ASIC has released updated regulatory guidance on statutory committee registration and discipline processes, and related issues: see Revised Regulatory Guide 258 Registered liquidators: Registration, ongoing obligations, disciplinary actions and insurance requirements (RG 258). AFSA provides similar guidance. Reviews of committee decisions will be heard by the new Administrative Review Tribunal from 14 October 2024. This is part of broader regulation and competition issues in the insolvency industry.
The ASIC guidance is updated to reflect several developments since it was first published in March 2017 when the current legal arrangements for registration and regulation were introduced.
Up until then, corporate insolvency relied upon ASIC assessing applications for registration as a liquidator ‘on the papers’; and upon the Companies Auditors and Liquidators Disciplinary Board (CALDB, now the CADB) for the conduct of disciplinary processes. Under the changes made by the Insolvency Law Reform Act 2016, ASIC adopted the same statutory committee process for registrations, and for disciplinary processes, as had been used in personal insolvency for several decades before.
ASIC says that the changes reflect reforms made to the corporate insolvency legislative framework in 2021, its own experience in administering the regime, various Administrative Appeals Tribunal decisions and also industry feedback. Note that RG 258 refers to the Administrative Review Tribunal, which replaces the AAT on 14 October 2024.
ASIC has usefully issued a report on its responses to the various submissions made when reviewing RG 258: Report REP 796 Response to submissions on CP 376—Updates to RG 258 and supporting documents and templates (asic.gov.au).
The updates to RG 258
Separate guidance is provided on applications for registration for each category of liquidator, including small business restructuring practitioners under Part 5.3B, a new type of liquidator created by the 2021 insolvency law reforms. Hence the length of the Guide.
Although the restrictive requirement for membership of a private accounting industry body was removed from the law some years ago, Part 5.3B restores that requirement in relation to small business restructuring practitioners, who, subject to the decision of the committee, must be a “recognised accountant”.
Guidance is provided on when a registration committee may exercise its discretion to register an applicant who does not meet the 4,000 hours experience requirement during the five years immediately preceding the application, because of a “career break or other leave of absence, yet they have experience beyond the five-year period”. According to ASIC, this “potentially helps address the gender imbalance in the profession”.
Only about 10% of liquidators are women. The 2023 PJC Report on Corporate Insolvency took up submissions that suggested that the 4,000 hours experience requirement was an impediment to gender parity, but that “there are clearly broader cultural or systemic issues at play, and they must be reflected on and addressed”.
The purpose of this added flexibility to the law was broader, being based on the need to encourage “greater diversity of practitioners into the field, and greater resilience of the sector”: EM to Corporations Amendment (Corporate Insolvency Reforms) Bill 2020. The discretion for a committee to assess a person as suitable therefore extends beyond the hours of experience criterion to allowing a person to be registered who might have qualifications and experience from outside accounting and law, provided that they are otherwise suitable to be registered.
See also Building a diverse and inclusive profession 2030 from ARITA’s Balance Taskforce for Diversity & Inclusion 2023/2024.
Broader insolvency regulation, and competition, issues are covered elsewhere: 1A.
There remains an absolute requirement that the applicant be a “fit and proper” person.
There is more extensive guidance on the law’s requirement for a liquidator to have adequate and appropriate professional indemnity and fidelity insurance cover. While the law provides that ASIC may determine, by legislative instrument, what constitutes adequate and appropriate insurances (s 25-1(2)), no such determination has been made. However Regulatory Guide 258 gives extensive guidance on the nature of insurance required by the law.
There is information on the “official liquidator” role, which ceased as a designation 1 March 2017.[1] That role involved an ASIC imposed obligation to consent to act in a court ordered winding up solely even where the company had no assets to cover the anticipated remuneration. It was removed from the law in 2017 to assist in addressing cross-subsidisation in insolvency, raised by the PJC in its 2023 report.
And there is information on the rights of New Zealand liquidators to be registered and to practise in Australia, under the Trans-Tasman Mutual Recognition Act 1997. Under New Zealand law, Australian liquidators may be registered to practise there.[2]
Trustees in bankruptcy
Comparable and long-standing processes apply for the required separate registration as a trustee in bankruptcy, managed by AFSA. See Processes for registration of trustees – Inspector-General Practice Statement 13, which explains the separate processes for registration of persons as trustees.[3]
Separate registration provisions apply to debt agreement administrators, who may be either an individual or a company: Part IX Div 8, Bankruptcy Act. See Processes for registration of debt agreement administrators – Inspector-General Practice Statement 4, which explains the processes for registration of debt agreement administrators.
AFSA has provided particular guidance on the “fit and proper” standards expected of trustees and administrators: Inspector-General Practice Statement 19, Fit and proper requirements for personal insolvency practitioners.[4]
Administrative Review Tribunal
On 14 October 2024, the Administrative Appeals Tribunal (AAT) will be replaced by a new body, called the Administrative Review Tribunal (ART).[5]
All cases that are before the AAT will automatically transfer to the ART.
The nature of a tribunal review of a committee decision is that the Tribunal “steps into the committee’s shoes” when reviewing a registration or disciplinary committee’s decision.
A recent case involved a review of a committee decision under s 40-55 of Schedule 2 that a non-resident liquidator no longer had the requisite current knowledge and recent experience in light of his long period of working in insolvency overseas: Duncan and A committee convened under section 40-45 of the Insolvency Practice Schedule (Corporations) [2024] AATA 609.[6] The AAT set aside the committee’s decision and directed that Mr Duncan’s registration as a liquidator be reinstated, but subject to detailed conditions that would apply for such time as he remained a non-resident. The AAT “had the opportunity to observe Mr Duncan’s performance in the witness box where he was able to demonstrate his knowledge of Australian insolvency law and practice”.
The ART is said to provide a wider range of mechanisms in allowing reviews of administrative decisions, including those made in personal and corporate insolvency. Transition to the Administrative Review Tribunal | Administrative Appeals Tribunal (aat.gov.au)
Michael Murray[7]
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1A See for example Search Results for “regulation” – Murrays Legal and Review of the Regulation of Corporate Insolvency Practitioners, June 1997; Regulation, Competition and the Professions, Industry Economics Conference 2001, Professor Allan Fels; Study of the Professions Final Report – Accountancy, July 1992, Trade Practices Commission; Competition law issues for the professions (FCA) [2008] FedJSchol 21, former Justice John Mansfield.
[1] See EM to the ILRB 2015 9.135-9.137.
[2] See s 10 Insolvency Practitioners Regulation Act 2019 (NZ). Licensing of insolvency practitioners | Companies Office
[3] Processes for registration of trustees | Australian Financial Security Authority (afsa.gov.au)
[4] Fit and proper requirements for personal insolvency practitioners | Australian Financial Security Authority (afsa.gov.au)
[5] The term “Administrative Appeals Tribunal” is replaced by “Administrative Review Tribunal” in section 96-1 of Schedule 2 pursuant to the Administrative Review Tribunal (Consequential and Transitional Provisions No 2) Act 2024, (No 39, 2024), Schedule 2.
[6] Compare Petrenko and Australian Financial Security Authority [2024] AATA 448.
[7] I have been the Attorney-General’s appointee to committees under IPSB s 20-10 and s 40-45; and am the Minister’s appointee to committees under IPSC s 20-10 and s 40-45.
