The full article on this topic of 1800 words, for those interested, looks that the PJC Report recommendations about “untrustworthy pre-insolvency advisers”. It is Part 1 of 2, looking first at what ‘trustworthy’ pre-insolvency advice is available. As the PJC says, unlawful operators are more identifiable by the harm they perpetrate rather their job title or profession. Hence the enclosed examines all pre-insolvency advice and defines the requirements of the trustworthy advice and its pathways, and then the demerits of the remainder. The first might be the more difficult, and contentious, the second easier to identify. The first is discussed here; the second – Part 2 – will follow.
Some issues include:
- The history of professional competition – early bankruptcy trustees were said to be “persons of a very shady description” compared with official liquidators who were “accountants of high standing and integrity”; and “an amorphous group called pre-insolvency advisors who promote phoenixing, [but] no evidence has been put forward as to precisely who these people are”;
- Psychology – there is the issue that an IP would tend to give advice in terms of their learning and background; that is, to a person with a hammer, no matter how well intentioned, everything looks like a nail, with an insolvency appointment the obvious option.
- Independence – have IPs made their independence requirements so strict, they have left a vacuum that is inevitably filled, and not always filled well?
- Should there be “a split of the profession, a bit like barristers and solicitors, where you have the restructuring side and then the investigative side”?
- While, as in the UK, Australian IPs are exempt from debt advice regulation, UK practice standards (SIP3) require IPs to be objective and comprehensive in the options they suggest, which Australia could emulate.
The aim of any comprehensive review of insolvency should be to ensure that any debtor should receive objective and comprehensive advice about resolving their financial difficulties, whether that be an insolvency option or otherwise, and advice that is pro-debtor, and not pro-adviser.
Next: Part 2 Untrustworthy pre-insolvency advisers