Insolvency Law – Page 2 – ░░░ INSOLVENCY INTERFACE

Practitioners’ association updates insolvency information for stakeholders

Checklists and guides, Corporate Insolvency, Insolvency Law, Insolvency practices, Personal Bankruptcy, Practitioners Association (ARITA) Comments Off

Sep 052017

With the commencement on 1 September 2017 of the delayed parts of the Insolvency Law Reform Act 2016 (the ILRA), the Australian Restructuring Insolvency & Turnaround Association (ARITA) has updated the Insolvency Explained section of its website which provides information to stakeholders in the insolvency process, and has developed a range of information sheets designed to assist creditors with understanding insolvency processes.

This is a guide to ARITA’s information, with links to the relevant website pages.

1. Insolvency explained CLICK HERE

What is insolvency? CLICK HERE
- Overview of insolvency – corporate
What is bankruptcy? CLICK HERE
- Overview of insolvency – personal
How does insolvency work? CLICK HERE
Insolvency and creditors CLICK HERE
Insolvency and employees CLICK HERE
Insolvency and shareholders CLICK HERE
Insolvency and company directors CLICK HERE
Insolvency information sheets see section 2 below
Glossary of terms CLICK HERE

2. ARITA insolvency information sheets

The ARITA insolvency information sheets listed below may be downloaded from the page headed “Insolvency information sheets”. They are all in PDF format. ….. CLICK HERE

Company insolvency

Creditor rights (liquidation)
Creditors rights (voluntary administration)
Remuneration of an external administrator
Proposals without meetings
Committees of Inspection
Offences and recoverable transactions in a voluntary administration

Personal insolvency (including bankruptcy)

Creditor rights
Proposals without meetings
Committees of Inspection.

A short history of the ILRA

The ILRA reform provisions relating to the rules and conduct of external administrations, commenced on 1 September 2017. This followed ILRA reform provisions relating to the registration and discipline of registered liquidators, and provisions relating to matters such as notification of contravention of a Deed of Company Arrangement and lodgement of a declaration of relevant relationships and declaration of indemnities in a voluntary administration, which commenced on 1 March 2017.

Parliament passed the Insolvency Law Reform Act 2016 (the ILRA) on 22 February 2016. The government registered the related Insolvency Practice Rules (Corporations) 2016 (the Rules) in December 2016. The ILRA and Rules change the law relating to the registration and discipline of liquidators and the conduct of external administrations.

It’s not the Court’s function to apply or interpret ARITA’s code – Judge

Corporate Insolvency, court decisions, Insolvency Law, Insolvency practices Comments Off

Aug 132017

In a recent judgment in the Federal Court the judge, the Honourable David John O’Callaghan, discusses the part that ARITA’s code of professional conduct plays in determining questions concerning the independence and impartiality of an external administrator’s conduct.

What His Honour said – extracts:

There is no doubt that the code is a useful document in assisting practitioners; …. it is “a useful guide to the common practice in such matters, and to the profession’s own view of proper professional standards”; …. it is “… permissible for the Court to take [it] into account, to that extent, in applying the law concerning independence and impartiality to the insolvency practitioner’s conduct in the case before it”; …. On the other hand, the code “has no legal status”; …. Any question relating to the appearance of impartiality must be determined according to law. It is not the Court’s function in a case such as this to either apply or interpret the code.

For more, see his complete comments below.

The Hon David John O’Callaghan

Judgment published 11 August 2017 … In Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 914

….

The code of professional practice

92. I should also say something briefly about the Code of Professional Practice of The Australian Restructuring Insolvency and Turnaround Association (ARITA) (the code), because the administrators sought to rely on the code as providing an independent basis upon which they might be permitted to continue to act as administrators. In particular, submissions were made on behalf of the administrators about those parts of the code which define “exceptions” to the “rule” that, relevantly, practitioners must not take an appointment if they have had a professional relationship with the insolvent company during the previous two years: see section 6.8 of the third edition of the code.

93. There is no doubt that the code is a useful document in assisting practitioners, including with respect to questions of whether, in accepting or retaining an appointment as an administrator, the practitioner is, and is seen to be, independent: see chapter 6 of the third edition of the code. The code is intended to provide guidance on standards of practice and professional conduct expected of ARITA members.

