Liquidators – have your “policies and procedures” handy, or “propose to put them in place”, soon

New section 30B of the ASIC Act allows ASIC to ask a liquidator to produce the ‘policies and procedures’ relating to external administrations and receiverships that the liquidator ‘has adopted or proposes to adopt’ in their firm, as well as information on the liquidator’s past, current and ‘proposed’ administrations.  

These must be supplied even if this involves the liquidator breaching an obligation of confidentiality owed to the company.

The section is based upon s 30A of the ASIC Act which allows ASIC to request similar information from auditors.

In personal insolvency, AFSA has powers to request documents and information from trustees under s 12 Bankruptcy Act and these are wide enough to require the same responses from trustees without going into the detail of section 30B. 

ASIC’s use of the power

The new ASIC powers are said to be for the purposes of ASIC’s “surveillance” activities. The term surveillance is not one used or defined under the Corporations Act or the ASIC Act, its use having readily been adopted by ASIC, with 817 references to the word on its website.  As we know, perceptions and appearances are important.

ASIC can only exercise these s 30B powers for the purposes of the performance or exercise of any of its functions and powers in relation to the “liquidator requirements”, compliance with them and any breaches of them.  These include any “alleged or suspected” contraventions of the law that relate to the liquidator’s conduct, or which involve “fraud or dishonesty’.  The power is also connected with any investigation under Division 1 of the ASIC Act.

Liquidator requirements are not helpfully defined but they mean those in relation to liquidators, the external administration of companies and the receivership of the property of corporations under Chapter 5 of the Corporations Act; Schedule 2 to the Act (the Insolvency Practice Schedule (Corporations)), and other relevant provisions.  

The s 30B notice may specify information concerning policies and procedures “that the liquidator has adopted or proposes to adopt”, or put in place, and also concerning an external administration that the liquidator “has conducted, is conducting or is proposing to conduct”.

ASIC can then decide to provide the liquidator’s internal processes and other information to a third party, presumably a creditor who has complained to ASIC.  It may also release what would be confidential information to ARITA, CPA, CAANZ and others: s 127 ASIC Act.  (ASIC’s RG 103: Confidentiality and Release of Information is much out of date).  

Other points

The requirements under s 30B extend to past events, before 1 March 2017.

The maximum penalty for non-compliance is 100 penalty units or 2 years jail or both: s 63 ASIC Act. Despite that, ASIC has issued no guidance or information on this new section. 

Some queries are whether the s 1289 qualified privilege for auditors should apply to liquidators, and whether a liquidator could plead penalty privilege in response to a s 30B notice, under s 1349.

ASIC’s reporting on the use of s 30B

ASIC is obliged to report on the use of its powers under s 30B, as it is of s 30A: ASIC Reg 8AAA.  Its 2015-2016 annual report shows that ASIC served 47 section 30A notices on auditors in that financial year, and 61 the year before. 

Its 2016-2017 annual report is due out in October 2017, which must contain other information on the operation of the new insolvency laws.

Australian Insolvency Management Practice

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