The law was changed in 2021 to allow greater flexibility for a selection committee to allow a person to be considered suitable to be registered as a bankruptcy trustee or liquidator, despite not meeting certain requirements as to prescribed qualifications, experience, knowledge and abilities. The change was intended to encourage
“a greater diversity of [practitioners] into the field, and greater resilience of the sector”.
While gender has been the main focus, it seems that moves are afoot to bring in suitably qualified candidates from a broader range of professional backgrounds and experiences than at present, so as to promote greater diversity within the practitioner profession.
The history
The history assists in understanding the aim of the 2021 law change.
The development of companies as vehicles for commerce in the 19th century in fact prompted the creation of the accounting profession. Accountants were needed to audit and wind up the new corporate entities – in fact the UK’s 1862 Companies Act was called the ‘accountant’s friend’ because it required the presence of accountants at every phase of a company’s life, from its formation through its working life to its liquidation.[1]
Lawyers were less interested in insolvency work given its perceived modest rewards and because of some elevated sense of social, moral and status concerns about being associated with debt collecting.[2]
The accountants have since then ruled the scene.
Lawyers and others
However the 1988 Harmer Report, a 1997 regulation report[3] and the 2010 Senate Committee report, each suggested a wider pool of disciplines beyond accounting to be eligible to be licensed as an IP – those in “law, building, engineering, valuation”, or those with an MBA.
The then Trade Practices Commission reported in 1992 that
“the role of an insolvency practitioner in Australia today is only indirectly linked to the accountancy profession”.
It recommended allowing lawyers with experience in the legal side of insolvencies and those with broader commercial experience who may have particular skills relevant to particular administrations.[4]
None was adopted. Accounting had become entrenched despite some attempts to break through.
In one case, the Court rejected opposition from the Inspector-General in finding that a lawyer, despite his lack of exposure to trustee work, would have been well capable of performing the duties of a trustee. He was
“a very competent solicitor with substantial experience in insolvency work … [who had] also practised extensively in the administration of deceased estates which carries with it a substantial degree of work in the accounting field”.
But the then accounting requirements under the law prevented this: Moore v Inspector General in Bankruptcy [1997] FCA 638.
A reality is that lawyers are generally more broadly educated than accountants, with law studies often combined with economics or commerce, or accounting.
But the focus on accounting remained as a hurdle until it was relaxed in 2021 to allow registration despite not having the qualifications, experience, knowledge and abilities prescribed. These prescriptions included at least 3 years of full-time study in commercial law and accounting, academic requirements in insolvency at least 4,000 hours of relevant insolvency experience.
Now, 5 years later, it would be interesting to see if there is in fact greater diversity of practitioners.
ARITA has an impressive looking diversity and inclusion program, and body of statistics, but based mainly on gender and age, “initially” and which does not refer to the 2021 law change.
ASIC and AFSA
The two regulators seem to have examined the data following the 2021 relaxation in the law to see if the aims of that law have been achieved.
AFSA’s submission [76] to the Productivity Commission’s “business dynamism” inquiry says that AFSA is working with ASIC on reforms in order to
“ensure the registration process is accessible to suitably qualified candidates from a broader range of professional backgrounds and experiences, supporting greater diversity within the practitioner profession”.
Gender
One aspect of diversity is gender. The discussion has centred around the proportion of women in the industry rather than on alternate qualifications or experience.
And the gender debate has picked on the 4,000 hours prior experience required to be an IP. This requirement is said to be relevant to the low female representation of women in the industry. This compares with 600 hours in England and 1-2,000 hours in NZ: see Jan v New Zealand Institute of Chartered Accountants [2021] NZHC 2056.
In Australia, the rather conservative approach is not to argue for a reduction in the 4,000 hours but to extend the time over which those hours must be earned.
It should be pointed out that a lawyer would not have any such hours.
A deeper dive into the history may show how and why the 4,000 hours were set back in 2016, though we might make a ready guess. The setting of high thresholds for entry to a profession or industry is a common protective practice.
Why not women?