94. In Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; 45 ACSR 612, Austin J described (at [163]) the Code of Professional Conduct published by the Insolvency Practitioners Association of Australia (as ARITA was previously known) as “a useful guide to the common practice in such matters, and to the profession’s own view of proper professional standards”. Accordingly, his Honour held that “[i]t is permissible for the Court to take [it] into account, to that extent, in applying the law concerning independence and impartiality to the insolvency practitioner’s conduct in the case before it”: see Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; 45 ACSR 612 at [163]; comparing National Roads and Motorists’ Association Ltd v Geeson [2001] NSWSC 832; 39 ACSR 401 at 403 and Permanent Trustee Australia Ltd v Boulton & Lynjoe Pty Ltd (1994) 33 NSWLR 735 at 738.

95. On the other hand, the code “has no legal status”, as Sanderson M stated in Monarch Gold Mining Co Ltd; Ex parte Hughes [2008] WASC 201. Relevantly, Sanderson M observed in that case, “a failure to comply with the terms of the code would not render a practitioner liable for prosecution under the Corporations Act or any other statute … Nor does a failure to comply with the provisions of the code mean that there has been a failure to comply with what is required in the DIRRI”: see Re Monarch Gold Mining Co Ltd; Ex parte Hughes [2008] WASC 201 at [37].

96. Any question relating to the appearance of impartiality must be determined according to law. It is not the Court’s function in a case such as this to either apply or interpret the code.

Those regulated by ASIC are to pay ASIC for the privilege

ASIC, Corporate Insolvency, External administration, Insolvency Law, Regulation Comments Off

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 »

Law change is significant win for insolvency practitioners

Corporate Insolvency, External administration, Insolvency Law, Insolvency practices, Law reform proposals, Practitioners Association (ARITA) Comments Off

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 »

Index to Schedule 2—Insolvency Practice Schedule (Corporations)

Corporate Insolvency, External administrators, Insolvency Law, Regulation Comments Off

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

Final report on university research into fraudulent phoenix companies

ASIC, Corporate Insolvency, Insolvency Law, Phoenix company activity, Regulation, White collar crime Comments Off

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.

Australian Bankruptcy Laws commencing 1 March 2017

Insolvency Law, Insolvency practices, Personal Bankruptcy, Regulation Comments Off

Feb 172017

Some of the changes to the Australia’s bankruptcy legislation approved when the Insolvency Law Reform Act was passed in 2016 will commence on 1 March 2017. The Australian Financial Security Authority (AFSA), the regulator of the Bankruptcy Act, has issued a table listing those changes and comparing them with the existing provisions. Set out below is a copy of that table. (The original is available for download from AFSA.)

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Comparative Table (Bankruptcy tranche 1 – commencement date 1 March 2017) re Insolvency Law Reform Act.

Table comparing the provisions of the Insolvency Practice Schedule (Bankruptcy) that are to commence on 1 March 2017 with existing provisions of the Bankruptcy Act

