New insolvency practitioner codes have issued in Australia, with the UK and NZ perhaps not far behind. It remains to see whether the codes are adaptable enough to reflect what is a changing business and professional environment and thereby to remain relevant and accepted.
The international accounting Code of Ethics – APES 110 in Australia – commenced in its new form on 1 January 2020. It harmonises with the International Ethics Standards Board for Accountants and includes Australia-specific requirements and guidance. A new version of APES 330 – Insolvency Services applies to insolvency practitioner accountants in Australia from 1 January 2020.
In the UK, the section of the 2020 Code of Ethics applying to insolvency practitioners – Part 5 – remains in its 2014 form. We are told that its new guidance will issue shortly.
One reason for the delay in the issue of the insolvency code may be that the UK is still grappling with the issues raised in a public inquiry of 2017, which brought out issues concerning what it said were the changing environment of insolvency practice. These issues included new rules about referrals and remuneration, and conflicts. Another current uncertainty in the UK is the review by the Insolvency Service of the roles of the recognised professional bodies themselves.
It has probably not been a reason that the UK has been awaiting the new Australian Code, that of ARITA, which also commenced on 1 January 2020, along with APES 330.
Australia’s insolvency practitioners have a different history from that of the UK – one of close regulation by government and the courts, rather than by professional bodies – which some may see reflected in its Code. Its new Code may nevertheless offer some insights.
The UK may find more parallels in NZ, which has similar insolvency history.
NZ’s imminent creation in 2020 of a new licensed insolvency profession under the Insolvency Practitioners Regulation Act 2019 parallels what occurred in the UK, in 1986, when its insolvency professionals were regulated for the first time, under the Insolvency Act 1986. A co-regulatory approach between the UK professional bodies was adopted and has applied since. NZ’s new co-regulatory regime will leverage off the voluntary regulation scheme of CAANZ and RITANZ which has applied for some time.
In particular, currently under review in NZ are the new standards, conditions & policies to be set for the insolvency accredited bodies under the 2019 Act. One relevant criterion for accreditation is as to the body’s
‘rules, code of ethics or similar documents governing the conduct, ethics and actions of members of the applicant for recognition’.
That NZ consultation closes on 7 February 2020.
In many areas, the law has difficulty in keeping up with societal, business and technological changes. Codes of conduct assist in setting an accepted standard in their relevant areas of coverage, general enough in their wording to remain useful guidance, but with some level of prescription. Codes can drive useful change, with the law following.
It has been said# that any law is of little use unless there are personnel who are willing and capable to transform the written rules into reality and daily practice:
‘if we were forced to choose, we would opt for bad law and good personnel over good law and bad personnel’.
At the same time, a danger is that too prescriptive a code will inhibit developments in practice needed to address external change.
The changes in insolvency practice discussed in the UK are examples, bases of remuneration and the gap in access by debtors to pre-insolvency advice in Australia are others.
The new insolvency codes in the UK and NZ may yet be instructive in giving guidance in response to those on-going changes.
# reference available.