Interim report issued by Senate Committee inquiring into ASIC’s performance

 ASIC, Australian Senate 2013-14, Corporate Insolvency, Official Inquiries, Regulation  Comments Off on Interim report issued by Senate Committee inquiring into ASIC’s performance
May 292014

The Senate Economics References Committee has tabled a short interim report outlining its reasons for seeking an extension of time to present its final report on its inquiry into the performance of the Australian Securities and Investments Commission. The Committee was due to report by 30 May 2014 but has asked for an extension to 26 June 2014. In its interim report the Committee says, amongst other things:

“This is an important inquiry. The size and growth of Australia’s financial sector and the fact that millions of Australians are involved in it, not least because of compulsory superannuation, makes it essential that modern and adaptable regulations are in place and regulators such as ASIC are at the top of their game…. Many of the people who wrote to the committee recounted their experiences of receiving bad financial advice, of unknowingly being placed in high-risk investments, of having documents forged and signatures used improperly. They referred to serious financial losses and difficulties in having their complaints addressed. In their view, the regulatory framework and the regulator had failed to protect their interests…. The committee was well advanced in preparing its report, when on 16 May 2014, ASIC and the CBA advised the committee that there were inconsistences in the way in which the compensation arrangements for CFP clients had been applied. This revelation suggested that, for some time, the CBA had not kept either the committee or ASIC fully informed about the compensation process for clients affected by serious misconduct within CBA’s businesses (see attachments)…. The latest information that ASIC and the CBA provided to the committee in order to correct the record was sketchy and left many key questions unanswered…. Concerned that it may still not have a correct understanding of what has happened, the committee has sought additional information and clarification from both ASIC and the bank on this matter of central importance to the committee’s inquiry and report.”

Sources and links

Email of 28 May 2014 from Committee to all submitters and witnesses.

Copy of the interim report in pdf format.

Committee webpage with full details of its inquiry into ASIC


Insolvency Services Standard for public accountants to be strengthened

 Checklists and guides, Corporate Insolvency, Ethics, Insolvency practices, Regulation, Standards  Comments Off on Insolvency Services Standard for public accountants to be strengthened
May 282014

Australia’s Accounting Professional and Ethical Standards Board (ASESB) is revising the professional standard that governs accountants in public practice who perform insolvency services.

APESB logo

On 21 May 2014 ASESB issued an exposure draft of the proposed revisions. It is seeking feedback from insolvency accountants and “other stakeholders” by 4 July 2014.

Chairman of ASESB, Stuart Black, says

“The proposed new requirements to (the professional standard) APES 330 will further strengthen the professional requirements applicable to liquidators and administrators and provide a reference for creditors, regulators and other stakeholders to evaluate and monitor practitioner conduct”

The Media Release states that:

“APESB sets the code of ethics and professional standards by which members of Australia’s three major professional accounting bodies (CPA Australia, the Institute of Chartered Accountants Australia and the Institute of Public Accountants) are required to abide.”

Overview of the proposed changes

The exposure draft  contains the following list of “significant revisions” to the existing APES 330:

  • Revision or addition of the following definitions: Administration, Appointment, Approving Body, Contingent Fee, Controller, Firm, Independence, Insolvency Services, Insolvent Debtor, Member, Member in Public Practice, Professional Activity, Professional Bodies, Professional Services, Professional Standards, Referring Entity, and Related Entity;
  • Removal of the defined terms: Associated Entity, Controlled Entity, and Witness Report;
  • Extending the scope of the standard to include members’ voluntary liquidations with the exception of having to comply with the Independence requirements of the standard;
  • Introduction of a requirement to disclose the source of a referral where the Appointment follows a specific referral;
  • Introduction of a requirement to declare in the DIRRI that no information or advice, beyond that outlined in the DIRRI, was provided;
  • Use of the term “believing” to clarify that it is the Member in Public Practice’s reasons for believing that the Pre-appointment Advice provided or the relationship disclosed does not result in a conflict of interest or duty;
  • Extension of the prohibition on providing Pre-appointment Advice to both an insolvent Entity and its directors; to include an Insolvent Debtor and any corporate Entity associated with that individual;
  • New guidance to encourage disclosure of relationships with Associates of the insolvent Entity that were more than two years prior to the Appointment;
  • Amendment of the current prohibition of consenting to an Appointment where prior business dealings were held to exclude immaterial dealings, or those business dealings that occurred more than two years prior to the Appointment;
  • Additional guidance on what is considered a material business relationship;
  • A new requirement to provide the basis of fee calculations and where relevant the scale
  • Mandating that where fee estimates are provided that these be provided in writing with explanations of the variables that may affect the estimated fee;

