In anticipating the funding bases for the government meeting ASIC’s costs of regulating insolvency practitioners (IPs), I wrote that there
“should be some comfort taken from the fact that the legislation is being handled by Treasury which, with its economic and financial accountability focus, will ensure that ASIC’s claimed costs are necessary and properly calculated, and are in parity with comparable regulators here and internationally, and are supported with comparative input from AFSA and Attorney-General’s”.
This is the end result, starting with a UK comparison.
UK
The Insolvency Service funds its oversight regulation of insolvency practitioners through a levy on the several recognised professional bodies, which license all insolvency practitioners. Those bodies pass the levy on to their insolvency practitioner members.
The current levy is £360 per insolvency practitioner as set out in the Fees Order 2015.
The separate cost of operating the insolvency Complaints Gateway is recovered under a Memorandum of Understanding agreed by the authorising bodies.
This cost is currently set at £40 per insolvency practitioner and is reviewed periodically in accordance with the terms of the agreement. The costs of regulation of insolvency practitioners is shown in the annual report and accounts of the Insolvency Service for 2016-2017, p 70.
AFSA
AFSA obtains its funds through an interest charge and a 7% “realisations charge” on all asset realisations by trustees under the Bankruptcy (Estate Charges) Act 1997. See also its costs recovery policy.
The levy is payable though AER online, which allows trustees to view the running total of all their realisations and interest charge receipts and liabilities at any point in time with a number of streamlined payment options.
Total asset and funds realisations by registered trustees in 2015-206 exceeded $300 million.
AFSA is unable to say what it costs to regulate trustees.
ASIC
Under the ASIC Supervisory Cost Recovery Levy Act 2017 and the ASIC Supervisory Cost Recovery Levy Regulations 2017, ASIC operates on the basis of a liquidator metric and a leviable liquidator’s liquidator metric for a sub‑sector for a financial year is the amount worked out for the liquidator under a provision of Part 3 that specifies an amount to be the liquidator’s liquidator metric for the sub‑sector for the financial year. But the following amounts must not be included in the amount of ASIC’s regulatory costs for a financial year, the cost of operating a committee convened under section 40‑45 of Schedule 2 to the Corporations Act; the cost of operating and maintaining a public register kept by ASIC under the Act; and the cost of preliminary investigations and reports by liquidators into the failure of a company with few or no assets.
The amount of levy payable by a leviable liquidator for a financial year is the sum of each levy component the liquidator has for the financial year. A leviable liquidator has a levy component for a financial year in respect of each sub‑sector of which the liquidator forms part at any time in the financial year. The amount of a leviable liquidator’s levy component for a financial year in respect of a sub‑sector is, (a) if a provision of Part 3 provides that the basic levy component applies to the sub‑sector for the financial year—the basic levy component for the liquidator for the sub‑sector for the financial year; or (b) otherwise — the amount of the levy component worked out for the liquidator and the sub‑sector under Part 3. For the basic levy component, see section 9.
However, the amount of levy payable by a leviable liquidator for a financial year is nil if: (a) the liquidator is required to lodge a return relating to the financial year with ASIC under section 11 of the ASIC Supervisory Cost Recovery Levy (Collection) Act 2017; and (b) before the end of the day on which the return is required to be lodged: (i) the liquidator is deregistered under Part 5A.1 of the Corporations Act; or (ii) ASIC publishes a notice regarding the proposed deregistration of the liquidator under section 601AA or 601AB of the Act; and (c) the liquidator’s registration has not been reinstated before the end of that day.
