May 182017
 

professional-associationA new professional association for Australian insolvency practitioners  – named the Association of Independent Insolvency Practitioners (AIIP) – has been formed and is currently endeavouring to recruit as members those registered liquidators and trustees in bankruptcy who work as sole practitioners or in small firms.

In an email circular on 4 May 2017 (see below), Nicholas Crouch, a Sydney liquidator and registered trustee in bankruptcy, acting for the AIIP, stated that “80 of the 350 small firm liquidators and trustees in Australia have joined AIIP”. The annual membership fee has been set at just $20.

Also, the AIIP plans to create – for use in company liquidations, voluntary administrations and receiverships and in personal bankruptcy – sets of  precedent or pro forma letters, forms, checklists, etc.,  that fulfil the requirements of the new insolvency legislation. It estimates that the price per practitioner will be about $2,000.  This is far less than amounts charged by existing suppliers (CORE IPS and CCH).

It is not clear whether the AIIP sees itself as an alternative or an adjunct to the Australian Restructuring Insolvency and Turnaround Association (ARITA), which is the peak body representing insolvency practitioners.  ARITA describes itself as “Australia’s leading organisation for restructuring, insolvency and turnaround professionals.”  Recently ARITA has greatly enhanced its power and prestige as a result of insolvency legislation classing it as an “industry body” and giving it an important role in the official registration  of  liquidators and bankruptcy trustees.

But it seems a significant number of insolvency practitioners are not happy with the direction that ARITA has taken. Dissatisfaction with the association  relates to  a perception that it is dominated by large insolvency firms  (supposedly leading to a focus on issues that are of interest to them),  its decision to admit lawyers, bankers and academics as members, and its high membership fee.

Text of AIIP email to liquidators and trustees in bankruptcy

Dear Fellow Liquidator/Trustee in Bankruptcy

A new liquidator’s club has been established. The objective of the Association of Independent Insolvency Practitioners (“AIIP”) is to encourage small insolvency firms to collaborate and develop best practice procedures and precedents for its members.

To date, 80 of the 350 small firm liquidators and trustees in Australia have joined AIIP.

AIIP is a not for profit association.

Membership of AIIP is limited to registered liquidators and bankruptcy trustees.

I invite you to join AIIP by contacting Stephen Hathway or Ginette Muller as follows:
[deleted]

The annual membership is $20 and an application form is attached.

Discussion groups have been established in Sydney & Brisbane and AIIP hopes to roll out new discussion groups in each capital city as soon as practicable.

New Precedents For Your Firm

AIIP has a committee that is developing a set of liquidation, VA, receivership & bankruptcy precedents that will be compliant with the new laws.

AFSA & ASIC have agreed to consider, but not endorse, the AIIP precedents when they are finalised.

AIIP members will be able to purchase and immediately use the new precedents or use the AIIP precedents as a guide when amending their own existing precedents.

The projected cost of the precedents is uncertain, but my preliminary estimate is about $2k per member.

I am hopeful the costs can be reduced through increasing the AIIP’s membership. I encourage you to invite other small firm insolvency practitioners to join AIIP.

If you wish to offer assistance to this project please advise me.

ASIC & AFSA Review Of AIIP Precedents

On 25 November 2016, Senator Williams assisted the AIIP by asking the ASIC Chairman and 3 ASIC Commissioners who were present at the Federal Government’s Joint Parliamentary Committee on Corporations and Financial Services, if ASIC would assist AIIP with our precedents project.

Senator WILLIAMS:  I have a couple of questions, Mr Price, on insolvency. With the new insolvency laws, every insolvency firm must update its precedents and templates. This is a massive and costly task. I know of a group of 40 independents, a small firm of liquidators. Small firms are creating one set of documents that they will all use as templates. It is an industry first. This will save ASIC work. Is ASIC prepared to work with this group to develop these templates?

ASIC Commissioner Price responded as follows:

Mr Price:  Certainly. We would be happy to discuss with groups that are thinking about that.
….
AIIP is very grateful for the assistance of Senator Williams, ASIC & AFSA.

