Those regulated by ASIC are to pay ASIC for the privilege

 ASIC, Corporate Insolvency, External administration, Insolvency Law, Regulation  Comments Off on Those regulated by ASIC are to pay ASIC for the privilege
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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Index to Schedule 2—Insolvency Practice Schedule (Corporations)

 Corporate Insolvency, External administrators, Insolvency Law, Regulation  Comments Off on Index to Schedule 2—Insolvency Practice Schedule (Corporations)
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


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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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Australian Bankruptcy Laws commencing 1 March 2017

 Insolvency Law, Insolvency practices, Personal Bankruptcy, Regulation  Comments Off on Australian Bankruptcy Laws commencing 1 March 2017
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.)

————————————————————————————

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.

————————————————————————————
End of table

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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.

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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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