Part of the Ministry's Strategic Direction is ensuring that New Zealand's regulatory institutions can be effectively monitored and that business regulations are enforced. This in turn promotes accountability and responsibility in business practice.

The NEU is responsible for the investigation, and where appropriate the prosecution, of delinquent bankrupts and company directors under various enactments on behalf of the Official Assignee and the Registrar of Companies. The NEU is also responsible for the preparation of prohibition reports on behalf of the Registrar.

LEGISLATION:

1. Insolvency Act 1967
2. Companies Act 1993
3. Securities Act 1978
4. Securities Act (Contributory Mortgage Reg) 1988
5. Financial Reporting Act 1993
6. Crimes Act 1961
7. Superannuation Schemes Act 1989
8. Electricity Act 1992
9. Motor Vehicle Sales Act 2003
10. Radio Communications Act 1989

Free access to copies of all legislation

HISTORY of the NEU

In 1999 Shane Keohane was appointed Manager of the National Enforcement Unit in Auckland. The purpose of the Unit is to investigate allegations and where sufficient evidence exists, to consider possible prosecution action for breaches of legislation.

The first year of operation was spent establishing a Unit that would be capable of addressing a variety of issues, including the development of policies and strategies to deal with these issues in a professional manner. This involved clearing a backlog of work and the commencement of a recruitment process. By the second year of operation, the Unit had exceeded its targets with regard to investigations and prosecutions. The Unit had also made significant progress in terms of structure, and had gained respect within the commercial sector.

Creditors and practitioners have commented regarding the success the Unit has achieved through having dedicated and properly trained staff on board. The Unit has not only succeeded in bringing about numerous prosecutions, but also breaches of the Insolvency Act 1967 not previously considered have been brought before the courts. Alternative charges have been considered as a method for minimising the growing trend of associates who front for bankrupts to allow them to continue to run businesses or trade.

One of the biggest challenges facing the Unit was that of education, not only of the bankrupt, but also of creditors and practitioners regarding the purpose and role of the Unit. This is an ongoing exercise and will continue to be promoted through presentations and publicity generated through the successes of the Unit itself.

There is a perception that 'Bankruptcy is a Crime". It is not an offence to be bankrupt, however at the time of adjudication a bankrupt is restricted to certain conditions related to bankruptcy. It is an offence to breach these conditions and duties imposed on a bankrupt as outlined under Section 60 of the Insolvency Act 1967.

It is important for the public to be aware that the National Enforcement Unit is in operation and that should there be sufficient evidence to support breaches, and if it is in the public interest or it is merited, action can be taken.

DIRECTOR PROHIBITIONS / BANNED DIRECTORS

In addition to investigation and prosecution of offenders under the various legislation identified, the NEU also assesses and determines whether candidates should be prohibited from being directors of a company under section 385 of the Companies Act 1993.

The purpose of the prohibition process is to review persons that have been involved as a director or manager in:

	One or more companies that have failed within the previous five years, and where
	Mismanagement is at least a potential cause of the associated failure or failures.

Among the reforms introduced by the 1993 Companies Act legislation was a significant amendment to the power of the Registrar of Companies to prohibit directors or managers of failed companies from future directorships or management positions. This affirms the accountability of directors to Creditors and Shareholders demanded by the Companies Act 1993.

The key background to sec 385 of the Companies Act 1993 is:

	To protect the public from directors or managers who have a track record of commercial failure.
	To protect the public and business from losses caused by dishonesty, irresponsibility, or mere incompetence.
	To protect against those who use limited liability to abuse its privileges and place the public at risk.

The object is not, however, to use it against merely unsuccessful entrepreneurs so as to stifle all enterprise.

It is not so much a penalty for past misconduct but a method of protecting the public from future misconduct.

The NEU is operated by the Ministry of Economic Development (www.med.govt.nz).

Street Address:
Level 18, ASB Building
135 Albert Street
Auckland, New Zealand

Facsimile: (09) 915-6313