registered liquidators – ░░░ 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.

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 »

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

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

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.

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Contents of RG 258

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

ASIC, Corporate Insolvency, External administrators, Regulation Comments Off

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.

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

Government contemplates imposing a regulation levy on external administrators

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

Aug 312015

UPDATE TO THIS POST: In November 2016 the Treasury issued a revised proposal for consultation. See my blog titled “Levy on registered liquidators and other industries to help fund ASIC”.

A Government levy on registered liquidators is included in a draft proposal to adopt an “industry funding” model, or user-pays system, for the Australian Investments and Securities Commission (the ASIC). The levy is intended to recover costs incurred by the ASIC in regulating registered liquidators.

The Consultation Paper, issued on 28 August 2015, estimates that a flat levy on registered liquidators:

“… would equate to around $12,700 per year and some liquidators would potentially pay a high proportional fee relative to their costs of regulation.”

The paper discusses, as another option, the merits of the levy being based on “assets realised”. It states that one point in favour would be that:

“Levying liquidators on the basis of ‘assets realised’ would promote greater harmonisation between bankruptcy and corporate insolvency laws. It would be similar to the asset realisations charge administered by the Australian Financial Security Authority.”

In bankruptcies the liability to pay the asset realisations charge is that of the practitioner, but the amount of charge paid is borne by the estate or administration. This aspect is not discussed in the Consultation Paper. But presumably if the ASIC levy follows the bankruptcy scheme, the levy will be paid from funds held or realised by the company under external administration. Continue reading »

Insolvency industry bodies may request disciplinary action by ASIC against registered liquidators

ASIC, Corporate Insolvency, External administrators, Insolvency Law, Law reform proposals, Practitioners Association (ARITA), Regulation Comments Off

Dec 092014

Under the Insolvency Law Reform Bill 2014 the insolvency practitioners association and the accountants associations are to be granted the right to formally refer registered liquidators who they suspect are guilty of misconduct to the Australian Securities and Investments Commission to consider using its disciplinary powers.

Disciplinary-action The following table sets out the proposed legislation by using extracts from the Bill and related official material.