  • An obligation on the Member in Public Practice to provide details of Expenses that may be charged from the Administration and the basis of how the Expenses will be charged and recovered by the Firm;

  • Prohibition of Members in Public Practice claiming any pre-appointment disbursements as an Expense;

  • Requirement for consistency between fees charged and those sought for prospective fee approval;
  • The scale of rates used to calculate prospective fees must be that approved by the Approving Body
  •  Where a Member in Public Practice accepts an Appointment with another Member, all Members are equally responsible for all decisions on the Appointment; 

  • Payments received for the costs of an Administration from third parties must be disclosed to the Approving Body and approved (other than in an Appointment as a Controller);
  •  Detailed requirements and guidance on Expert Witness obligations has been replaced by referring Members in Public Practice to APES 215 Forensic Accounting Services; and
  •  New requirements for a Member in Public Practice to use appropriate procedures to ensure statutory timeframes are met in a timely manner.


Deadline for comments


The deadline for stakeholder comments is 4 July 2014. APESB says it welcomes comments from respondents on any matters in the exposure draft (ED 01/14).

Comments should be addressed to:
The Chairman, Accounting Professional & Ethical Standards Board Limited
Level 7, 600 Bourke Street, MELBOURNE, VIC, 3000.

A copy of each submission will be placed on public record on the APESB website.


Sources and Links

APESB Media Release 21 May 2014

APESB At A Glance, APES 330 Insolvency Services ED, May 2014

Proposed Standard: apes 330 Insolvency Services


The Australian Restructuring Insolvency & Turnaround Association (ARITA) also has an extensive Code of Professional Practice.  That governs members of ARITA, but has also been accepted by some judges in hearings concerning misconduct as a guide to the professional standards expected of all insolvency practitioners.  Accordingly, the changes by the accounting bodies to APES 330 may not make much real difference to practice standards. But of course the accounting bodies must have their own rules in place.


ASIC report seeks more ideas on reducing red tape

 ASIC, Corporate Insolvency, Forms, Insolvency practices, Regulation  Comments Off on ASIC report seeks more ideas on reducing red tape
May 232014

Australia’s corporate regulator, the Australian Securities and Investments Commission, estimates that 10 per cent of its 362 statutory forms could be removed, consolidated or streamlined in the name of reducing “red tape”.

This is revealed in Report 391 – ASIC’S deregulatory initiatives, published on 7 May 2014.


Those forms identified for possible removal include ones which ASIC says are “not required or used regularly by ASIC or the public”.  ASIC says that:

A number of the forms identified for removal are currently required to be provided to ASIC under the law, but provide information that might not be necessary for ASIC to hold. Subject to stakeholder comments, we may suggest that these forms be removed through legislative amendment.

Other forms are marked for removal on the basis that:

      •  the “information is available from the company”;
      • they are “obsolete“; and
      • they are “Administrative only”.

Forms that may no longer be required in corporate insolvency administration

Below I’ve listed the insolvency forms identified by ASIC for removal because the “information is not used by ASIC” *. (Per Table 1 of Appendix 1 of Report 391.)

  •  Form 540 – Statement in writing of posting of notices of appointment to settle list of contributories – Reg. 5.6.59(2)
  • Form 545 – Statement in writing of giving notice to persons placed on the list of contributories – Reg.5.6.62(5)
  • Form 555 – Notice of controller extending time to submit report as to affairs – S.429(4)
  • Form 558 – Court order extending time to provide report as to affairs – S.429(5)
  • Form 562 – Notice of liquidator extending time to submit report as to affairs – S.475(7)(b)
  • Form 911 – Verification or certification of a document – Reg. 1.0.16

* NOTE: The phrase “Information not used by ASIC” used in the Appendix appears to be an abbreviation of the phrase “information not required or used regularly by ASIC or the public”.