AIIP recognises this is a historic opportunity for all small firm Insolvency practitioners to work with the regulators to produce best practice documents which will assist both the regulators and the small firm insolvency practitioners by raising the standard of practice and reducing the cost of compliance.

ARITA has declined to work with AIIP on this project.

CCH is in preliminary discussions with AIIP and they may offer their assistance with the precedent project.

Expressions of Interest

Kindly advise me by return email if you are interested in purchasing the AIIP precedents ….

 


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May 102017
 

An idea put forward by the Australian Government about a year ago has almost become a reality with the introduction into Parliament on 30 March 2017 of the ASIC Supervisory Cost Recovery Levy Act 2017 to establish an industry funding model for the Australian Securities and Investments Commission (ASIC) and with the release on 4 May 2017 of draft regulations for consultation.

The idea –  to enable the recovery of the regulatory costs of ASIC by imposing a levy on persons regulated by ASIC – was described in Parliament by the Assistant Minister to the Treasurer (Mr Sukkar) as follows:

Industry funding of ASIC will mean that … those entities that create the need for that regulation will be the ones who pay for it—as opposed to Australian taxpayers—who too often bear the cost of financial sector misconduct.  Further, because each regulated subsector will only ever pay an amount equal to its costs of supervision, industry funding will promote equity between different regulated entities. This is because certain industry subsectors will no longer cross-subsidise the costs of the regulation of other sectors.

The laws are due to take effect on 1 July 2017.  General news article: “Companies face levy in ASIC funding overhaul”.

ASIC Supervisory Cost Recovery Levy Regulations 2017

The closing date for submissions regarding the proposed Regulations is 26 May 2017.

In releasing its consultation paper for the Regulations the Treasury department said:

The Government is seeking stakeholder views on the draft regulations necessary to support the industry funding model, which will recover (the Australian Securities and Investments Commission’s)  regulatory costs though annual levies and fees-for-service. The proposed regulations are to establish the mechanisms that will be used to calculate the levies payable by each class of regulated entity, each financial year.

There are 6 industry sectors covered by the Regulations. Each sector has several industry subsectors.  In all there are 48 industry subsectors. Each subsector  describes the “leviable entity” that is included in the industry subsector.

Registered liquidators levy

Registered liquidators are in the industry sector named Corporate, and are leviable entities in a subsector named, not surprisingly, registered liquidators.

The levy to be imposed on each registered liquidator in a financial year is the sum of:

(a)  the minimum levy component (which is proposed to be $2,500); and

(b)  the graduated levy component.  The graduated levy component is a variable amount depending on each entity’s share of the total number of notifiable events for the subsector.  The Regulations define what constitutes a notifiable event (see below).  ASIC will prescribe its regulatory costs and the total number of these notifiable events for the subsector as part of its annual legislative instrument. Continue reading »

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May 082017
 

Before it is due to come into effect on 1 September 2017, section 60-20 of the Insolvency Practice Schedule (Corporations) (Australia) is to be amended.

Under the heading “Refining the Insolvency Law Reform Act 2016”, the Minister for Revenue and Financial Services has released draft legislation of amendments to the Corporations Act 2001 and Bankruptcy Act 1966.

The professional association representing insolvency practitioners has welcomed the amendments. The Australian Restructuring Insolvency & Turnaround Association (ARITA) says (on its website 5/5/2017):

The section would (have) require(d) external administrators and trustees to obtain consent from creditors prior to related entities obtaining any profit or advantage from any administration or estate – effectively requiring Insolvency Practitioners to seek creditor approval for their own firms to work on an appointment. We are delighted that Treasury have announced draft legislation specifically to resolve this issue. It is now clear that once remuneration is approved, further approval to share that remuneration with related parties (e.g. an Insolvency Practitioner’s firm or partners) is not required …. ARITA has been working very hard behind the scenes on this under strict confidentiality. The draft legislation is on The Treasury’s website for consultation. This is a significant win for the profession, achieved by ARITA.