Schedule provision	Current Bankruptcy Act provision	Comment
10-5: Inspector-General (IG) must work cooperatively with Australian Securities and Investment Commission (ASIC) in performing functions and exercising powers	No equivalent	Requirement for the IG to work cooperatively with ASIC applies in relation to persons who are, have been or may become both registered trustees under the Bankruptcy Act and registered liquidators under the Corporations Act.
15-1: IG must establish a register of trustees	No direct equivalent – some trustee information is currently entered on the National Personal Insolvency Index (NPII)	The register will contain information relating to the trustee’s registration, as well as contact details and certain disciplinary action taken against trustees. The information on the register will be publicly available.
20-5: Application to IG for registration as a trustee	154A	An application must be in the approved form and accompanied by the application fee.
20-10: IG may convene committee to consider registration application	155	The committee to consist of the IG; a registered trustee chosen by a prescribed body; and a person appointed by the Minister. The ‘prescribed body’ is the Australian Restructuring Insolvency & Turnaround Association (ARITA).
20-15: IG must refer applications to the committee	No equivalent – 155 assumes referral of applications	The IG must refer an application within two months of receiving it.
20-20: Committee to consider applications	155A	The committee must decide within 45 business days of interviewing an applicant whether he/she should be registered.
20-25: Committee to report	155A(6)	A report must be given to the applicant and the IG.
20-30: Registration as a trustee	155B and 155C	The IG must register an applicant if the committee recommends it and if the applicant has produced evidence in writing that he/she has taken out adequate and appropriate professional indemnity and fidelity insurance, and has paid the registration fee. Registration has effect for three years, and the IG must give the trustee a certificate of registration (may be given electronically).
20-35: Insolvency Practice Rules (IPRs)4 may impose conditions on all registered trustees or on specified class of trustee	No equivalent	Provides for imposition of industry-wide conditions, or conditions limiting the kinds of activity in which a trustee may engage. Conditions include undertaking at least 40 hours of continuing professional education each year (10 hours of which must be capable of being objectively verified by an competent source) and maintaining adequate professional indemnity and fidelity insurance during any period of suspension of registration in relation to work carried out prior to the suspension taking effect. (see IPR 20-5)
20-40: Application to IG to vary or remove condition on registration	155E(1) to (3)	An application must be made in the approved form, but cannot be made if the trustee’s registration is suspended; if the condition is of a prescribed kind; or in prescribed circumstances.
20-45: IG may convene committee to consider application to vary or remove condition	155E(4) & (5)	The committee to consist of the IG; a registered trustee chosen by a prescribed body, and a person appointed by the Minister. The ‘prescribed body’ is ARITA.
20-50: IG must refer application to the committee	No equivalent – 155E assumes referral of applications	The IG must refer an application within two months of receiving it.
20-55: Committee to consider application	155E(6) & 155F(1)	The committee must interview an applicant unless the applicant agrees otherwise, and within 20 business days thereafter decide whether the condition should be varied or removed.
20-60: Committee to report	155F(2)	A report is to be given to the applicant and the IG.
20-65: Committee’s decision given effect	155F(4)	If the committee recommends removal or variation of condition, the condition is removed or varied in accordance with the decision.
20-70: Application for renewal of registration	155D(2) & (3)	Applications for renewal under 20-70 must be made in the approved form.
20-75: Renewal	155D(1)	The IG shall give a trustee a certificate of registration upon renewal.
20-80: False representation that a person is a registered trustee	No equivalent	A new offence that carries a maximum penalty of 30 penalty units (1 penalty unit = $180).
25-1: Registered trustees to maintain adequate insurance	No equivalent, however undertaking to maintain adequate insurance is a requirement for registration and failure to do so can be grounds for the IG to issue a ‘show cause’ notice	New offences introduced for failing to maintain adequate professional indemnity and fidelity insurance. Maximum penalty of 1,000 penalty units (for false or reckless failure); or 60 penalty units (for failure in other circumstances – e.g. inadvertent failure). The IG may, by legislative instrument, determine what constitutes adequate insurance. • No legislative instrument is currently proposed. Requirements relating to insurance will be outlined in Inspector-General Practice Statement (IGPS) 13
30-1: Annual trustee return	No equivalent	A new requirement for trustees to lodge annual return in the approved form, including evidence that adequate insurance has been maintained. The return must be lodged annually within one month of the anniversary of the date of a trustee’s registration. Maximum penalty for failure to lodge, 5 penalty units.
35-1: Notice of significant events to IG	161A	Introduction of new notifiable events that include: • being issued with a bankruptcy notice • disqualification from managing a corporation • ceasing to have adequate insurance • being issued a ‘show cause’ notice in relation to registration as a liquidator, or having registration as a liquidator suspended or cancelled. The notice must be filed in the approved form within five business days after the trustee could reasonably be expected to be aware that the event has occurred. Maximum penalty for failure to notify is 100 penalty units.
35-5: Notification of other events to IG	No equivalent	Introduction of an obligation to notify in the approved form if information in the annual trustee return or annual administration return is, or becomes, inaccurate in a material particular, and any other events prescribed (in the IPRs). The notice must be lodged within 10 business days after the trustee could reasonably be expected to be aware that the event has occurred. Maximum penalty for failure to notify is 5 penalty units.
