3. Goals for Reforming the Bankruptcy Administration Procedure
The Government's key goal in reforming insolvency law is to provide an environment that furthers the public interest by maximising the business community's contribution to the New Zealand economy. This can be achieved by fostering an environment which encourages businesses to produce goods and services at least cost, directs scarce resources to areas where they can contribute the most to the economy and fosters innovative ways to meet consumer needs.
A bankruptcy administration regime should be predictable and as simple as possible. The cost of aiming for a simple system is lost flexibility. Having a system that manages financial failure as quickly and efficiently as possible will reduce the costs of failure for everyone involved. Given the nature of the New Zealand market-place, the system for administering financial failure should not stifle innovation, responsible risk taking and entrepreneurialism by excessively penalising business failure. However, bankruptcy should have a deterrent role by providing clear signals to individuals that commercial misconduct or dishonesty is unacceptable behaviour.
The system for administering financial failure must also seek to maximise creditors' returns by providing flexible and effective methods of insolvency administration and enforcement that encourage early intervention when financial distress becomes apparent. The costs of not seeking to maximise returns to creditors will be a decrease in certainty in the market.
For debtors, a procedure that enables them to be discharged of outstanding debt, in appropriate circumstances, will enable them again to participate fully in the economic life of the community.
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