Illustration of Change to Corporate Insolvency Law

I have set out below an illustration of the changes that are being made to section 60-20 of the Insolvency Practice Schedule (Corporations). Although “interested parties” have been invited to make a submission regarding the draft legislation by 17 May 2017, it is doubtful whether there will be any change to the draft. Continue reading »

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Apr 282017
 

Issues impacted upon by this new legislation

Schedule 2 is now part of the Corporations Act 2001. The Act is available for viewing/download from www.legislation.gov.au. Schedule 2 is in Volume 6, and follows section 1637 of the Act. To see Schedule 2 only, go to this page at austlii.ed.au

Continue reading »

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New Corporate Insolvency Laws commencing 1 March 2017

 ASIC, Corporate Insolvency, Insolvency practices, Regulation, Standards  Comments Off on New Corporate Insolvency Laws commencing 1 March 2017
Mar 072017
 

Commencing on 1 March 2017 are some of the changes to Australia’s corporate insolvency legislation that were approved when the Insolvency Law Reform Act was passed in 2016. The Australian Securities and Investments Commission (ASIC), the regulator of the Corporations Act, has issued a table listing and summarizing what it says are the key changes. Set out below is a copy of that table. (The original is available to view at ASIC).

For a convenient list of NEW ASIC FORMS and AMENDED ASIC FORMS go to this EMAIL extract from ASIC to registered liquidators on 6 March 2017. NOTE: Some of the new and amended forms have not yet been released by ASIC (7/3/2017).

………………………………….

Corporate Insolvency Law Reform – key changes effective from 1 March 2017

Subjects

  1. Registration Process
  2. Industry wide conditions
  3. Applying to vary or remove a condition or to lift or shorten a suspension
  4. Renewal of registration
  5. The Liquidator Register
  6. Insurance
  7. Annual liquidator return
  8. Notice of significant, and other, events
  9. ASIC power to direct registered liquidator to lodge documents or give information or correct inaccuracies
  10. ASIC power to cancel or suspend a person’s registration
  11. Disciplinary action by a committee
  12. Notice by industry body of possible grounds for disciplinary action
  13. Court oversight of registered liquidators
  14. Registration and disciplinary committees
  15. Administrator’s notice to owner or lessor of property
  16. Notice – material contravention of deed of company arrangement
  17. Company’s former name
  18. Relation back day
  19. Lodging declarations of relevant relationships and indemnities
  20. Lodgement requirements relating to pooled groups


Continue reading »

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New ASIC guide on how to become, and behave as, a registered liquidator

 ASIC, Corporate Insolvency, External administration, Insolvency practices, Regulation  Comments Off on New ASIC guide on how to become, and behave as, a registered liquidator
Mar 022017
 

Registered Liquidators: Registration, disciplinary actions and insurance requirements.

ASIC Regulatory Guide RG258, Issued: 1 March 2017

Australian Securities and Investments Commission:

This guide is for individuals who are or wish to become registered liquidators under … the Corporations Act 2001 …. This guide explains how to apply for registration as a liquidator, including the requirements that must be met to become a registered liquidator. This guide also explains the renewal of registration process, the disciplinary and other actions a registered liquidator may be subject to and our policy on adequate and appropriate insurance.

CLICK HERE to read or download a copy of ASIC’s Regulatory Guide RG 258.

——————————————————

Contents of RG 258

Continue reading »

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Feb 252017
 

Melb Uni
Researchers at Melbourne University have issued their third and final report on investigations into insolvency fraud committed through the use of phoenix companies.

The 162 page report, issued on 24 February 2017, is titled Phoenix Activity: Recommendations On Detection, Disruption And Enforcement.

In the Executive Summary the authors state:

Harmful phoenix activity, left unchecked, has the capacity to undermine Australia’s revenue base and the competitive ‘level playing field’. It is wrong that legitimate business operators, paying taxes, wages and other debts, might be driven out of business by those engaging in harmful phoenix activity. Minimising business distrust caused by harmful phoenix activity can lower the cost of finance and make it more widely available. If less tax revenue is fraudulently avoided, the economy and society as a whole benefit. If fewer employee entitlements are lost as a result of harmful phoenix activity, there is likely to be less reliance on the Fair Entitlements Guarantee, freeing up government resources for other purposes.

