A KPMG partner is lobbying the Government to offer insolvent companies protection against creditors when laws are restructured later this year.
Kerryn Downey said the IRD's preferential debt-collection right should be dumped and companies should have "rehabilitation models", much like the chapter 11 protections of the United States orthe voluntary administration of Australia.
Such measures, said Downey, gave businesses with financial problems time to be restructured.
Downey, who believes New Zealand's insolvency laws are "third world", has put together a paper on the subject in answer to the Ministry of Economic Development's discussion paper on the issue, released last year.
He said New Zealand's insolvency laws were biased and a model based on Australia's voluntary administration would be better in the long term for all stakeholders.
Adopting an Australian-type regime would mean removing the Inland Revenue Department as a preferential creditor.
Downey is also concerned that under New Zealand's law there is no automatic stay against creditors. "This is the single most obvious problem, together with a lack of prescriptive rules, reporting requirements and time frames," he said.
Under Australian law companies are put into voluntary administration through a board resolution, by a secured creditor or by a liquidator.
After the company has been put into administration there is a month-long hiatus on creditors' rights. Irene Chapple
Mimicking Australia's Voluntary Administration would make trans-tasman business easier, says Downey.
"To adopt a radically different regime would be unwise given the close and often co-mingled business ties between the two countries.
"The benefits of co-ordinating with Australia would outweigh the costs."
