Insolvency law – assets and liabilities, activities and affairs – ASIC and AFSA

ASIC has released its new Report On Company Activities and Property (ROCAP), said to have been the result of an ‘extensive revision process and industry consultation conducted through an external consultant’.  This is the report as to company’s affairs referred to in s 475 of the Corporations Act, and other sections, required of company directors. ASIC has adopted a term not found in the sections. 

At the same time, AFSA is in the midst of its continual review of its Statement of Affairs (SOA), the equivalent document required of debtors and bankrupts under the Bankruptcy Act and named as such in the legislation.

The accountants can assess whether the forms are consistent in their respective descriptions of assets and liabilities, and in their adoption of current accounting terminology.

As to the law, the Insolvency Law Reform Act 2016 started off a process of harmonisation between personal and corporate insolvency.  The approaches of both ASIC and AFSA don’t appear to be harmonised, in the way for example that New Zealand, under the one regulator, has comparable asset and liability forms for personal and corporate insolvency.

A bankrupt director

This is what bankrupt director BD would need to know about submitting to the liquidator a ROCAP, and the liquidator about lodging that ROCAP with ASIC – s 475; as compared with the debtor filing the SOA with the Official Receiver and if necessary, furnishing a copy of the order to the trustee – s 54.

  • As a director, BD must submit the ROCAP within 10 business days of the date of the winding up.
  • As a later bankrupt, BD must file and furnish the SOA within 14 days of being informed of the sequestration order.

^^^^^^^^^

  • As a director, BD may suffer a penalty of 50 penalty units, and other lesser penalties, but there are no other immediate consequences unless the offence is prosecuted and a conviction recorded.
  • As a bankrupt, the same 50 penalty units may be imposed, if convicted, but there is the more serious consequence of an automatic delayed discharge from bankruptcy, beyond the existing 3 years.

Filing the ROCAP with the Court

The liquidator has to also file a copy of the ROCAP with the ‘Court’ within 5 business days: s 475(7).  Why the Court needs a copy of the ROCAP is not known; it seems to remain there as a matter of history. In fact, any Court – Supreme or Federal – around the country can deal with the one external administration; hence filing with one Court and its registry makes little sense.  I have raised this with the Courts and government several times.

The requirement to file a copy of the SOA with the Federal Court was removed in 1996. Corporate insolvency might need to catch up.

Harmonisation

It was the Harmer Report that raised the idea of a single piece of legislation for corporate and personal.  The Report did not see this as necessary, comforted as the Committee was by the fact that the law of corporate and personal insolvency came under the one federal government.

The history of insolvency law reform since Harmer has shown that comfort was unwarranted.

It would be wise for a one government approach to be given to insolvency law reform.

As to which, see my forthcoming comments on the Treasury Laws Amendment (Measures for a later sitting) Bill 2018.

Note: Under s 1274 Corporations Act, ASIC can “edit from a statement of affairs” any information that ASIC is satisfied is commercial-in-confidence, before allowing a person access to it: s 1274(4D).

Section 1274(4E) defines a “statement of affairs” as a statement or report required to be prepared under one of the listed provisions, broadly, ss 421A, 429, 438B, 475, 494 or 497. Section 1274 (4F) defines “commercial-in confidence”.

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