Insolvency practitioners (IPs) are regulated as individuals, not through their firm. In fact, the practitioner’s independence within the firm is required, as to the retention of their statutory discretions and authority under insolvency law, and as to remuneration and resource arrangements.[1]
Back in 2023, I reported on insolvency practitioner regulation in the UK, where it was proposed to examine the merits of the regulation of IPs and their firms. This followed a decision not to change the regulation of IPs by the recognised professional bodies. Regulation of firms offering insolvency services – Murrays Legal
That has not yet been implemented, the UK Insolvency Service’s latest Confidence in the Regime report of June 2026 still canvassing views about it.
Reasons for regulating firms
The rationale was that while an IP has a personal appointment, of necessity they are assisted by staff to whom work is delegated and by third parties. The firm supplies the hardware and marketing, and culture. In the UK, the legislative remit of insolvency regulators did not extend to looking at the firm and its practices or the actions of its directors, managers or non-IP employees. It was felt that this made it difficult for regulators to track estate funds where there were discrepancies, to establish governance structures, and there was no ability to hold the firm to account for its business practices or governance culture that may have led to some misconduct.
Disciplinary action against a practitioner is unlikely to impact the firm itself, “which can simply replace the practitioner and continue with the same poor practices”.
There were also concerns about conflicts of interest for practitioners working for the larger firms, as to IPs’ contract with their employer or partners, or as to the relationship between the firm and financial institutions.
The lack of firm regulation was said to hamper any attempts to address these concerns.
This was said to be a common area of criticism during debates on the Corporate Insolvency and Governance Act 2020 and similar concerns were raised by the All-Party Parliamentary Group on Fair Business Banking,[2] which conducted its own review of regulation of the insolvency profession.
The 2026 Confidence in the Regime report said that most responses agreed that extending regulation to cover firms would strengthen accountability and build public trust in the insolvency regime.
“It will increase the accountability of firms and encourage them to be more active in ensuring that the licence holders they have are kept under control.”
Productivity Commission’s review of barriers to business dynamism including insolvency practice
In the context of the Productivity Commission’s 2026-2027 review of aspects of insolvency practice, in its barriers to business dynamism inquiry, it is not apparent that the structure of the industry itself and how it operates is part of that.
The 2023 PJC Report did not address IP regulation to any degree but it did examine the fact that Australia might be said to suffer from having two regulators, only one having an official receiver role, two laws, a range of courts, separately registered professionals, and until recently, separate government administrations. These can be indicators of inefficiency in systems pathways and effectiveness of outcomes.
The reforms introduced in Australia by the Insolvency Law Reform Act 2016 significantly altered the regulatory structure and somewhat harmonised the processes and were said to have made some savings. But to some extent may also have cemented in certain restrictions – the separate regulators and professions remain.
Efficiency and productivity issues go to how an industry regulates itself and may by design or unwittingly assist in maintaining a particular pool of expertise, or gender divisions or qualification requirements. Competition scrutiny has been given to the professions in the past, including as to broadening the expertise required to be an IP.[3] There may also be such issues as to the appointment of a liquidator or trustee, and related independence issues.[4]
These may be issues of inquiry by the Productivity Commission.
Independence
The PJC in fact recommended the independence requirements be reviewed. Those rules serve important purposes but they also add to the cost and inefficiency of the system. This is more so with small business insolvencies involving combined personal and corporate liabilities where in certain cases judges have allowed co-appointments in favour of the economic advantages of doing so.[5]
Data
Lack of data or knowledge can be an impediment to the operation of a system, and to monitoring of its on-going efficiency. The Commission may find, like all inquiries before it, that data is limited, certainly as to the cross-over between personal (AFSA) and corporate (ASIC).
The industry itself holds much data. The 2026 Confidence in the Regime Report referred to a call from the UK profession to promote its successes as a means of displaying its value to society.
But successes, carefully defined, have to be reported in the context of a lack of success in many recovery actions and in the large number of estates that produce no return to creditors. This is data we should have in Australia.
The All-Party Parliamentary Group on Fair Business Banking was critical of the fact that although the aims of the legislation were included in the UK Insolvency Act 1986, there was no attempt by the profession or the regulator to provide data as to whether or how those aims were being met.
The Group tried to measure the success of the insolvency system but
“what was disturbing, and possibly revealing, was no one collates this data. We asked the firms, the RPBs and the Insolvency Service if they could provide us with data breaking down the outcomes that are pursued and achieved in administrations. The universal answer was that this data is not collected”.
This went to the objective set out on the legislation, that of “driving economic growth by saving companies and saving jobs”.
Implementing such a focus on data and accountability in Australia would be useful; otherwise, we are “legislating in the dark’: Shedding light on the dark side of insolvency practice – Murrays Legal.
Submissions
These issues may or may not be relevant to the Commission’s inquiry. Submissions close on 3 July, after which the PC will issue an interim report.
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[1] Re Lamb v Registrar in Bankruptcy [1984] FCA 282; 4 FCR 2. Re Hurt [1988] FCA 85; see also IGPS 13.
[2] Resolving Insolvency: Restoring confidence in the system, A report by the APPG on Fair Business Banking produced with the support of City law firm Humphries Kerstetter, September 2021.
[3] Industry Economics Conference 2001 Regulation, Competition and the Professions 13 July 2001 Melbourne Professor Allan Fels AO Chairman ACCC; Review of the Regulation of Corporate Insolvency Practitioners – June 1997.
[4] Trade Practices Commission Report on the accountancy profession, 1991, which was “critical of the tightly regulated insolvency profession, suggesting that entrance be widened to allow non-accountants to practise”: AFR, 8 November 1991.
[5] Application by Solomons [2013] FCA 1273; cf Newman (Trustee) v El-Sheikh Investment Holdings [2025] FCA 681.
