Selfies of Australian insolvency practitioners – not looking good …?

Recent Australian academic research reveals an insolvency industry comprising practitioners with low self-identity, lacking in self-confidence and with a limited outlook. The research is based on anonymised interviews with a wide range of corporate insolvency practitioners having a particular focus on the impact of recent law reforms, on ASIC and ARITA, and on regulation and cost.

The findings, if accepted, do not look good for the development of insolvency law and practice, much in need of 21st century reform.  It is of concern given what is a respectable view that if there were choice in insolvency between a good profession and a good law, the former would be preferred.

Accepting that major insolvency reform is not likely in Australia, the message from the thesis might be to work on insolvency practitioners themselves, and those that seek to represent them.


A recent 2019 doctoral thesis [Insolvency] Practitioners Perspectives: Experiences Adhering to Legal and Ethical Regulatory Standards – will be of interest to many working and studying in insolvency, in Australia, and overseas.[1]

As the abstract explains, the thesis is a phenomenological examination of the experiences of Australian corporate insolvency practitioners in meeting their legal and ethical regulatory standards, at a specific moment in time. Qualitative interviews of practitioners were undertaken between July 2017 and October 2017.

This is described as

‘a significant timeframe in the Australian insolvency industry: a time when practitioners were grappling with the commencement of the Insolvency Law Reform Act, the commencement of the ASIC Supervisory Cost Recovery Levy Act and the intended rollout of a user-pay regulation levy, the aftermath of significant case law pertaining to remuneration and conflict, the commencement of additional significant regulation pertaining to director protections, and the passing of legislation impacting contractual creditor protections. This was in addition to the ubiquitous transformative influences affecting businesses generally across both Australia and the global market, such as digital disruption’.[2]

Dr Streten explains that there is an absence of literature as to how practitioners go about their work, and of how they seek to reconcile and to comply with their legal and ethical regulatory obligations. This has propagated what she says are unrealistic expectations by stakeholders and regulators with respect to practitioner performance and insolvency outcomes, engendered under-confidence in practitioners and threatened the effectiveness of the Australian insolvency regime.

Rather dramatically, she says that her research shows that the Australian corporate insolvency profession was ‘in crisis’ throughout July to October 2017, involving

‘a general lack of confidence in practitioners, the public having an unrealistic understanding of corporate insolvency practice, ‘blame-shifting’ to practitioners; poor relationships between practitioners and the regulator ‘with practitioners heavily critical of their regulators’ approaches and reticent to engage in any dialogue or dealings with’ them. Practitioners suffered from weak professional identity. They were struggling to adjust to changing technology, changing societal attitudes, legislative reforms and the expectations and demands of their diverse stakeholders and regulators. Practitioners needed to adapt to meet the changing world, but were reticent, and struggling, to do so’.[3]


The thesis calls for comment and perhaps action. Some thoughts of mine are these.

Corporate focus only?

For as long as I have been in practice, I have found that corporate insolvency practitioners (‘corporates’), and their lawyers, and academics and judges cannot much acknowledge personal insolvency. It seems odd to me that this thesis is confined to one side of the ‘industry’ in particular given that the outcome of the 2017 reforms has been to harmonise personal and corporate insolvency practice.

We have come only a little way from the late 19th century, when a similar process of harmonisation of bankruptcy and liquidation in the UK provoked adverse comments from the corporates:

“now it was well enough to put trustees in bankruptcy … under the control of the Board of Trade: because the old trustees in bankruptcy were persons of a very shady description. Official liquidators are not. They are accountants of high standing and integrity …”.[4]

It may be for that reason that the corporates were in fact ‘in crisis’ in 2017, as Streten describes, given that Australian corporate insolvency law and practice suffered from moribundity for some years, eschewing the constant and beneficial reforms proceeding in personal insolvency since at least 1980. Those on-going reforms to personal insolvency over two or three decades might well have been disruptive – what law change isn’t? – but it was dealt with.

When corporate insolvency was suddenly confronted with change in 2017, this provoked a ‘crisis’, even before September 2017, when the main changes started. Perhaps it was the

‘crisis the corporates had to have’.


As to the poor image of the corporates, history tells us this is not new, including in bankruptcy. In the 19th century, practitioners were said to ‘make their fortunes out of the misfortunes of others’; and the constant collapse of major public companies was enough to for the insolvency fees of a major accounting firm to constitute over 93% of the firm’s income.

But ‘blaming the funeral directors for your brother’s death’ as one corporate put it, is not only unfair, but ignorant. Though many a profession has suffered from obtuse misunderstanding.

Corporates do acknowledge they may in fact not have the skills to counter this image – and that is fair enough, but their professional associations should have. The UK’s R3 Impact Report 2019 in my mind is a good example of what work can be done.


