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Australian restructuring Insolvency & Turnaround Association (ARITA)

 Selected Extracts from ARITA's Code of Professional Practice

(Current version 3, as amended 18 August 2014)


NOTE: A PDF copy of the complete Code of Professional Conduct is available from ARITA's website or from this website.
 ARITA's Explanatory Memorandum to the third edition of the Code is available from its website.


From ARITA Code of Professional Practice,  Part B: The Principles (pages 14 to 16)

Broad Principles

"... The Code applies to insolvency practitioners in so far as they are appointed to, or contemplating appointment to, any Appointment under the Corporations Act or the Bankruptcy Act ...."

     

Principle No.

Principle Applicable to Practitioners

 Details


Conduct
1 In addition to the obligation to comply with the law, Members must exhibit the highest levels of integrity, objectivity and impartiality in all aspects of administrations and practice management. Part C: Guidance - Section 5 of the Code.
     
2 When accepting or retaining an appointment the Practitioner must at all times during the administration be, and be seen to be, independent. Part C: Guidance - Section 6 of the Code.
3 Disclosure and acceptance of a lack of independence is not necessarily a cure. Part C: Guidance - Section 7 of the Code.
     
4 Members must communicate with affected parties in a manner that is accurate, honest, open, clear, succinct and timely to ensure effective understanding of the processes, and their rights and obligations. Part C: Guidance - Section 8 of the Code.
     
5 Members must attend to their duties in a timely way. Part C: Guidance - Section 9 of the Code.
     
6 A Practitioner must not acquire directly or indirectly any assets under the administration of the Practitioner. Part C: Guidance - Section 10 of the Code.
     
7 When promoting themselves, or their firm, or when competing for work, Members must act with integrity and must not bring the profession into disrepute. Part C: Guidance - Section 11 of the Code.
     
8 When dealing with other Members in transitioning or parallel appointments, Practitioners must be professional and co-operative, without compromising the obligations of the Practitioner in their own particular appointment.
Part C: Guidance - Section 12 of the Code.
Remuneration
9 Members must maintain professional competency in the practice of insolvency. Part C: Guidance - Section 13 of the Code.
     
10 A Practitioner is entitled to claim Remuneration, and disbursements, in respect of necessary work, properly performed in an Administration. Part C: Guidance - Section 14 of the Code.
     
11 A claim by a Practitioner for Remuneration must provide sufficient, meaningful, open and clear disclosure to the approving body so as to allow that body to make an informed decision as to whether the proposed Remuneration is reasonable. Part C: Guidance - Section 15 of the Code.
     
12 A Practitioner is only entitled to draw Remuneration once it is approved and according to the terms of the approval.
Part C: Guidance - Section 16 of the Code
Practice Management
13 When accepting an appointment the Practitioner must ensure that their Firm has adequate expertise and resources for the type and size of the administration, or the capacity to call in that expertise and those resources as needed. Part C: Guidance - Section 17 of the Code
     
14 Members must implement policies, procedures and systems to ensure effective quality assurance. Part C: Guidance - Section 18 of the Code.
     
15 Members must implement policies, procedures and systems to ensure effective compliance management. Part C: Guidance - Section 19 of the Code.
     
16 Members must implement policies, procedures and systems to ensure effective risk management. Part C: Guidance - Section 20 of the Code.
     
17 Members must implement policies, procedures and systems to ensure effective complaints management. Part C: Guidance - Section 21 of the Code.
     


From ARITA Code of Professional Practice, pages 40 and 41

Part C: Guidance - Section 6:  Independence

6.13 Pre-appointment disclosure of proposed basis of Remuneration

Where the Practitioner is considering accepting an appointment to the Insolvent, the Practitioner must provide the directors/individual Insolvent with a disclosure of the basis of Remuneration prior to their Appointment. This is not an approval process, but is to ensure that the directors/individual Insolvent are fully informed, in writing, of the Practitioner’s proposed basis of Remuneration, prior to making the appointment.

This requirement does not apply to Controllers, Voluntary Administration appointments made by a Secured creditor or any Appointments made by the court.

Where the Practitioner proposes that they will use hourly rates as the basis of their Remuneration, the scale of hourly rates must be provided in the pre-appointment disclosure.