The basic levy component for a leviable liquidator for a sub‑sector for a financial year is the amount worked out using the formula where: the basic rate liquidator metric means: (a) unless paragraph (b) applies—the liquidator’s liquidator metric for the sub‑sector for the financial year; or (b) if no provision in Part 3 specifies an amount to be the liquidator metric for the sub‑sector for the financial year—A sub‑sector metric means the number specified by ASIC in an annual determination to be the sum of the amounts of basic rate liquidator metric for all leviable entities that form part of the sub‑sector for the financial year and sub‑sector regulatory costs means the sub‑sector regulatory costs in relation to the sub‑sector for the financial year. However, if a component of the formula is nil or a negative amount, the amount of the basic levy component is nil. The graduated levy component for a leviable liquidator for a sub‑sector for a financial year is the amount worked out using a set formula where the graduated liquidator metric means: (a) unless paragraph (b) applies—the liquidator’s liquidator metric for the sub‑sector for the financial year; or (b) if a provision of Part 3 specifies a minimum levy threshold for the sub‑sector for the financial year—the difference between the liquidator’s liquidator metric for the sub‑sector for the financial year and the minimum levy threshold. And the minimum levy component means the minimum levy component for the sub‑sector for the financial year; sub‑sector metric means the number specified by ASIC in an annual determination to be the sum of the amounts of graduated liquidator metric for all leviable entities that form part of the sub‑sector for the financial year; and, sub‑sector population means the sub‑sector population in relation to the sub‑sector for the financial year; and sub‑sector regulatory costs means the sub‑sector regulatory costs in relation to the sub‑sector for the financial year. However, if a component of the formula is nil or a negative amount, the amount of the graduated levy component is nil. As to a leviable liquidator for a financial year, if (a) a provision of Part 3 (the pro‑rata provision) that applies to the liquidator provides that there is a pro‑rata of the liquidator metric for a sub‑sector for a financial year; and (b) the number of counted days for the liquidator for the financial year under the pro‑rata provision is less than the number of days in the financial year. The liquidator metric for the leviable liquidator is to be reduced by multiplying it by the following fraction:
Where counted days means the number of days counted for the liquidator under the pro‑rata provision. An amount worked out under the Division must be rounded to the nearest whole dollar (rounding 50 cents upwards). If a liquidator metric worked out under this instrument is not a whole number, the liquidator metric must be rounded to the nearest whole number (rounding 0.5 upwards). If a liquidator metric is an amount worked out in Australian dollars, the amount of the liquidator metric is instead the number of dollars in the amount. If a minimum levy threshold is an amount in Australian dollars, the amount of the threshold is instead the number of dollars in the amount. Each section in Subdivisions 1.2 and 1.3 specifies criteria for identifying one or more leviable entities that form part of the sub‑sector mentioned in the section. The sub‑sectors for which criteria are specified in this Division are in the corporate sector. A leviable liquidator may form part of 2 or more sub‑sectors in the corporate sector. The basic levy component applies to each sub‑sector specified in a section of Subdivision 1.2. A leviable liquidator forms part of the registered liquidators sub‑sector in a financial year if, at any time in the financial year, the liquidator is a registered liquidator. The amount of a leviable liquidator’s levy component in respect of the sub‑sector for the financial year is the sum of the minimum levy component for the sub‑sector and the graduated levy component for the liquidator for the sub‑sector, as to which see s 10. The leviable liquidator’s liquidator metric for the sub‑sector for the financial year is the sum of the number of the following appointments under Chapter 5 of the Corporations Act accepted by the liquidator in the financial year, (i) an appointment as a controller; (ii) an appointment as a liquidator; (iii) an appointment as a managing controller; an appointment as a receiver; an appointment as a receiver and manager; an appointment as a scheme manager; an appointment as a voluntary administrator; an appointment as an administrator of a deed of company arrangement; and the number of appointments of the kind mentioned in subparagraph (a)(i) to (viii) that were accepted in an earlier financial year and that the liquidator is still acting in at the start of the financial year for which the levy component is to be calculated; and the number of the following events that are published on the publication website maintained by ASIC under regulation 5.6.75 of the Corporations Regulation for the liquidator in the financial year, being (i) notice of meetings; (ii) notice of disclaimer of property; (iii) notice to submit particulars of debt or claims; (iv) notice to creditors to submit formal proof; (v) notice of intention to declare dividend; and (d) the number of the following documents lodged with ASIC by the liquidator in the financial year: (i) a notice of the outcome of a proposal to pass a resolution without a meeting (however, if more than one proposal to pass a resolution without a meeting in relation to the same administration is decided on the same day, count the proposals as a single lodgement); (ii) an executed deed of company arrangement (however, if the deed involves more than one company under external administration, count the deed as a single lodgment).
The minimum levy component for liquidators is only $2,500.
ASIC will advise later what it says it costs to regulate liquidators.
If in doubt, see ASIC’s Report 535, ASIC costs recovery arrangements 2017-2018