The regulator, ASIC, does not come out of this study well and a change in culture seems to be required.[5] In that respect, while Australia having two insolvency regulators is a little excessive, it does allow some useful comparisons. One corporate interviewee said:

“I’m also a registered trustee. I think ASIC don’t do a particularly good job at regulation. I’ve seen two different regulators. I’m lucky to have the benefit of seeing two different models. I think the AFSA model of an education review process and encouraging people through education and rather than coming and hitting people on the head like ASIC will do for not lodging a form in time, and there’s really no real effect on stakeholders whether you lodge a form on time or not. It really doesn’t. Whereas AFSA have a much more inclusive mentoring approach to regulation and I would suggest that is probably more effective than ASIC. Everyone is so scared of ASIC no one will talk to them or engage with them. I just think that heavy handed approach doesn’t necessarily change behaviours in the profession. I think the educative review process AFSA has will change behaviours, important behaviours …’.


As for ARITA, it is also criticised – one the one hand because of a perceived poor relationship between ARITA and ASIC, and on the other a perceived overly-strong relationship between ASIC and ARITA; a perceived ‘focus on the big end of town rather than the little end of town’, and a perception of ARITA’s board consisting of too many lawyers rather than practitioners.

Movement of practitioners to a new insolvency body, AIIP, is discussed.


The relationship between ARITA’s Code and the law itself suggests some disjuncture, with one comment being that staff were instructed to

‘stick to the law in preference to the Code because the Code itself did not represent the law that would be upheld in a court’.

This is the subject of interviews in the thesis about independence for example, although with perhaps too much emphasis on the Network 10 case – the courts have for some time made decisions about independence without reference to and not necessarily consistent with the Code.

Corporates also seemed unaware of the extensive law on remuneration in bankruptcy, to which they might, in the future at least, refer.

Safe harbour

Some saw the director safe harbour reform as

‘a missed opportunity to bring some regulation to the pre-insolvency market by enforcing a minimum level of qualification, some basic licencing process together with some ethical and regulatory standards’.

There was concern that the reforms had insufficient protections to ensure that the reform did not ‘become a tool for an unethical industry or another con on directors …’.

Pre-insolvency advisers

The interviews gave a view that the focus of ASIC’s approaches were misdirected at practitioners rather than the more significant issue of rogue directors and rogue pre-insolvency advisors themselves.


‘ASIC’s approach to monitoring and enforcement continued to increase practitioners’ administrative burdens, practitioners described a feeling that ASIC was failing to adequately address more serious issues’.

One practitioner statement referred to the

‘red tape, blue tape, green tape’ … to become registered practitioners and then they are ‘smashed’ for ‘missing a lodgement by a day or two’.

In contrast, the

‘pre-insolvency advisor was permitted to function without the same regulatory restrictions and without the uncertain burden of ASIC’s user-pay model’.

There was

‘a sense of astonishment and unfairness’ with one practitioner expressing an intention to reconsider his career path as a practitioner because of the disparity in obligation and cost’.


The fact that practitioners are accountants is the result of English history, in contrast to the US and elsewhere. There is considerable literature generally on how professions both define and confine the problems they deal with in terms of their expertise, and then offer means to resolve it, by way of their professional ingenuity, or perhaps professional subversion – no less so than in the development of insolvency.[6] The outcome of the High Court decision in Mighty River is said to be the result of a beneficial moulding by the insolvency industry to suit changing circumstances; Justice Edelman’s recent article refers.[7]

But the reality is, and as long recognised, accounting qualifications have less to do with insolvency practice than knowledge of the law and business.[8] And while accountants’ lack of intellectual contribution to their calling was the subject of criticism some time ago,[9] this is perhaps still evident today – the texts, articles, and higher-level thinking are from lawyers and legal academics, not accountants. For that reason, the intellectual debates about the purposes of insolvency, much had in the US, are noticeably absent in Australia, as Dr Streten acknowledges, to the disadvantage of the system.


When there was some chance of a new style regulation of practitioners, in 2010, corporate conservatism took over. That does not explain the industry bodies’ reluctance or perhaps failure to implement the regulatory processes of the 2017 law.[10] In the UK and NZ [pending], the profession regulates itself, through respective co-regulatory arrangements. The benefits include lower costs and closer regulation. While there are potential disadvantages, taking charge of the law’s standards of conduct must be more confidence-boosting than being directly and closely overseen by the government regulator, as in Australia.

That reluctance to take charge in Australia may well have been a factor of the lack of self-confidence referred to in the thesis. The industry might have [justifiably] reacted to the government’s expressed views that

‘there was no professional body or industry association resourced or structured’ to undertake this type of a co-regulatory role, necessarily referring to ARITA. ‘Any such body would need to be substantially reformed. Up-front and ongoing funding for this reform would need to be obtained from industry members. Given the small size of the industry (then, 685 registered corporate insolvency practitioners and 208 registered trustees), ‘the cost per industry participant of maintaining the infrastructure needed for effective co-regulation’ was seen as prohibitive.[11]

As to cost, Streten covers the ASIC levy – imposed annually in the order of $10,000 – and contrasts it with the 7% levy on realised assets of AFSA. In NZ, a $2.50 levy on company registrations has been proposed. Note that NZ has around 100 practitioners, the UK 1565.