Practitioners should also include an explanation that:

There is no mandatory requirement to provide an estimate of cost of the Administration to the directors/Insolvent, but where an estimate of the cost of the Administration is provided, it must be:

Practitioners must exercise care in providing an unconditional quote or fixed fee to directors/individual Insolvent prior to accepting an appointment, as this may be perceived to restrict the proper conduct of the Administration. If a fixed fee or unconditional quote is provided, the Practitioner must not ask for a fee approval greater than this amount from the Approving Body.

To reduce disputes regarding what information was provided to the directors/individual Insolvent, Practitioners should obtain the directors’/individual Insolvent’s acknowledgement of receipt of the information regarding the proposed basis of Remuneration and any estimate, quote or fixed fee.

The suggested format for providing pre-appointment disclosure of basis of Remuneration to the directors/individual Insolvent is at 23.2.3.



From ARITA Code of Professional Practice, pages (i) to (iii)

Independence

Topics covered in Section 6

SECTION NUMBER AND TITLE PAGE
6  Independence 19
6.1  The Test of Independence 19
  6.1.1  Not a State of Mind 19
6.1.2   Possible Conflicts - How Real or Perceived? 19
6.1.3   Timing 20
6.1.4   Allegations of lack of independence 20
6.1.5   The Declaration of Independence, Relevant Relationships and Indemnities 20
6.2  Rationale for the Independence Principle 21
6.3  Threats to Independence 21
6.4  Independence of the Firm 23
6.4.1   Previous firms 23
6.5  Trivial relationships 24
6.6   Referrals from other Professionals and Creditors 24
6.7   Ongoing relationships with creditors 25
  6.8   Professional Relationships within two years 26
6.8.1   Exceptions to the two year rule 26
6.9   Professional relationships beyond two years 32
6.10  Relationships with Associates 32
6.10.1   Associate defined 33
6.10.2   Examples of Associates 33
6.10.3   Information to be provided 34
6.11  Concurrent Appointments to related parties 35
6.11.1   Group Company Appointments 35
6.11.2   Individual/Company Appointments 36
6.11.3   Joint personal insolvency appointments 37
6.12  Other Relationships 37
6.12.1   Family 38
6.12.2   Business 38
6.12.3   Friendship 38
6.12.4   Animosity 39
6.13  Pre-appointment disclosure of proposed basis of Remuneration 39
  6.14  Up-front payment for Remuneration 40
6.14.1   Companies 40
6.14.2   Personal Insolvencies 41
6.15  Court appointment disclosure requirements 41
6.15.1   Consent to Act – Court Liquidation 41
6.15.2   Currency of Consents in Court Appointments 41
6.15.3   DIRRI after a Court Appointment 41
6.16  Independence processes and documentation 42
6.17  Format of the DIRRI 43
6.17.1   Content of the DIRRI 43
6.17.2   Additional requirements for appointments under Part X of the Bankruptcy Act 46
6.17.3   The nature of explanations / disclosures in the DIRRI 46
6.17.4   Signing of the DIRRI 47
6.17.5   Timing 47
6.17.6   Replacement Appointees 47
6.17.7   New Information 47
6.18  Post Appointment Actions – threat to Independence Identified 48
6.18.1   Non-precluded Relationships 48
6.18.2   Precluded Relationships 48


From ARITA Code of Professional Practice, page (v)

Remuneration

Topics covered in Section 15

SECTION NUMBER AND TITLE PAGE
15 Meaningful disclosure in Remuneration claims 74
15.1    Recording of Work Done 74
15.2    Bases of calculation 74
15.2.1   Time based charging 75
15.2.2   Prospective Fee Approval 75
15.2.3   Fixed fee 75
15.2.4   Percentage 76
15.2.5   Success or Contingency Fees 76
15.3    Information to be disclosed and when 77
15.3.1   Court requirements 78
15.3.2   Information to be provided for all Remuneration bases 79
15.4    Sources of Funding 88
15.4.1   Department of Employment payments 88
15.4.2   Assetless Administration funding 88
15.4.3   Litigation funding 89
15.4.4   Creditor funding 89
15.4.5   Secured creditor funding 89
15.4.6   Indemnities and up-front payments 89
15.5    General guidance on reporting 89
15.6    At the meeting 90
15.7    Changing basis of Remuneration 90