Sep 292011

The Senator who instigated the Senate Economics References committee inquiry into the role of administrators and liquidators has called for a Royal Commission into white collar crime. 

Senator John Williams, the Nationals Senator for New South Wales, has congratulated the Armidale Dumaresq Council for supporting his call.  Senator Williams said yesterday (28/9/2011) that Armidale Dumaresq Council has first-hand knowledge of the damage that can be done to community assets through unscrupulous practices of some in the insolvency industryThe YCW Leagues Club in Armidale was the victim of the administration of Newcastle liquidator Stuart Ariff who this week was found guilty on 19 criminal charges relating to a separate matter.

Senator Williams said the Council’s submission to the 2009 Senate inquiry was damning of the Australian Securities and Investments Commission (ASIC) for a lack of action. Since then, Armidale Dumaresq Council Deputy Mayor Jim Maher has been keen to see reform in the insolvency industry, and successfully moved two motions.

On 21 September 2011 Senator Williams called for a Royal Commission into white collar crime in Australia, and handed a file of statutory declarations alleging wrongdoing to the Australian Federal Police and the NSW Fraud Squad.

“Unfortunately there is no confidence in the industry regulators like ASIC anymore. Mr. Ariff is a case in point. I hope the Federal government acts on white collar crime because it is destroying peoples’ lives. To do nothing would be a green light for the illegal activities to continue”, Senator Williams said.

SOURCE: MEDIA RELEASE BY SENATOR JOHN WILLIAMS, 28 September 2011. Click here for  Senator William’s Website.

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Proposed merger of Australian insolvency regulators is formally rejected

 Australian Senate 2009-2010, Insolvency practices, Official Inquiries, Regulation  Comments Off on Proposed merger of Australian insolvency regulators is formally rejected
Jun 062011

The Government has just announced another inquiry into the conduct of insolvency practitioners. This inquiry will consider “reforms with a view to address possible misconduct in the insolvency profession and to improve the value for money for recipients of insolvency services.”

The release of an “options paper” titled “A modernisation and harmonisation of the regulatory framework applying to insolvency practitioners in Australia”,  follows the often feverish 2010 Senate Economics References Committee inquiry into the role of liquidators and administrators, their fees and their practices, and the involvement and activities of the Australian Securities and Investments Commission.

In issuing the options paper the Government says that the Senate Committee’s recommended that the corporate insolvency arm of ASIC be transferred to ITSA to form a new personal and corporate insolvency regulator will not be accepted.

The paper calls for comment and suggestions aimed at ensuring that the framework for insolvency practitioners: 

•  promotes a high level of professionalism and competence by practitioners; 

•  promotes market competition on price and quality; 

•  promotes increased efficiency in insolvency administration; and 

•  enhances communication and transparency between stakeholders.

To obtain a copy of the paper CLICK HERE.

Interested parties are invited to comment on the paper. Closing date for submissions: Friday, 29 July 2011.  Address written submissions to:
The Manager
Governance and Insolvency Unit
Corporations and Capital Markets Division
The Treasury
Langton Crescent

Enquiries:  Timothy Beale on (02) 6263 2870.


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Code of conduct for liquidators being revised

 Australian Senate 2009-2010, Ethics, Official Inquiries, Regulation, Standards  Comments Off on Code of conduct for liquidators being revised
Sep 302010

Due to “various factors”, including the Senate Inquiry into Liquidators and Administrators, the Australian association of  insolvency practitioners has drafted changes to its code of conduct.

On 29 September 2010 the latest version of the code (Version 2) was released to members of the Insolvency Practitioners Association of Australia (IPA) and made available to the public via its website:

Visitors to the site can view the existing Code of Professional Practice (COPP) — which is Version 1,  issued in May 2008 — and a version of the proposed new code marked up for changes between versions 1 and 2.

Typically such codes  set out the ethical principles, values, behaviours and standards of practice expected of members

The IPA says that its COPP is the standard for professional conduct in the insolvency profession.  It says that: “The primary purposes of the COPP are to educate IPA members as to their professional responsibilities; and provide a reference for stakeholders against which they can gauge the conduct of Practitioners”.

IPA members have until  20 October 2010 to provide feedback or raise any concerns in respect of the draft Version 2.  The IPA expects that Version 2 will be in operation prior to the end of 2010.

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Hourly fees charged by liquidators, receivers and administrators

 Australian Senate 2009-2010, Official Inquiries  Comments Off on Hourly fees charged by liquidators, receivers and administrators
Sep 212010

A chart showing  hourly fees charged by liquidators was supplied to the Senate Committee by the Australian Securities and Investments Commission (ASIC).  See below:

Table supplied to the Australian Senate Committee Inquiry

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Corporate insolvency regulator is “overburdened” says Senate Committee.