40-5: Registered trustee to remedy failure to lodge documents or give information or documents	No equivalent	The IG may direct a trustee in writing to comply with the requirement to lodge any document or give any information or document required to be given to a person under the Act or to be lodged with the IG. If a trustee fails to comply, the IG can direct the trustee not to accept further appointments and/or apply to the court for an order for compliance.
40-10: Registered trustee to correct inaccuracies etc.	No equivalent	If the IG suspects information provided by a trustee is incomplete or incorrect, the IG can direct the trustee in writing to confirm information is complete or correct, or to provide complete or correct information and/or notify persons of the addition or correction. If a trustee fails to comply, the IG can direct the trustee not to accept further appointments and/or apply to the court for an order for compliance.
40-15: Direction not to accept further appointments	No equivalent	The IG may direct a trustee in writing not to accept further appointments if: • the trustee has failed to comply with a direction under 40-5 or 40-10 • a committee convened to consider the trustee’s ongoing registration decides the IG should give the direction • the trustee has failed to comply with a direction under 7070 (to give information to debtor or creditors) or • the trustee has failed to comply with a direction under 75-20(1) or (2) to convene a meeting of creditors – note 70-70 and 75-20 commence on 1 September 2017. When given, a direction not to accept further appointments becomes a condition on the trustee’s registration.
40-20: Automatic cancellation of registration	182	Cancellation of registration occurs on the death of a trustee or if he/she becomes an insolvent under administration.
40-25: IG may suspend registration	No equivalent	The IG may suspend a registration where the trustee: • is disqualified from managing a corporation • ceases to have adequate insurance • has had his/her registration as a liquidator suspended or cancelled (other than on request) • owes more than the prescribed amount of estate charges • fails to comply with a court order to repay remuneration to an estate • has been convicted of an offence involving fraud or dishonesty or • requests the IG to suspend the registration.
40-30: IG may cancel registration	No direct equivalent (155G provides a trustee may request the IG that registration cease)	The IG may cancel a registration where a trustee requests it, or in circumstances equivalent to those mentioned in relation to the suspension of a registration under 40-25 (except registration as a liquidator must be cancelled, not merely suspended).
40-35: Notice of suspension or cancellation	No equivalent	If the IG decides to suspend (under 40-25) or cancel (under 40-30) a trustee’s registration, the IG must give notice of the decision, along with reasons, to the trustee within 10 business days. The decision comes into effect the day after the notice is given. Failure to give the notice within 10 business days does not affect the validity of the decision.
40-40: IG may give a show- cause notice	155H(1)	A show-cause notice may be issued by the IG where the trustee: • no longer has the requisite qualifications, experience, knowledge and abilities • has committed an act of bankruptcy • is disqualified from managing a corporation • ceases to have adequate insurance • has breached a condition of registration • has breached a provision of the Bankruptcy Act • has had his/her registration as a liquidator cancelled or suspended (other than on request) • owes more than the prescribed amount of estate charges • fails to comply with a court order to repay remuneration to an estate • has been convicted of an offence involving fraud or dishonesty • is permanently or temporarily unable to perform the functions of a trustee due to physical or mental incapacity • fails to carry out adequately and properly the duties of a trustee • fails to carry out adequately and properly the duties of the administrator of a debt agreement • is not a fit and proper person • is not resident in Australia or • has failed to comply with a standard prescribed in the IPRs.
40-45: IG may convene a committee	155H(2) & (3)	The committee is to consist of the IG; a registered trustee chosen by a prescribed body, and a person appointed by the Minister. The ‘prescribed body’ is ARITA.
40-50: IG may refer matter to a committee	155H(2)	The IG may refer a matter to the committee if no explanation is received within 20 business days after a show-cause notice is given; or if not satisfied by the explanation.
40-55: Decision of the committee	155I(1), (2) & (3)	The committee can decide one or more of the following: • the trustee continue to be registered • the trustee’s registration be suspended or cancelled • the IG direct the trustee not to accept further appointments • the trustee be publicly admonished or reprimanded • a condition be imposed on the trustee’s registration • a condition be imposed on the registration of all other trustees that they not allow the trustee in question to exercise powers or perform functions on their behalf • the IG publish specified information in relation to the committee’s decision.
40-60: Committee to report	155I(4)	A report must be given to the registered trustee and the IG.
40-65: IG must give effect to committee’s decision	155I(6)	The IG must give effect to the decision made by the committee.
40-70: Application to lift or shorten suspension	No equivalent	A trustee may lodge an application with the IG in the approved form to lift, or shorten the period of a suspension.
40-75: IG may convene a committee to consider applications	No equivalent	The committee is to consist of the IG; a registered trustee chosen by a prescribed body; and a person appointed by the Minister. The ‘prescribed body’ is ARITA.
40-80: IG must refer applications to a committee	No equivalent	The IG must refer an application within two months of receiving it.
