laila Harre, the Associate Commerce Minister, announced changes to the laws dealing with preferential payments.
You may be aware, that both Graeme and John, other Insolvency Practitioners, the Law Commission and the Credit & Finance Institute have made submissions recommending that the amount of preferential payments should be reduced so that the amount which will be available to unsecured creditors can be maximised. In the circumstances we found it hard to come to grips with the announcements of the Minister.
Whereas it had been suggested that the Inland Revenue Department should rank as an unsecured creditor for GST and PAYE it was announced the department would retain its priority. Not only that, the existing priorities in respect of individuals would be increased. At present an employee has a priority of $6,000 in respect of wages going back for four months and for holiday pay. That priority has now been increased to $15,000 and also includes redundancy. Redundancy in the past has never been regarded as preferential.
We find the new legislation to be anti business. Certainly the rights of unsecured creditors have again been eroded. We believe that there will be less incentive for businesses to set up as they will find it even more difficult to obtain money from banks under the security of a debenture. At one stage the security of a debenture was valuable. This is no longer the case.
For a full copy of the Associate Commerce Minister Laila Harre's address, along with media releases:
1.Ministerial Announcement
2.November 22 2001 - Media Statement
3.Herald Article
4.Insolvency Law Reform
DISCLAIMER
This article is intended to provide general information and should not be construed as advice of any kind. Parties who require clarification on issues raised in this article should take their own advice.