ASIC and one-year bankruptcy, AUSTRAC, a fees claim settled, and more …

The following further commentary on insolvency – submissions due, events and conferences and case law – may be of interest. For example, how many objections to a bankrupt’s discharge are lodged with AFSA each year? How does ASIC say it might react if the one year bankruptcy proceeds; Mr Shipton’s first appearance before a joint parliamentary committee; directions from AUSTRAC to liquidators; and resolution of a dispute between the Inspector-General and trustees over $279,250.40 in remuneration, and what is happening, or not, with some disciplinary proceedings.  

See my earlier and first commentary for 2018.

 

Bankruptcy

Submissions on the bill for the one-year period of bankruptcy were due by 31 January. Those lodged include interesting and well-argued proposals:

  • from Pitcher Partners as to the re-instatement of a bankruptcy or termination of a discharge;
  • from AFSA drawing on UK experience and on its own statistics.
  • For example, did we all know that only 519 objections to discharge were filed in 2016-2017, in relation to 57,923 undischarged bankrupts.

  • And that the “Official Trustee is more likely to lodge objections to discharge within the first year of bankruptcy than registered trustees. Registered trustees are more likely to lodge objections to discharge 33 months or more after a bankruptcy commences”.

  • And from ASIC, that a consequence of a one year bankruptcy may be that ASIC
  • “may well be required to take steps to disqualify relevant persons as directors more frequently.  … pursuant to ASIC’s powers at s.206F Corporations Act”.

The Senate committee has a reporting date of 19 March 2018.

ASIC Commissioner

As the new ASIC Commissioner, Mr James Shipton has his first appearance before the PJC monitoring ASIC, on 16 February in Sydney, at Mascot. Various take-on-notice responses have been provided by ASIC from previous hearings.

New Zealand

RITANZ is understood to be issuing its new Code shortly, ahead of its 17th Annual Corporate Insolvency and Restructuring Conference, in Auckland, being held from 9-11 May. The eminent UK lawyer, Mr Gabriel Moss QC, will be a key speaker.

AUSTRAC

In Australia, insolvency practitioners should note the AUSTRAC Compliance Guide and its answer to its own question: Does a reporting entity under external administration have AML/CTF Act obligations? The answer given is this:

“The obligations of the AML/CTF Act continue to apply to a corporate reporting entity placed under external administration. An external administrator (appointed to take control of the company from the directors) must continue to carry out the entity’s AML/CTF obligations where the entity is continuing to provide designated services.

It is AUSTRAC’s view that the external administrator must carry out the company’s AML/CTF obligations because he or she is the only person with the authority to act in the company’s name.

However, an administrator may delegate his or her authority on a limited basis to a company director to act for the company in appropriate circumstances and with the administrator’s written approval. Similarly, a liquidator may delegate his or her authority with the liquidator’s written approval or the approval of the court.

Employees given the authority to undertake AML/CTF compliance activities by the directors (for example, to lodge transaction reports) may also retain that authority where agreed by the external administrator.

Any AML/CTF guidance issued by AUSTRAC is equally applicable to reporting entities where they have been placed under external administration”.

Treasury Laws Amendment (Taxation and Superannuation Guarantee Integrity Measures) Bill 2018

 This is a standard attempt to enforce compliance by employers with their legal obligations to pay their employees’ superannuation to their respective funds.  Recalcitrant employers can be directed to be re-educated, akin to an education direction under s 160 of the SIS Act. Submissions to Treasury by 16 February 2018.

Professional conduct

As to professional conduct and safe harbour advisers, the new (3rd) edition of Corporate Insolvency Law, now by Finch & Milman, contains useful analysis of the roles and professional responsibilities of RTPs including in comparison with insolvency practitioners. Such an extract among many is this:

“… informal rescue procedures do not provide all creditors with the same protections that are provided by statutory insolvency processes. This is not, however, a situation that is necessarily to be deplored. A distinction has to be drawn at some stage between informal and formal procedures and, in any event, the law offers a general set of protections for those who have provided credit to the troubled company. It cannot be guaranteed that turnaround professionals will always consult the whole array of interested parties when carrying out reconstruction negotiations. A number of factors, however, may encourage turnaround professionals generally to favour processes that are accessible, transparent and procedurally fair. One such factor is the incentive turnaround specialists have to protect their reputations as even-handed and effective negotiators of corporate solutions”: pp 243-244.

The textbook refers to the Institute for Turnaround whose Code of Ethics seeks to promote that reputation with its guidance and information on the principles of conduct and ethics for its members, including the new International Code of Ethics obligations.

Courts

  • We await appeal decisions in Linc Energy (QCA) and Amerind (VCA) and Killarnee (FCFCA), and in ASIC v Joubert (AAT).
  • What might have been a useful decision by a judge in a remuneration dispute between bankruptcy trustees and the Inspector-General has settled – the Estate of Groll: VID516/2017. We may never know what was involved in the I-G’s direction to the trustees to repay $279,250.40.
  • A Full Federal Court on 12 February 2018 will be deciding, on appeal from a Federal Circuit Court, “whether it is possible for a bankruptcy court to go behind a judgment based on a costs assessment where there are substantial grounds for questioning whether the party in whose favour the costs assessment has been made did not pay or otherwise did not become liable to pay the costs of the lawyers who were on the record for the party”: see Lowbeer v De Varda and v Tov-Lev [2017] FCCA 1658.
  • And Macks v Viscariello, the recent appeal decision from South Australia, is worthy of a close examination for its analysis of the nature of the fiduciary duties of practitioners. See the excellent analysis by A/Professor Jason Harris – Duties of Voluntary Administrators.

But while he says that the decision finalises what has been a long running saga going back 17 years, the court notes the possibility of ASIC taking some action; and a decision is also to be made by ARITA.

More?

At some stage.

 

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