What was described in earlier reports as “fraudulent phoenix activity” is described in the final report as “harmful phoenix activity”.

CLICK HERE to read and/or download a copy of the report.

The authors are Professor Helen Anderson, Professor Ian Ramsay, Professor Michelle Welsh and research fellow Mr Jasper Hedges.

Their Phoenix Project (“Phoenix Activity: Regulating Fraudulent Use of the Corporate Form”) “seeks to enhance Australia’s economic stability by determining the best methods of addressing fraudulent use of the corporate form without unduly inhibiting its proper use”. The project was launched in 3 years ago.

Analysis and highlights of the report will be posted here in due course.


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Jan 192017
 

drawing-sorry

Boo Hoo

In March 2016 I lodged a submission with the Senate Standing Economics References Committee which is inquiring into penalties for white collar crime in Australia. However, for reasons which remain a mystery (probably just an administrative stuff-up), my submission did not make it to the committee, and so is not published on the Inquiry’s website with the other 139 submissions appearing there (at 19 Jan 2017).

The 139 submissions are listed (and publicly available) on two web pages:

Although my submission didn’t contain any astonishing revelations or brilliant insights, a considerable amount of thought and work went into creating it, and the facts and ideas it contains are probably worth considering. Therefore, I’ve decided to publish most of the submission here, just for the record.(The Senate Committee is due to report by 28 February 2017.)

OFFENCES IN CORPORATE INSOLVENCY

The committee is looking at penalties for white-collar crime in general. The focus of my submission was the field of corporate insolvency and the penalties for white collar crimes committed by directors of insolvent companies. Continue reading »

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Regulating insolvency practitioners: what ASIC aims to achieve in 2016-17

 ASIC, Corporate Insolvency, External administrators, Regulation  Comments Off on Regulating insolvency practitioners: what ASIC aims to achieve in 2016-17
Dec 202016
 

The Australian Securities and Investments Commission (ASIC) has a business plan to guide its regulation of insolvency practitioners. In 2016-17 two new projects have been added to the ongoing ones. Here is ASIC’s summary of the plan as published recently on its website …

2016-17 ASIC Business Plan Summary by Sector: Insolvency Practitioners

ASIC Key Projects

ASIC Focus

Stakeholder engagement
Communicating with industry and individual firms to reinforce and articulate standards and expectations (ongoing project)
⚬ Communicating with stakeholders (e.g. through media releases, journal articles, ad-hoc bulletins, regular newsletters), including in relation to surveillance outcomes, to reinforce and articulate standards and expectations

⚬ Releasing key communications, such as:
– Annual report on supervision of registered liquidators
– Monthly insolvency statistics
– Annual report on insolvency statistics

⚬ Engaging with stakeholders, including meeting with individual firms and industry bodies (such as the Australian Restructuring, Insolvency and Turnaround Association (ARITA), Chartered Accountants Australia and New Zealand, CPA Australia, and Australian Financial Security Authority, and other government agencies such as the Australian Taxation Office, Department of Employment and Fair Work Ombudsman

⚬ Participating in and contributing to the Phoenix Taskforce and the Serious Financial Crime Taskforce

Information for registered liquidators and other stakeholders (new project) ⚬ Working closely with industry to further develop guidance and lift standards of conduct

⚬ Reviewing existing ASIC guidance to reflect law reform and improving existing creditor and other stakeholder information published by ASIC

⚬ Reviewing and improving what information registered liquidators currently report to facilitate the assessment and, where appropriate, investigation of reports of alleged misconduct