40-85: Committee to consider applications	No equivalent	The committee must interview an applicant unless the applicant agrees otherwise, and within 10 business days thereafter, decide whether the suspension should be lifted or shortened.
40-90: Committee to report	No equivalent	A report must be given to the applicant and the IG.
40-95: Committee’s decision given effect	No equivalent	If the committee decides to lift or shorten the suspension, the suspension is lifted or shortened in accordance with that decision.
40-100: Notice by industry bodies of possible grounds for disciplinary action	No equivalent	An industry body may lodge with the IG a notice in the approved form stating that it reasonably suspects there are grounds for the IG to impose a condition on, or suspend or cancel the registration of, a trustee, or issue a show-cause notice to the trustee. The IG must consider the information but is not bound to act on it.
40-105: No liability for notice given in good faith etc.	No equivalent	An industry body is not liable civilly, criminally or under any administrative process for a notice given in good faith and where the suspicion that is the subject of the notice is a reasonable suspicion. That protection extends to persons who give information to the industry body that is contained in a notice to the IG and to persons who make a decision as a result of which the industry body gives a notice.
40-110: Meaning of industry body	No equivalent	The IPRs may prescribe industry bodies–ARITA and the peak accounting and legal professional bodies are prescribed (see IPR 40-1).
45-1: Court oversight of registered trustees	No direct equivalent (some of the same subject matter is contained in 176 and 179. Other provisions of the ILRA also partially replicate 179 – e.g. 9015)	A Court may make such orders as it thinks fit in relation to a registered trustee, either on its own initiative, or on application by the IG or the trustee. In making orders the court may take into account: • whether the trustee has faithfully performed his/her duties • whether an action or failure to act by the trustee complies with the Act or IPRs, or the order of the court • whether any person has suffered, or is likely to suffer, loss or damage as a result of the trustee’s act or failure to act • the seriousness of the consequences of any act or failure to act by the trustee, including the effect on public confidence in registered trustees as a group.
45-5: Court may make orders about costs	No direct equivalent, but some overlap with 176	Without limiting 45-1, the Court may make orders in relation to a registered trustee that deal with the costs of a matter considered by the Court.
50-5: Prescribed body appointing a person to a committee	No equivalent	The IPRs may prescribe knowledge and experience requirements for members of a committee chosen by a prescribed body (at least 5 years’ experience as a registered trustee is prescribed – see IPR 50-15). The ‘prescribed body’ is ARITA.
50-10: Minister appointing a person to a committee	No equivalent	The Minister must be satisfied that a person is qualified by virtue of his or her knowledge of, or experience in, one or more of: business; law; economics; accounting; public policy relating to bankruptcy.
50-15: Single committee may consider more than one matter	No equivalent	A single committee may consider one or more of the following: • matter(s) relating to one application for trustee registration • matter(s) relating to more than one applicant for registration • matter(s) relating to one or more registered trustees.
50-20: Ongoing consideration of matters by committee	No direct equivalent (but similar in some respects to the subject matter in Bankruptcy Regs 8.05G and 8.23)	The committee’s powers are not affected by a change in membership of the committee; the committee may adjourn consideration of a matter (and may do so more than once). A matter may be transferred to another committee.
50-25: Procedure and other rules relating to committees	No equivalent	The IPRs may provide for (see division 50 of the IPRs): • the manner in which committees perform their functions including: (i) meetings (ii) quorum requirements (iii) disclosure of interests and (iv) how questions are decided • the reconstitution of a committee and • the termination of consideration of a matter by a committee and the transfer of matters to another committee.
50-30: Remuneration of committee members	No equivalent	Committee members are entitled to receive remuneration as determined by the Remuneration Tribunal. If no Tribunal Determination is in place, the members are entitled to receive such remuneration as the Minister determines in writing.
50-35: Committee must only use information etc. for purposes for which disclosed	No equivalent	A committee member commits an offence if he/she uses or discloses information or a document that was disclosed to him/her for the purposes of serving on the committee (50 penalty unit maximum penalty). Exceptions apply where the document or information is disclosed to: ASIC; other committees under this Part or the corresponding Part of the Insolvency Practice Schedule (Corporations); prescribed bodies; authorities in States, Territories or overseas exercising similar functions to the committee or the IG; or a court or tribunal.
96-1: Review by the Administrative Appeals Tribunal (AAT)	155A(7) – registration application 155F(3) – application to vary/remove condition 155I(5) – disciplinary action by committee	The following decisions are reviewable by the AAT: • a committee decision under 20-20 (registration application) • a committee decision under 20-55 (application to vary or remove condition on registration) • IG decision under 40-15 (directing trustee not to accept further appointments) • IG decision under 40-25 (suspending registration) • IG decision under 40-35 (cancelling registration) • Committee decision under 40-55 (disciplinary action by committee) • Committee decision under 40-85 (application to lift or shorten a suspension).
105-1: The Insolvency Practice Rules	No equivalent	The Minister may, by legislative instrument, make rules providing for matters required or permitted by the Bankruptcy Act to be made by the Rules, or necessary or convenient to be provide for in order to carry out or give effect to the Act.

