By Hayley Hitch, Paralegal and Stephen Mullette, Principal, of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group
ASIC has conducted a recent webinar in July 2016 in which it has announced its ongoing commitment to the supervision of registered liquidators in Australia, focussing on “independence, competence and improper gain”. In addition it has reminded the industry of its vision to hold registered liquidators, “as gatekeepers, to account”.
ASIC advised they are using their surveillance powers to take proactive and reactive action (which just about covers the field!) to remove poor performing liquidators. ASIC is endeavouring to create public trust and confidence in the insolvency market with respect to the conduct of liquidations and returns to creditors.
According to ASIC, regular complaints are received by ASIC in respect of registered liquidators who:
- do not investigate to the fullest extent;
- fail to report to ASIC in respect of possible offences;
- fail to recover funds to the fullest extent; and
- fail to act in the best interests of the creditors of a company.
On the positive side, the reports of alleged misconduct have dramatically decreased over the last few years. In 2015, there were 364 complaints of alleged misconduct; much less than the 446 made in 2013.
ASIC suggests that its emphasis on receipt of complaints is on greater educative outcomes as opposed to disciplinary action or deregistration of a liquidator. The question ASIC asks is whether this has led to good results in providing trust and confidence to the public and whether such liquidators are improving from the education.
ASIC is conscious of market segmentation and notes that of the 710 registered liquidators in Australia 54% are in medium-large firms (10 or more liquidators) and 40% of registered liquidators are in firms of 1-4 practitioners. ASIC is aware of the concentration of firms on the east coast of Australia and that 50% of external administrations (Vas/CVLs) are dealt with by 15 firms. Unfortunately, ASIC appears to continue to maintain the view that having a lot of insolvency work of itself is a concern for independence, which in our view is a misconception from the Franklin(link is external) decision.
One concern remains the manner in which ASIC reports its outcomes. The presentation noted that in 2015 there were 11 voluntary and enforceable undertakings; and 7 formal investigations or enforcement actions commenced. Focussing on these outcomes risks identifying success with a substantive adverse outcome to an insolvency practitioner (rather than on the vast number of complying practitioners). Helpfully, at least, the presentation did at least include details of the total number of registered liquidators reviewed (more than 280) and the remuneration reports/relationship declarations reviewed (more than 50).
ASIC advised that it has 2 particular programmes underway looking at:
- published notices and practitioner compliance with notification obligations;
- annual statements, focussing on practitioner ability to undertake their professional obligations.
The ASIC presentation identified 3 key industry challenges being:
- professional facilitators of illegal activity (in essence, referral activity and the dangers of conflicts);
- practitioner remuneration; and
- law reform.
To mix metaphors, registered liquidators can be confident that the industry Watchdog will continue to ensure that Gatekeepers are keeping the flocks safe from industry wolves.
Watch the ASIC webinar here(link is external)
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Hayley Hitch, or one of the Principals in our Insolvency, Restructuring & Debt Recovery Group: