Large majority of insolvency administrators comply

The Australian Securities and Investments Commission (ASIC) has found that “the large majority” of registered liquidators are complying with their statutory duty to lodge six-monthly accounts of receipts and payments (Companies Form 524) (“financial statements”) in respect of external administrations they are conducting.

In a special compliance program the ASIC analysed its database of approximately 24,800 companies in external administration at March 2010.   It  identified 517 external administrations where a Form 524/financial statement  had been outstanding for a period of more than six  months; and 171 registered liquidators who appeared to be at fault.

Preliminary results of  the program were published  in the December 2010 issue of  “ASIC Insolvency Update – an update for registered liquidators”.  

Final results have just been published in an article by the ASIC  in the June 2011  edition of  “Australian Insolvency Journal”, the journal for members of the Insolvency Practitioners Association of Australia (IPA).  The  article and the chart accompanying it show that:

• In only 2.1% of external administrations were financial statements by the administrator overdue (517 out of 24,800).
• In  the 517 identified external administrations:
  •  there were an estimated 2,472 financial statements outstanding;
  • one registered liquidator had more than 800 outstanding financial statements;
  • another registered liquidator had 135 outstanding financial statements;
  • 612 financial statements were lodged as a result of the ASIC  project; and
  • 469 financial statements would be lodged as a result of the project because the external administrators had acknowledged that they had not been lodged.
• The ASIC wrote to 171 registered liquidators regarding outstanding financial statements. 63% of the liquidators were from small to medium size firms (of 1 to 9 practitioners). 7 registered liquidators  “did not respond (to the ASIC) within the project timeframe”. 
• The most common reasons for not lodging financial statements were:
  • “inadequate monitoring of internal control systems (including lack of staff supervision);
  • inadequate internal control systems;
  • staff turnover combined with heavy workloads; and
  • incorrect use or delayed implementation of insolvency-based software.”

There are some other findings and explanations reported in the article.  ASIC Commissioner, Michael Dwyer, says: “It was pleasing to see that the large majority of practitioners complied with their obligation to lodge accounts”.

[Undoubtedly the ASIC’s final report will appear in a form available to non-members of the IPA shortly. As soon as a link becomes available I will insert it in this blog.]