Forms that, if removed, could impair corporate insolvency administration

ASIC has marked other forms for possible removal because “the information is available from the company“. But liquidators of small companies – especially “phoenix” companies – frequently find it difficult or impossible to obtain information from the company. So removal of the following forms (or, more precisely, the requirement to lodge them with ASIC) may impair the efficient investigation of insolvent companies:

  • Form 909 – Notification of office at which registers are kept – Sections 100(1)(d), 172, 271, 1302(4) and 601CZC
  • Form  991 – Notification of location of books on computer – Sections 1301 and 1301(4) – inspection of books
  • Form 992 – Notification of change of location of books kept on computer – Sections 1301 and 1301(4) – inspection of books
  • Form 313 – Notification of address in Australia of information relating to financial records kept outside Australia – Section 289(2) – place where records are kept outside the jurisdiction. (See next heading.)

 Cloud computing

In recent years the uptake of cloud computing services by Australian businesses has increased dramatically. One common characteristics of cloud computing is that business books and records are held outside the Australian jurisdiction. Under section 289 of the Corporations Act 2001 “if financial records about particular matters are kept outside the (Australian) jurisdiction, sufficient written information about those matters must be kept in this jurisdiction to enable true and fair financial statements to be prepared (and) the company must give ASIC written notice in the prescribed form of the place where the information is kept”.

The proposed removal of Form 313 shows that this requirement is to be abolished.

Simplification and consolidation

Two form used in corporate insolvency administration are marked for simplification:

  • Form 529 Notice of meeting: Creditors to consider voluntary winding up
    Form 905A Notification of ceasing to act as or change of details of a liquidator.

Ideas and Comments

cut red tape

ASIC is seeking ideas and/or comments to be submitted to it by 18 June 2014.  These are to be sent to:

Ashly Hope, Strategic Policy Advisor
Australian Securities and Investments Commission
GPO Box 9827 Melbourne VIC 3001

 Sources and links:

ASIC Media Report 14-099MR “ASIC reports on red tape reduction and invites feedback”, 7 May 2014

Report 391 ASIC’s deregulatory initiatives published 7 May 2014.  ASIC says: “This report provides an overview of ASIC’s commitment to reduce compliance costs for our regulated population, including ongoing work and new initiatives.  It should be read by all businesses and individuals who are required to comply with laws and regulations administered by ASIC and those who have an interest in engaging with ASIC on our approach to deregulation.”

May 152014

Since mid-2012, when the Australian Securities and Investments Commission (ASIC) was given the power to wind up companies that met certain criteria, ASIC has ordered the winding up of 19 companies.
In its media releases ASIC has estimated that those 19 companies have over $1.5 million in unpaid employee entitlements (wages, leave, etc.) owing to 100 workers.
As a result of the companies being wound up, those workers will be entitled to claim payment of their entitlements from the Fair Entitlements Guarantee (FEG) scheme administered by the Department of Employment.
The following chart lists the 19 “abandoned companies” wound up by ASIC. They are called “abandoned” because ASIC believes they are no longer carrying on business and that their directors have effectively walked away from them and their debts. abandon-companies


In July 2012 ASIC was given the power to order the winding up of a company in certain circumstances [Part 5.4C of the Corporations Act 2001] [Section 489EA]. In the lead up to this legislation the phrase “abandoned companies” was coined to describe such companies. Shortly after obtaining these powers ASIC decided that its primary consideration when exercising its discretion would be whether ordering the winding up of a company would facilitate employee access to funds from the government’s General Employee Entitlements Scheme (GEERS), since replaced by the Fair Entitlement Guarantee scheme (FEG). [ASIC Consultation Paper 180]. This objective had been the main reason behind introduction of the new law, which was part of the Gillard Government’s  Protecting Workers’ Entitlements package of April 2012.  A precondition for an employee of a company receiving a payment from GEERS/FEG is that the company be placed into liquidation.


ASIC media release 13-233MR “Workers to gain access to entitlements after ASIC employs new powers”  27 August 2013 ASIC media release 14-097MR ” ASIC wind-up actions enable access to employee entitlements”  6 May 2014