Statement of Consultation Undertaken
A public discussion document relating to phoenix companies was released by the Ministry of Economic Development in January 2001 as part of tier one of the insolvency law review (although the phoenix companies topic was then deferred to tier two). Thirteen submissions were received from organisations, individuals and government departments with an interest in insolvency issues.
The public discussion document did not refer to the idea of imposing restrictions on the re-use by directors of the names of insolvent companies, although three submitters still referred to their support for restrictions on the re-use of the names of insolvent companies.
Most submitters were in favour of the availability of criminal penalties when a director is shown to have acted in bad faith to defeat the legitimate interests of creditors. However, three submitters were against the idea. The reason given by one was the difficulty and cost involved in proving an offence, another considered that it was pointless if they were rarely pursued, and the third considered that the existing criminal penalties were sufficient to deal with the more serious offences committed by directors. The Ministry of Economic Development considers that even if it would only be rarely pursued, it would still be beneficial to have an additional criminal offence available for situations where the Registrar of Companies decides to take action against a director.
A draft copy of the phoenix companies Cabinet paper was sent to the Ministry of Consumer Affairs, Inland Revenue Department, the Department of Labour, the Ministry of Justice, the Department for Courts, the Treasury, Te Puni KÅkiri, and the Department of the Prime Minister and Cabinet. All suggested changes identified by these stakeholders have been taken into account. The Department of Labour remained unconvinced that the proposals "will have any clear positive impacts for creditors or on the behaviour of directors".
The draft copy of the phoenix companies Cabinet paper that was sent to the departments listed above proposed that criminal penalties should not be available where a director is shown to have acted in bad faith to defeat the legitimate interests of creditors. The Ministry of Economic Development has since changed its view. The Ministry of Justice was asked if it still supported the availability of criminal penalties where a director is shown to have acted in bad faith to defeat the legitimate interests of creditors, but no reply was received.
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