Proposing an Alternative to Bankruptcy: Part XV in Retrospect

Abstract

With the arrival and subsequent repercussions of the 1987 worldwide sharemarket crash, the instances of businesses and individuals alike facing insolvency in New Zealand has escalated at an unprecedented rate. A large number of these insolvencies ultimately resulted in bankruptcy for individuals under the Insolvency Act 1967. Accompanying the growth in bankruptcies was a desire to avoid the restrictions and utilise alternatives to satisfy the demands of creditors. One such alternative is a proposal under Part XV of the Insolvency Act or an arrangement under Part X of the Bankruptcy Act 1966 (C'th). Utilisation of proposals as an alternative to bankruptcy has mirrored the growth in insolvencies in New Zealand if the number of judicial decisions is taken as the measure. This article investigates and critically evaluates proposals filed under Part XV of the Insolvency Act 1967. Proposals were first introduced with the 1967 consolidation and amendment to the Insolvency Act 1956. Part XV of the Insolvency Act provides the procedure for securing creditor acceptance and gaining court approval of a proposal.