While the UK is reviewing its insolvency practitioner (IP) co-regulation system, Australia’s direct regulation, with minimal but expansive co-regulation, might also come up for review. In the meantime, New Zealand has settled in to its newly created co-regulation without much ado, or cost. Perhaps we all overthink the issue of IP regulation, or overstate IPs’ potential for harm.
One particular feature of the insolvency practitioner (IP) registration and regulation processes introduced in Australia in 2017 was the spread of responsibility for IP regulation across 14 law and accounting industry or professional bodies around the country, each of which could share confidential information with, and refer matters to, the regulators.[1] The three main accounting bodies, to which nearly all IPs belong, are the CAANZ, CPA and IPA, with ARITA as the insolvency industry body.
That delegated responsibility was no doubt the subject of detailed consideration by the government at the time, to ensure those bodies had the capacity and willingness to co-regulate, though, oddly, no mention is made of the regime in any of the parliamentary papers.
In any event, that whole IP regulation process may be up for review in Australia this year, 2022, at the same time that the UK’s IP regulation process is also under review.
The UK
The UK is proposing to do away with its 4 recognised professional bodies (RPBs) as co-regulators – Chartered Accountants Ireland (CAI), Institute of Charted Accountants in England and Wales (ICAEW), Institute of Chartered Accountants of Scotland (ICAS), Insolvency Practitioners Association (IPA) – and replace them with a single independent regulator to sit within the Insolvency Service.
How the UK system presently works is shown in the recent review of each of the RPBs’ regulatory processes in the report from the Insolvency Service – Insolvency Practitioner Regulation 2021 – of June 2022. This shows the approaches to regulation adopted by each RPB, by way of site visits, complaints and other information.
Australia
While the roles of the Australian bodies involve much less, reports on their processes and activities will be useful.
As to ARITA, its annual reports explain its own regulation processes, under its Code, and show, for example, that it has made 6 statutory referrals of IPs to the regulators in the last 5 years, to what effect is not shown. Its issue is the pointed comment made by government when IP co-regulation was rejected in 2016, that there was then “no professional body or industry association … resourced or structured to undertake [a co-regulatory role] across the whole insolvency industry”.[2] Other issues involved cost, and a “deficiency in confidence in the insolvency industry”.[3] Since then, the AIIP has been established, but it assumes no regulatory role over its members.
It may well be that the industry prefers the direct government regulation that has existed now for some years, and to which the UK is moving.
In the meantime, NZICA and RITANZ in New Zealand have taken a co-regulatory role, and for limited cost (including an IP regulatory system levy on all companies of $1.00, plus GST), cost being a reason NZ opted for what is the present English system rather than Australia’s.[4]
But the threshold issue in Australia is not co-regulation, rather over-regulation, by government, though the separate regulation of personal and corporate insolvency, by separate regulators – ASIC and AFSA, and ministers – the Treasurer and the Attorney-General, along with ministers for small business, employment and more. Then we throw in the 14 industry bodies and around 8 or 9 different courts, just to be sure.
Fixing that would be a significant regulatory achievement: Personal insolvency law and policy under the new Labor government in Australia – Murrays Legal
IP regulation conference discussions
See AIIP-Ringside-2022-Conference-Schedule.pdf – Panel discussion | “Tag team with the professional bodies”, 23 June 2022.
INSOL London Academics Colloquium, “Report of findings on the regulation of insolvency practitioners in the UK and Australia”, Moffatt, Mason and Murray, 25 June 2022.
===============================================
[1] See Bodies everywhere – the role of professional bodies in regulating insolvency practitioners (2018) 19(5) Insolvency Law Bulletin 94, Murray.
[2] Explanatory Memorandum to the Insolvency Law Reform Bill 2015 at [9.149]
[3] At [9.181].
[4] New Zealand Ministry of Business Innovation and Employment Report No. 1 of the Insolvency Working Group, on insolvency practitioner regulation and voluntary liquidations, 27 July 2016, paras 142-144.
