Creators of ASIC’s ROCAP documents describe their process

 Creators of ASIC’s ROCAP documents describe their process  ASIC, Corporate Insolvency, External administration, Forms, Insolvency Law, Insolvency practices, Regulation  Comments Off on Creators of ASIC’s ROCAP documents describe their process
Jun 212019
 

Creators of ASIC’s ROCAP documents describe their process

Soon after the Australian Securities and Investments Commission (ASIC) issued a form titled “Report On Company Activities and Property“ (ROCAP), the creators of the form – the Communications Research Institute (CRI) – published an article describing the process they went through, their standards and the results of tests carried out.

Form Design process

CRI form design procedure (Source: CRI)

The ROCAP – which replaced the Report as to Affairs (RATA) – is used in corporate insolvencies, where company directors are required to supply liquidators and other external administrators with details of a failed company’s present position, assets, liabilities and history.

Below is a copy of the article written in October 2018 by the head of CRI, Professor David Sless.

As the reader will see, CRI reports that “in the final round of testing (of the new form/documents) participants described the documents as ‘straightforward’ (and that) they easily followed both instructions and the related form-filling task.”

If that’s how the form and accompanying documents are received and processed in practice, it will be a welcome change. Because, by contrast, CRI says it found that “not a single director who participated in the CRI testing of the original RATA could use it appropriately”.

By now (June 2019) feedback to ASIC should indicate whether the new design developed by CRI has been a success, i.e., is regarded by directors and liquidators as more user-friendly and useful. CRI says that “once introduced, the forms and instructions will be carefully monitored and further refined or changed as needed.”

A NEW FORM HELPING FAILED COMPANIES
A Communications Research Institute (CRI) Model project

WHEN A COMPANY fails and an External Administrator is appointed, the Administrator sends a director of the company a form to complete by a set date. The form, known until now as the Report As To Affairs (RATA) had remained largely unchanged since the 19th century.  The Australian Securities and Investment Commission (ASIC), which issues the RATA under the Corporations Act 2001, contracted CRI to develop a new design that would be:

  • user friendly,
  • consistent and logical,
  • visually appealing,
  • easy to read an complete.

CRI drew on its extensive research and practice in forms design spanning over three decades.  CRI collaborated and consulted throughout the project with ASIC and a diverse group of professionals, academics, industry bodies, and former company directors, all of whom contributed to the design of the new form. 

External administrators, in particular, who were the main RATA users told us that it failed to provide them with adequate information on the companies they administered.  CRI, in consultation with ASIC determined that the needs of administrators had to be taken into account in the redesign.

Receiving the RATA is an unhappy and often traumatic experience for company directors.  It marks the end of the company’s life, handing over its remains and final fate to an External Administrator who disposes of it and its assets in the best interests of its creditors.  The feedback showed that in that handing over, filling out the RATA was itself traumatic.

Tellingly, not a single director who participated in the CRI testing of the original RATA could use it appropriately.

The redesign involved all aspects of the form’s structure, language, layout, colour and content, and a change of name from RATA to are more easily understood name: ROCAP – Report on Company Activities and Property.  CRI undertook three rounds of designing, testing, and consultation with ASIC and stakeholders, followed by redesign.

The result is a totally new set of three documents to replace the RATA: Part A contains most of the RATA questions but in a totally new format, Part B contains new questions about the company records, history and management, and the third document contains detailed instructions for completing Parts A and B….

The instructions … are designed to exactly complement the questions, using the same numbering system throughout.

Observations from previous research shows that form users avoid reading instructions on a form because they see the task is primarily a form-filling task rather than are reading-and-form-filling task.  In CRI’s designs, the instructions are always in a separate document, physically removed from the form filling tasks.

Careful design refinement of the navigation between the two documents as a result of testing enabled easy navigation between the two.  In the final round of testing, participants describe the document as “straightforward”. They easily followed both instructions and the related form-filling task.  The new design meets all CRI standards for good information design.

Once introduced, the forms and instructions will be carefully monitored and further refined or changed as needed.

Professor David Sless

Communication Research institute – October 2018

My previous posts on this subject are titled “Framework of new Report as to Affairs (RATA) drafted by ASIC” and “ASIC notifies liquidators that ROCAP is to replace RATA”. 

I plan to post more articles about the new form and documents.

Two convictions for illegal phoenix activity, but questions unanswered

 Corporate Insolvency, Insolvency Law, Phoenix company activity, Regulation, White collar crime  Comments Off on Two convictions for illegal phoenix activity, but questions unanswered
Dec 192017
 

PhoenixThe Australian Securities and Investments Commission (ASIC) has reported on two successful convictions against directors for breaching their duties, in that they engaged in illegal phoenix activities.

The reports are in two media releases, both published on 19 December 2017. Copies of the media releases appear below. But unfortunately, the media releases do not report on what, if anything, happened in relation to the assets of the stripped companies. If the only consequences of the phoenix activities were fines and, in one case, disqualification, there has been little in the way of deterrence.

