New bankruptcy rules aim to protect consumers

Changes to insolvency law announced by the Government will include requirements to honour 50 per cent of the value of gift cards or vouchers held by consumers, Commerce and Consumer Affairs Minister Kris Faafoi says.

‘‘When a business is insolvent, these consumers are often left out of pocket. We are changing the law to require businesses that go into receivership, administration or liquidation but continue to trade, to honour at least 50 per cent of the value of the gift card or voucher.’’

Typically, when a retailer is placed in receivership or liquidation, the owners of gift cards or vouchers stand at the back of the queue of creditors owed money, behind staff, the IRD, banks, and any other secured creditors, alongside other unsecured creditors.

When Dick Smith collapsed just after Christmas 2015, its vouchers – many of which were recently purchased gifts – became worthless.

The Government is also improving protections for other creditors, including employees.

‘‘We’re extending the scope of the entitlements for employees of failed companies, so that both payments in lieu of notice and long service leave will be protected in the same way as wages.’’

Another change involves making insolvency law fairer for businesses that provide goods and services to failed companies in good faith.

‘‘Right now, the law allows liquidators to reverse transactions made by a company up to two years before they are put into liquidation.’’

Faafoi said this was too long a period for any creditor to be uncertain about whether an amount they received in good faith will have to be recovered.