SUBJECT: DISCIPLINE OF REGISTERED LIQUIDATORS:
POWER OF INDUSTRY BODY TO GIVE INDUSTRY NOTICE

SELECTED EXTRACTS FROM THE DRAFT BILL, PROPOSED RULES, ETC.	SOURCE OF TEXT
Subdivision G of Division 40 provides that an industry body will be able to provide information about potential breaches of the law by a liquidator, and also be able to expect a response from ASIC on the outcome of that information provision. The following industry bodies are proposed to be prescribed bodies: • Australian Restructuring Insolvency & Turnaround Association; • CPA Australia; • Institute of Chartered Accountants in Australia; and • Institute of Public Accountants.	Insolvency Practice Rules Proposal Paper, page 19, para 110
An industry body (prescribed in the Insolvency Practice Rules) may lodge a notice (*an industry notice*) stating that the body reasonably suspects that there are grounds for ASIC to take disciplinary action against a registered liquidator. The industry body must identify the registered liquidator and include the information and copies of any documents upon which the suspicion is grounded. ASIC must consider the information and documents included in the industry notice and take action as follows: • if ASIC decides to take no action ASIC, must give the industry body a notice within 45 business days after the industry notice is lodged; • however, such a notice does not preclude ASIC from taking action based wholly or partly on the basis of information in the industry notice of the following kind: – suspending or cancelling the registration of the registered liquidator; – giving the registered liquidator a show cause notice; or – imposing a condition on the registered liquidator; • if ASIC does take action based wholly or partly on the information included in an industry notice, ASIC must give the industry body notice of that fact. An industry notice is not a legislative instrument. An industry body is not liable civilly, criminally or under any administrative process for giving an industry notice if the body acted in good faith and the suspicion that the body holds in relation to the subject of the notice is a reasonable suspicion. A person who makes a decision in good faith as a result of which an industry body gives an industry notice is not civilly, criminally or under any administrative process for making the decision. A person who gives information or a document in good faith which is included, or a copy of which is included, in an industry notice is not liable civilly, criminally or under any administrative process for giving the information or document.	Explanatory Material, pages 140-141, paras 6.67 to 6.70
An industry body (which will be prescribed in the Insolvency Practice Rules) may give ASIC an ‘industry notice’ stating that the industry body reasonably suspects that there are grounds for ASIC to take disciplinary action in relation to a registered liquidator. ASIC is required to notify the industry body whether or not it has decided to take action in relation to the matters in the industry notice. An industry body is not liable civilly, criminally or under any administrative process if the body acted in good faith and its suspicion in relation to the subject of the notice is a reasonable suspicion. A person who makes a decision in good faith as a result of which an industry body gives a notice is not liable civilly, criminally or under any administrative process. Similarly, a person who in good faith provides information or gives a document which is included in an industry notice, or a copy of which is included, is not liable civilly, criminally or under any administrative process.	Explanatory Material, Comparison of key features of new law and current law, page 125
Notice by industry bodies of possible grounds for disciplinary action Industry body may lodge notice (1) An industry body may lodge with ASIC a notice in the approved form (an industry notice): (a) stating that the body reasonably suspects that there are grounds for ASIC: (i) to suspend the registration of a registered liquidator under section 40-25; or (ii) to cancel the registration of a registered liquidator under section 40-30; or (iii) to give a registered liquidator a notice under section 40-40 (*a show-cause notice); or (iv) to impose a condition on a registered liquidator under another provision of this Schedule; and (b) identifying the registered liquidator; and (c) including the information and copies of any documents upon which the suspicion is founded. ASIC must consider information and documents* (2) ASIC must consider the information and the copies of any documents included with the industry notice. ASIC must give notice if no action to be taken (3) If, after such consideration, ASIC decides to take no action in relation to the matters raised by the industry notice, ASIC must give the industry body written notice of that fact. 45 business days to consider and decide (4) The consideration of the information and the copies of any documents included with the industry notice must be completed and, if ASIC decides to take no action, a notice under subsection (3) given, within 45 business days after the industry notice is lodged. ASIC not precluded from taking action (5) ASIC is not precluded from: (a) suspending the registration of a registered liquidator under section 40-25; or (b) cancelling the registration of a registered liquidator under section 40-30; or (c) giving a registered liquidator a notice under section 40-40 (a show-cause notice); or (d) imposing a condition on a registered liquidator under another provision of this Schedule; and wholly or partly on the basis of information or a copy of a document included with the industry notice, merely because ASIC has given a notice under subsection (3) in relation to the matters raised by the industry notice. Notice to industry body if ASIC takes action (6) If ASIC does take action of the kind mentioned in subsection (5) wholly or partly on the basis of information or a copy of a document included with the industry notice, ASIC must give the industry body notice of that fact. Notices are not legislative instruments (7) A notice under subsection (3) or (6) is not a legislative instrument. No liability for notice given in good faith etc. (1) An industry body is not liable civilly, criminally or under any administrative process for giving a notice under subsection 40-100(1) if: (a) the body acted in good faith in giving the notice; and (b) the suspicion that is the subject of the notice is a reasonable suspicion. (2) A person who, in good faith, makes a decision as a result of which the industry body gives a notice under subsection 40-100(1) is not liable civilly, criminally or under any administrative process for making the decision. (3) A person who, in good faith, gives information or a document to an industry body that is included, or a copy of which is included, in a notice under subsection 40-100(1) is not liable civilly, criminally or under any administrative process for giving the information or document.	Insolvency Law Reform Bill 2014 Exposure Draft, Insolvency Practice Schedule (Corporations), sections 40-100 and 40-105, pages 186 & 187

1. Insolvency explained CLICK HERE

What is insolvency? CLICK HERE

What is bankruptcy? CLICK HERE

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