As can be seen, one director was convicted and fined $5,000, and automatically disqualified from managing corporations for five years.  His company (Brimarco) had all its funds – $34,800  – taken and transfered to a related company, leaving behind debts of $2 million. The release does not say whether the $34,800, or anything at all, was recovered.

The other director was discharged without conviction upon entering into recognisance in the sum of $2,000 on condition that she would be of good behaviour for two years. She sold the assets of her company (Greenlay Enterprises) to a related entity for $20,000, which appears to have been less than their market value. To make matters worse, the related entity did not actually pay the $20,000.  The release does not say whether the assets, or an amount equal to their worth, or anything at all, was recovered.

Continue reading »

ASIC reissues some of its insolvency information sheets

 ASIC, Checklists and guides, Corporate Insolvency, External administration, Insolvency Law, Insolvency practices, Regulation  Comments Off on ASIC reissues some of its insolvency information sheets
Sep 112017
 

Logo with border

With the commencement on 1 September 2017 of the delayed parts of the Insolvency Law Reform Act 2016 (the ILRA), the Australian Securities and Investments Commission (ASIC) has updated some of the Information Sheets which it makes available on its website to the general public.

ASIC says  that “Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.”

Over time ASIC has issued about 36 insolvency information sheets and flow charts (click here for my list).  Below is a list of 15 which have recently been reissued.

In the past, nearly all ASIC’s information sheets have been available to download as printable sheets in PDF file format.  However, this facility has not (yet) been provided with the updated/reissued sheets, which are only available as text on ASIC web pages. The links below are to the relevant website pages.

ASIC INSOLVENCY INFORMATION SHEETS – REISSUED 1 SEPTEMBER 2017
Form Number
Title of Sheet
Date Updated
Link to ASIC site
INFO 39 Insolvency information for directors, employees, creditors and shareholders

1/9/2017

 INFO 39
INFO 41 Insolvency: A glossary of terms 1/9/2017 INFO 41
INFO 42 Insolvency: a guide for directors 1/9/2017 INFO 42
INFO 43 Insolvency: a guide for shareholders 1/9/2017 INFO 43
INFO 45 Liquidation: a guide for creditors 1/9/2017 INFO 45
INFO 46 Liquidation: a guide for employees 1/9/2017 INFO 46
INFO 53 Providing assistance to external administrators – Books, records and RATA 1/9/2017 INFO 53
INFO 54 Receivership: a guide for creditors 1/9/2017 INFO 54
INFO 55 Receivership: a guide for employees 1/9/2017 INFO 55
INFO 74 Voluntary administration: a guide for creditors 1/9/2017 INFO 74
INFO 75 Voluntary administration: a guide for employees 1/9/2017 INFO 75
INFO 84 Independence of external administrators: a guide for creditors 1/9/2017 INFO 84
INFO 85 Approving fees: a guide for creditors 1/9/2017 INFO 85
INFO 152 Public comment on ASIC’s regulatory activities 1/9/2017 INFO 152
INFO 212 Illegal phoenix activity 1/9/2017 INFO 212

ASIC catalogues where a liquidator failed to perform his duties

 ASIC, Checklists and guides, Corporate Insolvency, Duties of External Administrators, External administrators, Insolvency practices, Regulation, Standards  Comments Off on ASIC catalogues where a liquidator failed to perform his duties
Jun 292017
 

In reporting on the results of an investigation into the conduct of a Victorian registered liquidator operating as a sole practitioner, the Australian Securities and Investments Commission (ASIC) has provided a list of procedures which the liquidator failed to carry out.  

The catalogue serves both as a guide to some of the duties that ASIC regards as important, and as a reminder to liquidators.

ASIC logo

Extract from ASIC Media Release 28 June 2017

ASIC’s concerns centred on alleged failures to:

  • conduct pre-appointment independence reviews;
  • send to third parties adequate ‘Day One’ correspondence;
  • properly investigate company affairs;
  • take steps to protect and secure assets in a timely manner;
  • adequately investigate potential illegal phoenix activities and taxation offences of directors and their advisors;
  • make sufficient requests of company officers for books and records;
  • seek prompt assistance from ASIC under the Liquidator Assistance program where the company director or accountant failed to provide adequate books and records;
  • undertake adequate review of voidable transactions, including unfair preferences and uncommercial transactions;
  • lodge complete reports with ASIC;
  • provide creditors with adequate reporting to enable informed assessment of remuneration requests and may have drawn remuneration he was not entitled to; and
  • comply with legal requirements to document work undertaken.

Not each and every one of ASIC’s concerns were found in all of the external administrations reviewed.

ASIC Commissioner John Price said, ‘ASIC continues its focus on registered liquidators who fail to carry out their legal obligations to carry out adequate investigations and report fully to creditors, including in circumstances suggesting pre-appointment illegal activity.

‘Creditors have every right to expect registered liquidators to act independently and competently – especially given their role as a fiduciary. The community needs to have trust and confidence in the administration of insolvent companies.

‘ASIC will continue to review and take action against liquidators whom ASIC believes fall short of meeting legal and professional standards.’

Continue reading »

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 »

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 »

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 »

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

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

Continue reading »

 Older Entries