 Australian Senate 2009-2010, Official Inquiries, Regulation  Comments Off on Corporate insolvency regulator is “overburdened” says Senate Committee.
Sep 142010

In its report released today (14 September 2010) the  Australian Senate Committee that was set up to inquire into liquidators and administrators  has recommended that  the corporate insolvency  arm of  ASIC  be  transferred  to  ITSA  to  form  the  Australian  Insolvency  Practitioners Authority (AIPA).

In discussing this recommendation (one of many in its 190 page report) the Committee said:

“.. (we have)  heard a range of evidence concerning  the  role  and  competence  of  the  Australian  Securities  and  Investments Commission  (ASIC),  the  Companies  and  Liquidators  Disciplinary  Board  (CALDB) and  the  Insolvency  Practitioners  Association  of  Australia  (IPAA).  The  criticism  of ASIC’s approach to monitoring the insolvency industry as outlined in chapter 6 of this report is of particular concern for the committee”. 

“ASIC  has  consistently  claimed  that  it  has  the  resources  to  fulfil  its  current responsibilities  in  insolvency  matters.   It  has  also  admitted  that  there  are  areas  in which it could improve.  Taken together, these comments suggest that ASIC believes it  can  address  these  areas  without  more  funding,  provided  its  responsibilities  in insolvency are not increased.”

“However,  the  committee  believes  that  regardless  of  funding,  ASIC  is overburdened. The oversight of insolvency practitioners is just one of 13 ‘stakeholder teams’  within  ASIC’s  organizational  structure.   Its  2008–09  Annual  Report  lists  six strategic  priorities,  none  of  which  relate  directly  to  corporate  insolvency  matters.  Understandably,  the  strategic  priority  of  managing  the  domestic  and  international implications  of  the Global  Financial  Crisis  has  consumed  much  of  ASIC’s time  and resources.”

“The  committee  believes  that  corporate  insolvency  in  Australia  needs  more priority  and  prominence  in  the  regulatory  framework.  This  will  not  be  achieved through more funding and responsibilities for the same overburdened agency. Rather, …  the  committee  argues  that  there  is  a  need  to  combine  the regulation of personal bankruptcy and corporate insolvency under the one body. This would be best achieved by transferring ASIC’s corporate insolvency responsibilities to within  the  Insolvency and  Trustee Service Australia (ITSA).  The new  agency  would therefore be under the Attorney-General’s portfolio.”

For a copy of the full report go to:


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Sep 132010

Statistics produced by Australia’s corporate regulator reveal that it treats only 11% of  the unfavourable  statutory reports it receives from insolvency practitioners  as serious enough to warrant any action.

Insolvency practitioners must lodge a report with the Australian Securities and Investments Commission (ASIC) when they suspect an offence under any Australian law relating to the company to which they are appointed.

In one of ASIC’s submissions to the Senate Committee’s inquiry into liquidators and administrators (see page 76 of the March 2010 submission), there is a chart showing the number of such reports – described as “reports of alleged misconduct or suspicious activity” –  received in the financial  years 2007, 2008 and 2009, and in the 6 months to December 2009.

See the copy of ASIC’s chart at the end of this article.

[All public submissions to the Committee may be found at ]

The chart in ASIC’s first submission reveals that during the period 1/7/2006 to 31/12/2009 ASIC received 20,225 “inital” statutory reports alleging misconduct or suspicious activity.  Of those only 2,918 (14.4%) were flagged or  escalated for further consideration.

In the 06/07 and 07/08 financial years the number of reports escalated equalled 17%.  But in the 08/09 financial year and the half year to December 2009,  that figure dropped to 11%.

Why are 89% of reports by liquidators and administrators not acted upon?  There would be several reasons.  Isn’t the public entitled to know what those reasons are and how many cases there are in each category?

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Treasury’s Answer to Senate Questions

 Australian Senate 2009-2010, Official Inquiries  Comments Off on Treasury’s Answer to Senate Questions
Sep 102010



 Circa March 2010

 Senator Williams

 ‘Can you take this on notice for me: how many countries actually have receivers? I believe in recent times in the UK they have actually banned receiverships. Could you fond out whether the UK has banned receivers? Could you also tell me how many countries around the world actually have a system of receivership and appointing receivers?’


