How to become an insolvency practitioner in Australia

The ‘new’ process of selecting by interview who should be an insolvency practitioner (IP) was the subject of a presentation by ASIC at the recent AIIP conference,[1] confined to the selection of company liquidators.

The process may have been new to ASIC and the corporate practitioners, but it in fact goes back several decades for bankruptcy trustees, indicative perhaps of the significant role of the IP and the need for close attention being given to those authorised.

History of the selection process

The original process came from 19th century English bankruptcy law and involved an application to the court, an interview and report to the court by the Official Receiver, and a personal appearance before a judge. The application was advertised, and objectors invited, which some did. In an early case, the applicant had 50 affidavits supporting his application, but a large number of people turned up to object and the judge refused his application.[2]

Changes to the law in 1991 introduced the involvement of the profession in the process. An “advisory interview committee” was established, comprising the Official Receiver, a departmental officer and registered trustee or liquidator selected and nominated by the Inspector-General

“from a list of 4 persons given to him or her for this purpose by the Insolvency Practitioners Association of Australia (IPAA)”.

However, the extensive recommendations of the 1988 Harmer Report[3] had been ignored, including as to the involvement of the accounting professional bodies, with the IPAA being seen then as too small to have much of a role. The Report also found that the two separate processes for registration of insolvency practitioners – one for bankruptcy trustees and one for liquidators – was

“wasteful and served no practical purpose”.[4]

Hence each of personal and corporate insolvency went their separate ways, with ASIC itself deciding, on paper applications, whether anyone was to be a liquidator.

That was seriously questioned during the Senate Committee report of 2010,[5] an independent interview process being suggested as a better test of a prospective IP’s qualities, putting ‘technical’ issues aside, than a paper-based application.

The Insolvency Law Reform Act 2016 therefore introduced the interview process for liquidators, with the same process mirrored and refined for bankruptcy trustees.

The selection committee

The selection committees are unusual in being ad hoc – convened for each applicant – and the only real guidance is found in the law, the rules and any court decisions. This is compounded by the fact that the committees are not necessarily required to publish reasons; their membership is not common; and any review by the AAT is de novo in any event. Some insight has been given to the new committee process in the AAT decision in Mansfield.[6]

AFSA and ASIC each issue its separate guidance (only) on what is, or should be, the same process.

That Australia has two separate processes for registration of insolvency practitioners remains as “wasteful and serv[ing] no practical purpose” now as it was in 1988.

ASIC’s approach

Putting that aside, positive aspects of ASIC’s approach include that its own nominee on selection committees comes from an administrative law area, with a particular focus on ensuring the integrity of the process, and the appearance of integrity. It was also explained that ‘ASIC’s’ initial view of the need for an applicant’s “exposure” to bankruptcy experience has now been corrected on review to the AAT in Mansfield. Whether that was ASIC’s view or not,[7] any decision is made by the committee, which ASIC is then bound to apply.

ASIC is reported as saying that 7 of the last 29 applications for registration as a liquidator had been refused, and of those, 4 had appealed to the AAT, one being successful (Mansfield), two withdrawn and one pending.[8]

As for AFSA, the pass rate for bankruptcy trustee committees is down from 70% to 50%.


A scenario was raised of an applicant for registration having a dispute with the prescribed industry body, ARITA, raising an issue of the appearance of a lack of impartiality by virtue of ARITA’s continued authority since 1991 to choose an experienced practitioner for the committee.

The answer offered was twofold, one, that although chosen by ARITA, the nominee must exercise their own independent mind, and not act at the direction of ARITA, in reality or perception; and two, that ARITA should not choose only from among its members and in the scenario, it would be best not to.

Just as insolvency practitioners must maintain actual and perceive independence, so too should the process by which they are selected.

Similarly, an applicant’s dispute with a regulator would require the regulator to carefully select someone from outside its insolvency area.

If, as claimed, most applicants for registration are now non-ARITA members, that raises a separate issue. The nomination of the IPAA in 1991 was made in the context of giving the profession some responsibility for the quality of the new IPs. Whether the source of what may now be an “industry” view needs to recalibrated was raised, without being resolved.

High thresholds?

It should be noted that the Harmer Report, and the 2010 Senate Committee report, unsuccessfully suggested a wider pool of disciplines to be eligible to be licensed as an IP – those in “law, building, engineering, valuation”, or those with an MBA.

With only 3 years required in accounting and commercial law, and a range of tertiary education options available in insolvency, the real threshold lies in the 4,000 hours prior experience required to be an IP. It compares with 600 hours in England[9] and 1-2,000 hours in NZ.[10]

For those outside, or in, 4,000 hours might be seen as anti-competitive and an example of professional institutionalised capture. The discretion given to a committee to decide that an applicant should be registered despite not meeting these thresholds remains a useful counter.

In the end

How one determines the legislative objects of these processes, in ensuring an appropriate level of expertise and ethical behaviour of IPs, is another thing again.


[1] On 28 June 2019 – see

[2] In Re J (1928) 1 ABC 15

[3] ALRC 45

[4] [925]

[5] The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework, September 2010

[6] [2018] AATA 1510

[7] ARITA’s Practice Alert 17 June 2019 continues to raise this as an issue.

[8] AIIP 2019 – it’s a wrap, Insolvency News Online, 3 July 2019

[9] Insolvency Licensing Regulations and Guidance Notes, ICAEW, 2015

[10] Insolvency Licensing Regulations and Guidance Notes, CAANZ, 2018

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