The government also had concerns that

‘by providing more power to industry bodies, there is an increased potential for new entrants to be effectively prevented from entering the market as it is in the interests of the current members to restrict the number of entrants to the market’.

With support like this, who needs enemies? though these are views only of government.


Also, the interviews reveal that corporates see the new registration processes – interviews, experience – as demanding.

They should appreciate that from 1928 to the 1980s, any person who wanted to be a trustee had to appear in public before a Bankruptcy Judge and be questioned, with those opposing given a right to be heard. Corporates were not regulated until the 1960s, then only through tick a box process that became debased.

Assetless jobs

Dr Streten refers to the ending of the antiquated ‘official liquidator’ role in 2017. Historically, it meant that the government could prevail upon the profession to do its assetless work, and the profession did. A 1979 report[12] revealed that 70% or more of court appointed liquidations in NSW were unremunerative. A fund sourced by a fee of $2 per annual return filed by a company was not accepted. Far better to rely upon the good graces of the accounting profession. It was initially a fledgling profession, struggling to achieve legitimacy; insolvency work was seen as lowly and it may have been that to be seen as an officer of the court gave some status and legitimacy.

Since 2017, there is no official liquidator obligation imposed on practitioners to take assetless appointments. That issue of unpaid work nevertheless remains, perhaps indicative of the current state of competition for work. This is despite the government’s intention that creditors be asked to fund liquidations, in default of which it accepted that there would be more default de-registrations.

More than five times as many companies disappear off the ASIC register as are reviewed through external administration.

Real estate agents?

The industry’s response to financial survival is perhaps one of adopting the model of real estate agents, working on a commission basis, with paying and non-paying jobs, or ‘swings and roundabouts’ as one judge described it.[13]


Industry confidence is further evident in Dr Streten’s analysis of the limited adoption of IT and the industry’s alternative of wanting more help and guidance on forms and process.


Dr Streten covers gender in detail, although attempts to have the profession meaningfully research the issues have, to my knowledge, been wanting: Gender essentialism and occupational segregation in insolvency practice,[14] 2015, is a useful start.


Ultimately Australian corporate insolvency practitioners’ self-identity is questioned, and their lack of confidence and limited outlook. If this is the case, this does not look good for the development of insolvency law and practice, much in need of 21st century reform, apart from the position of the industry members themselves.

Concluding thoughts

If, as is said, a good profession is better than a good law[15], and accepting that major insolvency reform is not likely in Australia, the message from the thesis might be to work on the corporate practitioners themselves, and those that purport to represent them. Apart from practitioners’ historic talent for shaping the law to suit its real purposes, looking outward to bankruptcy and its regulatory and practice approach and culture, and its practitioners, would also assist; as well as to the UK and New Zealand; and to other professions that have similar issues.

These are only my views, some tentative, prompted by my reading of Dr Streten’s thesis and accepting its stated credentials.

Michael Murray



[1] The 338 page thesis is written by Dr Elizabeth Streten of QUT, Brisbane for which she was awarded the degree of Doctor of Philosophy.

[2] As paraphrased in parts. Note that Dr Streten refers to the insolvency ‘industry’, rather than profession, which may be apt. Finch & Milman deny it professional status: Corporate Insolvency Law, Perspectives and Principles, CUP, 3rd ed.

[3] As paraphrased.

[4] Edward Manson, Tinkering Company Law (1890) 6(4) Law Quarterly Review 428-43.

[5] There is much written about culture within organisations which ASIC might heed.

[6] See Halliday and Carruthers, Rescuing Business – The Making of Corporate Bankruptcy Law in England and the United States (Clarendon Press, Oxford, 1998) pp 30-31, 60

[7] The evolution of bankruptcy and insolvency laws and the case of the deed of company arrangement, James Edelman, Henry Meehant and Gary Cheung, [2019] Lloyd’s Maritime and Commercial Law Quarterly 571.


[8] “(T)he role of an insolvency practitioner in Australia today is only indirectly linked to the accountancy profession”: Trade Practices Commission, Study of the Professions, Final Report – July 1992, Accountancy at p 72.

[9] Carr-Saunders, The Professions, 1932, p 225-227

[10] Murray, Bodies everywhere — the role of professional bodies in regulating insolvency practitioners, [2018] Insolvency Law Bulletin.

[11] Explanatory Memorandum to the Insolvency Law Reform Bill 2015

[12] The Helsham Report

[13] Re Greater West Insurance Brokers Pty Limited [2001] NSWSC 825 at [15] “a liquidator who takes on a non-paying liquidation will be assumed to act in the public interest on the basis of the well-known swings and roundabouts principle”.

[14] Joyce & Walker, (2015) 40 Accounting, Organisations and Society pp 41-60.

[15] Westbrook et al, A Global View of Business Insolvency Systems, 2010.

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2 Responses

  1. Thanks for bringing this to my attention Michael. I was a participant in the Study and was curious to read its outcome. Whether we like the message or not, I think it captures the mood of practitioners that I interact with pretty accurately.

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