Diversity and inclusion in insolvency

Diversity in the qualifications, experience, knowledge and abilities of those in the insolvency industry is the subject of this article, leaving other aspects of diversity in that sector to those more qualified.

With ARITA anticipating International Women’s Day in promoting its own Diversity and Inclusion program,[1] I was prompted to see my own comments on this Day in 2020 which, on review, remain relevant.   Since then, I have made comment on priority allocation of bankruptcy files to women trustees, and more.[2]

Leaving those aspects of diversity to others, a related issue is the diversity in other respects of those working in insolvency, now supported by two things – one, changes to the law encouraging a “greater diversity of practitioners into the field”, and two, a commitment by AFSA and ASIC, as members of IAIR, to “endeavour to promote diversity within their own organisations and within the wider insolvency profession”.[3]

Greater discretion given to committees

As the changes to the law recognise,[4] diversity encompasses qualifications, experience, knowledge and abilities, including internationally.  The government’s widening of the selection criteria for trustees and liquidators was intended to

“encourage a greater diversity of practitioners in the field and greater resilience of the sector”.[5] 

This was done by altering the need to strictly rely upon the statutory criteria so as to allow interview committees greater flexibility to decide that a person is suitable who has other qualifications beyond accounting, experience beyond insolvency, and other knowledge and ability that may more than qualify her or him to be registered.  International applicants may now more readily apply.

A wider talent pool

Diversity is not an end in itself, rather, as IAIR says, it is a means to a

“wider talent pool from which insolvency practitioners are drawn and a positive, inclusive and responsible culture, contributing to the higher quality of work, innovation and productivity within the insolvency system”.[6]

Its members, including ASIC and AFSA, are said to be committed to IAIR’s Diversity Value Statement.

AFSA

This may have prompted AFSA to not only celebrate International Women’s Day as well as International Men’s Day, but to decide to allocate a certain proportion of bankrupt estates to female trustees. It describes this as

“a bold step to bring impactful outcomes for female trustees at an industry level, making a commitment to distribute an initial target of 20% of estates to female trustees from 2021–22, noting that female trustees currently comprise 10% of insolvency practitioners. We will continually review this commitment, with an aim to increase the figure over time”.[7]

2021 and beyond

The pandemic itself will have had some impact on diversity in particular because of the turnover of staff, and their experience in other lines of work, bringing new perspectives and knowledge, and, with the restrictions of isolation, needed IT knowledge.

While urgent legislative changes to the law like these made in 2021 are necessary in matters of crisis, a more measured response might now be given, and in light of the experience of those changes.

Review of the ILRA 2016

In that respect, the changes brought in by the Insolvency Law Reform Act 2016 are due for review in 2022.  Diversity was in issue at the time in that the industry was seen as needing to be open to a wider base of experience and knowledge. The government referred to

“the barriers to entry into the market for insolvency services arising from the current registration requirements”

and the need to reduce those requirements.  That was a reason behind not granting licensing powers to the “industry bodies”, there being a concern that this

“would provide an opportunity for anti-competitive behaviour where it is in the interests of the bodies’ members to restrict the number of entrants to the market”.[12]

Whether the industry competition improvements and savings predicted in 2016 as a result of those registration provisions have occurred will be an interesting issue for reporting; similarly, to know of the extent of the greater flexibility and diversity from the 2021 reforms.

More thoughts on this soon.

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[1] Diversity and Inclusion (arita.com.au)

[2] See also Feminist input to the theories of insolvency? | Murrays Legal

[3] About Us: Who are the IAIR? (insolvencyreg.org)

[4] Corporations Amendment (Corporate Insolvency Reforms) Act 2020 .

[5] Explanatory Memorandum to the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020, Chapter 4.

[6] IAIR Diversity Value Statement, 21 January 2020.

[7] AFSA Annual Report 2020-2021; see also Sex Discrimination Act 1984 s 7D Special measures intended to achieve equality.

[8] Licensing of insolvency practitioners – decision making principles from New Zealand [updated post 13 June 2021] | Murrays Legal  –  “Putting professional licensing decisions in the hands of professional bodies, which are themselves regulated by the state is a common feature of co-regulation.  …. There are dangers of anti-competitive conduct in limiting new entrants by way of particular or high entry criteria”.

[9] 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.

[10] Commonwealth of Australia, Review of the Regulation of Corporate Insolvency Practitioners- Report of the Working Party, (AGPS, Pirie Printers, July 1997).

[11] Trade Practices Commission,  Study of the Professions – Accountancy, Final Report (July 1992)

[12] Explanatory Memorandum to the ILRB 2015 at [9.154].

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