Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Bankruptcy – transfer of files from the Official Receiver to private registered trustees, with 20% to women

Australia’s AFSA has announced that since 29 July 2021, it has changed the way it allocates bankrupt estates to bankruptcy trustees working in the private sector.  Changes to AFSA’s approach to transferring matters | Australian Financial Security Authority.  This includes allocating 20% of matters to women trustees.

AFSA says that its “main priority as the Official Trustee will be to focus on matters that are in the public interest and build confidence in the personal insolvency system – even if the administration may not result in a financial return to creditors or cover our administration costs”.

Other estates will be offered to trustees to administer according to listed criteria, a significant one being gender, with at least 20% of estates being directed to female trustees, to promote gender diversity.  AFSA says that a phased approach may need to be taken given the current low number of female practitioners and their capacity to take on a large volume of new appointments.

24 hours to consent

Given that the “timely allocation of matters is important to AFSA”, trustees will be given only 24 hours to consent to an appointment pursuant to s 156A, that is, for example, an appointment to a debtor’s petition presented but not yet accepted.  Section 156A of the Bankruptcy Act operates only where the trustee’s consent to act precedes the bankruptcy. It is assumed that the debtor’s agreement is obtained.  AFSA says other estates may also be transferred by the Official Trustee under s 181A, applicable after the administration has commenced, in which case creditors would need to approve the transfer.

These changes apply until 31 January 2022. During this period, AFSA says it will seek feedback to refine and improve the new process.

Comment

We commented on this earlier, when it was out for discussion. As we said then, there were a few issues that AFSA would have considered in this proposal, in particular in light of the past high percentage of estates handled by trustees where there is no remuneration paid. AFSA proposed a review of the outcomes achieved in transferred estates as to “realisations, dividends and remuneration” and a report on these aspects will be useful.  A proposed change of focus of the Australian Official Trustee in Bankruptcy | Murrays Legal Commentary

As to the gender quota, it seems that there is little interest in examining the issue in a serious way  The gender profile of the insolvency profession: occupational segregation? | Murrays Legal Commentary but change need not wait on that. We at Murrays Legal don’t have the expertise to debate the various findings beyond noting them for others to consider.  Some that we have reported include a claimed separation of positive and negative qualities between women and men, impacting upon their respective conduct of insolvency practice; gender essentialism in insolvency practice; and female focused issues such as women on boards as predictors of insolvency, defences to liability, risk aversion and concentration of health and services focus of board positions.  What is said to be a heightened aversion to risk, if a valid finding, might impact women trustees’ decisions to take estates from this new AFSA process: see Feminist input to the theories of insolvency? | Murrays Legal Commentary

As to the history of a matter of Lee and Macks, that was twice transferred to registered trustees by AFSA, on the second occasion only shortly before a 5 day court hearing, the Court has reserved its decision until 6 August 2021 as to whether the proceedings be struck out for want of prosecution: Assigning bankruptcy claims to a former trustee | Murrays Legal Commentary

Feedback on the new system is welcome.

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