 “Administrative receivership is the process in the United Kingdom where in the event of a default an a loan, a tender may be entitled to appoint an insolvency practitioner (i.e. an administrative receiver) who may have the control of the whole or a substantial part of a company’s property and wide powers over its business; for the purpose of realising the lenders security. In many ways, an administrative receivership is akin to a receiver and manager under Australian law.

 “In the United Kingdom, the Enterprise Act 2002 (UK) restricts the use of administrative receivership. Subject to exceptions, rights to appoint an administrative receiver are limited to those who have a floating charge that was contractually agreed prior to 15 September 2003.

” Treasury notes that Professor David Brown appeared before the inquiry in Adelaide on 9 April 2010 and Treasury refers to Professor Brown’s explanation of the current law in relation to receiverships in the United Kingdom.

 “Non‑administrative receiverships are still available in the United Kingdom. The availability of receiverships is legislated by the Insolvency Act 1986(UK).

 “Receivership in one form or another is present in most modern insolvency regimes such as Canada, United States of America and New Zealand.”

 Senator Fierravanti‑Wells

 ‘I would be really interested to know from Treasury’s perspective how much tax alone is foregone in corporate failures on a per annum basis.’


 “The Australian Taxation Office (ATO) has advised that during the financial year ending 30 June 2008, an estimate of $1.06 billion in taxation was forgone as a consequence of known corporate failures. The estimated amount for the financial year ending 30 June 2009 was $1.3 billion. These amounts relate to known or reported taxation liabilities and do not include unpaid or uncollected superannuation liabilities.”

 Senator Cameron

 ‘You may want to take this on notice but could you advise the committee of how many companies operate within Australia under that $10 million gross annual turnover threshold?’


” ASIC advise that there are approximately 1.7 million companies in Australia, with approximately 32,000 required to report under Chapter 2M of the Corporations Act. Of those that report, approximately 12,000 are proprietary companies and approximately 20,000 are public companies.

 “Small proprietary companies are generally not required to prepare financial reports, unless requested by their shareholders or ASIC. Even if required to prepare the reports, small proprietary companies are not required to lodge the reports on the public register. For the purpose of these provisions, a ‘small proprietary company’ is one which satisfies two of the following three criteria: having less than 50 employees, less than consolidated revenue greater than $25 million or assets under $12.5 million.

 “Excluding the approximately 20,000 public companies, almost all of the companies that do not lodge financial reports have consolidated revenue of less than $25 million.”

 Senator Fierravanti‑Wells

 ‘Following on from Senator Cameron’s question, in terms of sanctions that are imposed in this area on company directors, where does Australia rank? Could you take that on notice. For example, the stigma in this country in relation to bankruptcy and insolvency has disappeared and certainly is not comparable to the severity of sanctions that are imposed on directors in other countries where passports are removed and those sorts of things. We are nowhere near that. So, if you could take it on notice and give us a comparison, 1 would be interested in the answer.’


 “Australia has a robust system of corporate governance that is well recognised internationally.

 “The principal duty of the board of directors is to act in the interests of the company as a whole. This means acting in the best interests of members, having regard to their future as well as current interests. Every member of a company has certain rights by virtue of their membership. These rights are conferred by statute and by the company’s own constitution. The Corporations Act protects members of the company from unjust treatment and provides a range of mechanisms for members to protect their rights and interests as members of the corporation.

” The Government has put in place a principles‑based framework for corporate governance to protect the integrity of the market, facilitate commerce and industry, and maintain investor confidence in Australia’s companies.

 “The Corporations Act contains a range of duties setting out certain minimum obligations and responsibilities directors must fulfil. These include:

  •  the duty to act in good faith; the duty to act in the best interests of the company; 
  • the duty to exercise their powers with appropriate care and diligence that is reasonable in all of the circumstances; 
  • the duty to not make inappropriate use of inside information; 
  • the duty to not misuse their position for their own or a third party’s possible advantage (or to the possible detriment of the company); and the duty to avoid insolvent trading.

 “Directors face penalties of $200,000 for civil contraventions of these provisions, and can be disqualified from managing corporations. Directors may also be required to pay compensation. Criminal contraventions face maximum fines of $220,000 or imprisonment for 5 years, or both.

 “In relation to passports, where ASIC is conducting an investigation, a prosecution, or a civil proceeding against a person, the Court under section 1323 of the Corporations Act can require a person to deliver up to the Court their passport.

 “Given differing legal frameworks and institutional arrangements, regulatory arrangements are not readily amenable to international comparison.”

 Senator Cameron

 ‘Has Treasury done any analysis of the implications of phoenix companies for the overall economy? You may have to take this question on notice: does Treasury see phoenix companies as a problem generally in the economy?’