Registered liquidators’ independence and remuneration (new project) ⚬ Independence (including referral relationships with pre-insolvency advisors) and remuneration (including adequacy of disclosure and reasonableness); anticipated to continue into 2017-18
Surveillance of high-risk registered liquidators (ongoing project) ⚬ Misconduct resulting from conflicts of interest, incompetence and improper gain
Ensuring compliance with statutory lodgements obligations and publication of notices requirements (ongoing project) ⚬ Reviewing registered liquidator outstanding statutory lodgements and publication of notices (including insolvency and external administration related notices) on the ASIC published notices website to identify systemic non-compliance
Lodgement of annual statements (ongoing project) ⚬ Reviewing all annual statements from registered liquidators to detect non-compliance with the requirements to maintain registration, including identification of potential competence concerns
Transactional reviews (ongoing project) ⚬ Undertaking reviews identified through referrals, and responding to identified concerns including:
– inappropriate relationships between registered liquidators and pre-insolvency advisers
– inadequate declarations of relevant relationships and indemnities
– inadequate remuneration disclosure
Investigate and where appropriate take administrative or court action (ongoing project) ⚬ Investigating and taking action against registered liquidator misconduct, as identified through surveillances and referrals
Policy advice
Support development and implementation of key Government law reforms and other initiatives (ongoing project)
⚬ Advising Government on proposed insolvency reforms (including proposed reforms in the Government’s National Innovation and Science Agenda) and implementing the Insolvency Law Reform Act 2016, including engaging with Treasury, industry and professional bodies, introducing new guidance and implementing IT and business process changes

⚬ Delivering an enhanced ASIC Form 507 Report as to Affairs (RATA), including stakeholder consultation, to provide better information to facilitate the conduct of external administrations and improve reporting to creditors

⚬ Liaising with Treasury and industry/professional bodies regarding the Government’s proposals/reforms to facilitate corporate restructure (a ‘safe harbour’ and voiding of ipso facto clauses) from the Productivity Commission (in recommendations from its inquiry report into business set-up, transfer and closure) and the Government’s National Innovation and Science Agenda

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Levy on registered liquidators and other “industries” to help fund ASIC

 ASIC, Corporate Insolvency, External administrators, Regulation  Comments Off on Levy on registered liquidators and other “industries” to help fund ASIC
Dec 022016
 

….(UPDATE to post – 1 April 2017: In an email on 24 March 2017, Adrian Brown, leader of ASIC’s Insolvency Practitioners Team, informed practitioners that following a consultation process ASIC has worked with Treasury “to develop an alternative option for the Minister’s consideration”. The alternative option includes halving the fixed annual levy to $2,500.)….

….(SECOND UPDATE to post – 10 May 2017: The proposed fixed annual levy is now $2500 – SEE MY NEW POST.

A refined proposal for a government levy on registered liquidators – intended to recover costs incurred by the ASIC in regulating them – has been released as part of a Treasury consultation paper titled Proposed Industry Funding Model for the Australian Securities and Investments Commission – November 2016.

treasury consult banner

The proposal in brief

Each registered liquidator would pay a minimum, fixed annual levy of $5,000. On top of that the liquidator would be required to pay an activity-based levy – estimated to be $550 per appointment – for each external administration appointment in the financial year.

External administration appointments includes appointment as a controller, provisional liquidator, liquidator, voluntary administrator or administrator of a deed of company arrangement.

Special rules and adjustments are to apply where registered liquidators are appointed jointly and where an external administration appointment transitions from one type of external administration to another.

The paper states that there are 710 registered liquidators and the levies are aimed at recovering ASIC regulatory costs of $8.5 million.(Supporting attachment to the Government’s Proposals Paper, Table 8)

(More details of the proposal are supplied below, under the heading Extracts from the Consultation paper.)

What the liquidators’ professional association thinks

The Australian Restructuring Insolvency & Turnaround Association (ARITA) opposes the proposed quantum of the levy. In a statement on its website on 9 November ARITA describes the ASIC user-pays funding model for registered liquidators as “highly controversial”. It says:

“ARITA remains strongly of the view that the quantum per practitioner is excessive in every respect and will cause significant harm to the structure of the profession, regardless of the methodology used” , adding that “the quantum is completely disproportionate to other similar profession’s fees”.

ARITA’s detailed analysis and critique of the proposal will be made in a submission to Treasury, due by December 16.

Passing on cost of the per-appointment part of the levy to clients

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