Efforts to create a harmonious transtasman business environment have extended to company failures, with the Australian and New Zealand Governments agreeing to start work on streamlining insolvency regulations.
Commerce Minister Simon Power and Australian Corporate Law Minister Nick Sherry have jointly announced a project to review cross-border insolvency procedures.
"The
current global financial crisis makes this work particularly relevant as there are likely to be more companies with interests on both sides of the Tasman under financial distress," Power said.
The aim was to avoid complexities and duplication of tasks, thereby saving on administration costs, the minister said.
Insolvency practitioner Jeff Meltzer said his firm had seen an increase in transtasman company failures in the past year, particularly voluntary administrations.
He said streamlining would make life easier. "More and more insolvencies do have a transtasman flavour to them, there is no doubt."
With virtually all New Zealand banks owned by Australia, he said, "all the large decision-making when it relates to New Zealand insolvencies comes out of Australia".
Meltzer is the New Zealand administrator of Australasian manufacturer Nylex, maker of the Esky brand, which is now in receivership and administration.
He said there were inconsistencies between the voluntary administration regime in New Zealand and in Australia that had required work to clarify.
"I'm not quite sure that is necessary."
Meltzer said New Zealand and Australian insolvency law was similar so it should not be difficult to align the two regimes. However, one big area of difference was in the priority of creditors.
The Australian Tax Office's status as a preferential creditor was not the same as the New Zealand Inland Revenue Department's.
In Australia directors of failed companies had more personal liability for ensuring bills such as GST and PAYE were paid than they did in New Zealand.
This could be waived if the company went into voluntary administration, but that provision was not available in New Zealand.
Kensington Swan senior associate Tyrone Cooley agreed priority of creditors was an issue.
However, he believed lawmakers might still look at the concept of a single insolvency regulation across New Zealand and Australia.
Both countries had implemented a United Nations model law on cross-border insolvency in the past few years, and a single insolvency proceeding had been talked about at the time.
He said the insolvency industry saw the review as a good move.
"Definitely, it should reduce costs, expedite the insolvency process and hopefully result in a larger return to creditors."