Endnote (edited)

This table deals only with provisions in Parts 1 and 2 of the Schedule (and sections 96-1 and 105-1 in Part 4, to the extent those provisions relate to Parts 1 and 2).

Transitional arrangements apply in respect of some new provisions – the transitional arrangements are not covered in this table.

This table does not present a full description of the new provisions, but highlights their main features and/or how they differ from existing.

A reference to the IPRs is a reference to the Insolvency Practice Rules, which underpin the Insolvency Practice Schedule (Bankruptcy) and provide greater detail in relation to various requirements of the Parts 1 and 2 of the IPRs commence on 1 March 2017.

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End of table

Missing Submission On Penalties For White Collar Crime

Corporate Insolvency, Insolvency Law, Official Inquiries, Regulation, White collar crime Comments Off

Jan 192017

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:

134 submitted during the 44th Parliament

5 submitted during the current (45th) Parliament

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 »

Liquidators begin Public Examination of Queensland Nickel’s downfall

Corporate Insolvency, Insolvency Law, Insolvent Trading, Shadow Directors Comments Off

Sep 052016

NEWS REPORT FROM The Australian ON MORNING OF 5 SEPTEMBER 2016 ……………………………………………..

Clive Palmer faces Federal Court grilling over Queensland Nickel collapse

By Sarah Elks, Queensland political reporter, The Australian, September 5, 2016, 10:29AM.

Clive Palmer demanded weekly cash flow statements for Queensland Nickel (QN) be delivered to him in hard copy because he was “concerned about espionage”.

Former chief financial officer Daren Wolfe has told the Federal Court public examination into the collapse of the Townsville company that Mr Palmer had an “active interest” in the business during 2015, before it fell into voluntary administration in January.

Mr Palmer is alleged to have acted as a shadow director, a claim he denies.

Mr Wolfe told the court weekly and monthly financial documents were prepared about the health of the company. He said Mr Palmer asked for the data in hard copy, not via email. Asked why, by Tom Sullivan QC for special purpose liquidators PPB Advisory, Mr Wolfe said: “He had concerns about espionage”.

Mr Wolfe said Mr Palmer was required to sign off on any expenditure for Queensland Nickel over $10,000 — even when he was not a director of the company.

When Mr Palmer entered politics as an MP in 2013, Mr Palmer described himself as a fulltime politician and retired from business.

When QN collapsed, Mr Palmer said he was not involved in the day-to-day running of the business. However, the Federal Court has heard there was a practice within QN for Mr Palmer to have final say on expenditure even when he was not formally a director.

Palmer fronts court

After two failed attempts to avoid being publicly interrogated over the collapse of his Queensland Nickel company, self-proclaimed billionaire Clive Palmer must front court today over the corporate failure.

The resources tycoon, QN’s former chief financial officer Daren Wolfe, and the refinery’s former managing director of operations, Ian Ferguson, have been summoned to appear this morning in the Federal Court in Brisbane to face public examination. In hearings scheduled to last a fortnight, the three will be quizzed about the Townsville company’s downfall, which left creditors up to $300 million out of pocket and almost 800 workers without jobs. The federal government had to step in with $68m to cover the redundancy entitlements of Mr Palmer’s former employees.

Lawyers instructed by special- purpose liquidators PPB Advisory will lead the questioning, which will focus on whether a claim can be launched against QN’s director, Mr Palmer’s nephew Clive Mensink, and Mr Palmer as alleged shadow director, for insolvent trading.