 “Phoenix activity involves the evasion of tax and other liabilities through the deliberate, systematic and sometimes cyclic liquidation of related corporate trading entities. Minister Sherry released a proposals paper Action against Fraudulent Phoenix Activity in November 2009. We refer the committee to the overview and analysis of the problem of phoenix company behaviour set out in that paper.”


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Insolvency Inquiry: Treasury’s Guide

 Australian Senate 2009-2010, Official Inquiries  Comments Off on Insolvency Inquiry: Treasury’s Guide
Aug 182010

In December 2009 the Australian Senate Economics Committee invited the Treasury Department to make a submission to its inquiry into liquidators and administrators. Treasury obliged in February 2010 by pointing the Senate Committee to some useful background material. A copy of  Treasury’s covering letter is produced below.  I have added a few comments to improve and update the internet links.  [The Committee subsequently questioned Treasury and requested more information. Copies of these exchanges will be included in a future post to this site.]

An overview of the relevant legal framework is attached for the assistance of the Committee.  There are a number of completed reviews and reports that deal with many of the issues encompassed by the Committee’s terms of reference. The Committee may find it useful to review these in the course of the Inquiry.

Corporate Insolvency Laws: A Stocktake

The Parliamentary Joint Committee on Corporations and Financial Services (PJC) released the Corporate Insolvency Laws: A Stocktake report in 2004. The PJC recommended that the Australian Securities and Investments Commission (ASIC) work with professional bodies to encourage the adoption of best practice standards for remuneration and the prompt disclosure of the basis of fees charged by liquidators and administrators. A copy of this report is available at: 

Review of the Regulation of Corporate Insolvency Practitioners

A review of the regulation of corporate insolvency practitioners was completed in 1997 (Report of the Working Party on the Review of the Regulation of Corporate Insolvency Practitioners, June 1997). The recommendations contained in the Report of the Working Party cover eight areas: 

  • regulatory system;
  • registering authority for insolvency practitioners;
  • registration requirements; discipline and remedial supervision;
  • general supervision; appointments and qualifications;
  • remuneration of insolvency practitioners; and
  • administrative requirements for controllers.

A copy of the Report is available on the Treasury website at:   

The following materials have also been issued by ASIC or by the insolvency Practitioners Association.

•             Guide to Fees of insolvency practitioners

•             Approving Fees: a Guide for Creditors

Copies of these documents can be downloaded from    NOTE BY pjk:  A more useful link is the following:$file/Approving_fees_guide_for_creditors.pdf 

Insolvency Practitioners Association  

The IPA Code of Professional Practice (The Code) addresses a range of matters dealing with the conduct of insolvency practitioners. This includes setting out a series of principles that should be followed in regard to practitioner. Included in the Code is a Creditor Information Sheet for approving remuneration in external administrations. A copy of the Code can be downloaded from  

Listed below are a number of remuneration and conduct related reforms passed or initiated in recent years. 

Corporations Amendment (insolvency) Act 2007

These amendments were the first significant change to Australia’s insolvency laws since 1993 and focused on improving outcomes for creditors, deterring misconduct by company officers, improving regulation of insolvency practitioners and voluntary administration. These reforms introduced the requirement for liquidators and administrators to complete Declarations of Relevant Relationships. Administrators are also required to complete Declarations of Indemnities. In relation to remuneration, there was a codification of principles and improvements in the information available to creditors and the Court. This included the Insertion of criteria into the Corporations Act for the Court to consider when assessing the reasonableness of an external administrator’s claim for remuneration.  

Personal Insolvency Reform

The Bankruptcy Legislation Amendment Bill 2009 was introduced in the House of Representatives on 28 October 2009. The Bill aims to provide a more streamlined process for fixing trustee remuneration and a more transparent process for reviewing remuneration. The Attorney‑General’s Department has released a discussion paper, Amendments to the Bankruptcy Regulations 1996: Remuneration of Registered Trustees, which is available at

 International resources and guidelines 

The Office of Fair Trading (OFT) in the United Kingdom has recently launched a study into Corporate Insolvency. The study will look at the market structure, regulation, remuneration and competition between firms and practitioners. Initially, this will involve collection and analysis of data from interested parties including accountancy and law firms, government, regulators and industry. Further investigations will depend on the results of the initial investigation. The OFT expect to complete their investigation by the end of 2010. Information regarding this study can be found at:

 Final report of OFT

 In April 2001 the World Bank released a detailed statement of principles and guidelines for effective insolvency and creditor rights systems:   


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