As to gender, it is useful to work out the reasons for limited female registration and what that means in any event. Some will say that gender determines the approach taken to an administration. Another view given is that insolvency does not interest women so much.[5] Others take a deeper look at the issue. An increased focus on gender may serve to bring in other qualifications and backgrounds, and better views about gender.
AFSA says it
“committed to taking steps towards enhancing gender diversity in the personal insolvency profession”.
From its National Panel of trustees, AFSA directs a greater share of estates to female trustees, increasing the initial 20% target implemented in 2021 to 25% from 1 July 2025. The Inspector-General in Bankruptcy reports that four years ago women represented only nine per cent of registered trustees but today that figure is seventeen per cent. This is said to be good but not enough in that
“the profession should better reflect the community it serves”.
Any such efforts should be based on evidence which the regulators may have but a reality is that it is difficult to find. Australia seems to produce little academic or professional analysis in comparison with overseas. We seem to proceed on the basis that the profession should better reflect the community, on gender at least.
English studies
English research, some years ago, reported a perception of insolvency work as potentially perilous, requiring a [male] “dynamic, hero like approach,”[6] thereby explaining the low female representation.
One female IP recounted her appointment as receiver over a pub, and that the director
“was not a happy bunny. He pinned me up against a wall and punched the wall on either sides of my head telling me that if I wasn’t ‘a ******* woman’ he’d have punched my lights out. … I’ve never been so pleased to be a woman!”.[7]
This is then said to also impact the division between personal and corporate insolvency work. Personal insolvency is considered the appropriate arena for female trustees, on the assumed predilection of women to perform the “emotional work” of ‘dealing with individuals’ and situations where feminine attributes of caring and offering emotional support are important. Whereas corporate work requires masculine aggression, confidence and impassivity. Women IPs were reported as taking satisfaction from the fact that their advice could restore domestic tranquility and preserve the household and family.
Two other things to mention are whether a female trustee might produce better results than a man. While that degree of assessment would be difficult, if relevant, but there are studies showing companies with females on the board are less likely to go insolvent. A related issue is whether a lawyer would better administer an insolvent estate.
Ethnicity, etc
Of course gender is only one thing. In having the industry better reflecting the community it serves, should we look at “class,”[8] as in the UK? where the effects of class background on career progression and inclusion are said to be important issues within the UK accounting profession, “a profession that has historically excluded those from non-professional backgrounds and recruited based on class-cultural affinities with existing members”.[9] Then there is ethnicity which has also been the subject of analysis in the UK.
Race class, or caste are not issues here, are they?
In any event, these don’t seem to get the same degree of attention as gender. But in terms of reflecting the community they are relevant.
Getting back to the 2021 reforms, if their intent was to allow greater diversity, we should know if they have. We also know that merely passing a law will often have little effect without promotion and support behind it. Efforts may be required from the regulators to provide that promotion and support.
=======================
[1] Richard Brown, A History of Accounting and Accountants (Jack, Edinburgh, 1905) 234.
[2] Flood & Skordaki, Insolvency Practitioners.
[3] Review Of The Regulation Of Corporate Insolvency Practitioners Report Of The Working Party June 1997
[4] 1992 Study of the Professions – Accountancy.
[5] The gender gap among Australian liquidators (2022) 22(3&4) INSLB 54, Dr P Fishman
[6] According to Flood & Skordaki (1995) “it has been known for insolvency practitioners to be threatened at gun point …” although the authors don’t explain the gender issue there.
[7] Quoted in Joyce, Y., and Walker, S. P. (2015) Gender essentialism and occupational segregation in insolvency practice. Accounting, Organizations and Society, 40. pp. 41-60.
[8] Christopher Flanagan & Yvonne Joyce, The recognition and negotiation of class-based barriers to progression and inclusion in accounting professional services firms Accounting, Organizations and Society 112(2024),
[9] Y Joyce, (2014) Knowledge mandates in the state–profession dynamic: a study of the British insolvency profession. Accounting, Organizations and Society, 39(8), pp. 590-614 “immense power of insolvency professionals to structure and shape those policies that elected governments have sought to implement and to play a significant role in determining the economic and non-economic consequences for the wide cross section of society affected by corporate failure”.