The special-purpose liquidators have also been told to investigate QN’s historical affairs and possible claims against its parent companies, QNI Metals and QNI Resources, both ultimately controlled by Mr Palmer.

Mr Palmer denies he acted as a shadow director and both men deny any wrongdoing.

Mr Mensink is overseas and has not yet been served with a summons.

Mr Palmer could also be interrogated about his personal assets, such as property, as liquidators seek funds that might be distributed to creditors.

Under the Corporations Act, examinees are entitled to claim privilege against self-incrimination before each answer. That does not shield the witnesses from answering a question, but prevents their answers being used against them as evidence in future criminal or civil proceedings, apart from perjury. The Australian understands the strategy is used commonly by witnesses in public examinations, particularly directors or former directors of failed companies.

Mr Palmer did not respond to questions from The Australian yesterday.

The former federal MP for Fairfax, who stood down before this year’s election, twice tried and failed to avoid the public examination. Both attempts were dismissed by Federal Court judges, who said the hearings were in the public interest.

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Insolvency practitioners granted more time to prepare for law reforms

Corporate Insolvency, Insolvency Law, Law reform proposals, Regulation Comments Off

Aug 242016

The Australian Restructuring Insolvency & Turnaround Association (ARITA) and The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, announced on 23 August 2016 that many of the changes to insolvency law that were to be implemented under the Insolvency Law Reform Act 2016 have been postponed from March 2017 to September 2017.

ARITA Announcement

IPs get more time to prepare for Insolvency Law Reform Act

In a major win by ARITA, the Minister for Revenue and Financial Services has agreed to delay the commencement of a portion of the Insolvency Law Reform Act (ILRA).

This decision will avoid the situation where the profession simply would not have enough time to become compliant with the Act by the scheduled commencement date of 1 March 2017.

We understand that while Parts 1 and 2 of the two new Insolvency Practice Schedules (for Corporations and Bankruptcy) will still commence on 1 March 2017, these parts of the legislation are largely concerned with registration and discipline, and can be easily implemented by the profession.

The Minister has agreed to delay Part 3 of the new Insolvency Practice Schedules which relate to the general rules for the conduct of external administrations and bankruptcies. These provisions will not commence until 1 September 2017.

We also understand that parts of Schedule 3 of the ILRA (very specific provisions dealing with matters such as termination of a DOCA and the relation back day) will also still commence on 1 March 2017.

The Government’s caretaker period during the lengthy election stopped all work on the all-important Insolvency Practice Rules, which is likely to push out their formalisation until December 2016.

This would have meant there was no way firms could adjust their IT systems or complete the necessary extensive staff retraining before the scheduled commencement. This extension simply provides a more reasonable time period for compliance.

These issues were first flagged with Government, agencies and regulators by ARITA prior to the election, and have been the subject of sustained action on our part to drive for a more acceptable commencement time frame.

Minister’s Announcement

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP today announced that the industry is being given more time to implement the Insolvency Law Reform Act 2016 reforms.

This major reform will increase confidence in Australia’s insolvency regime by:

improving practitioner registration and disciplinary processes;
providing new regulatory powers to ASIC;
increasing practitioner insurance requirements;
introducing new review and audit processes; and
addressing conflicted remuneration and ensuring that offences and penalties are appropriate and proportionate.

“The reforms also ensure that our insolvency processes are modern and efficient – reducing costs, improving timeliness of administrations and improving returns to creditors,” Minister O’Dwyer said.

“Most importantly, the changes will enhance the ability of creditors to terminate underperforming practitioners.

“Given the scale of these reforms industry is being given time to upskill and to update their software systems and business processes before commencement.

“The reforms to insolvency administration processes, to enhance efficiency, improve communication and increase competition, are now scheduled to commence on 1 September 2017.

“We will not defer commencement of those reforms directed at promoting competency and professionalism in the insolvency industry. The practitioner registration and discipline provisions, and enhancements to the ASIC’s powers will commence on 1 March 2017, as planned.

“The Insolvency Law Reform Act represents the Government’s first tranche of insolvency reforms, directed at improving the integrity and efficiency of Australia’s insolvency laws.

“The Government’s second tranche of insolvency reforms will enhance business rescue and support entrepreneurship, and are being progressed as part of the Government’s National Innovation and Science Agenda,” Minister O’Dwyer said.

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