Over the last two months we have examined the avenues available to people that disagree with actions of insolvency practitioners and wish to have those actions or decisions reviewed. To date the process has been the same regardless of whether the practitioner was acting in a corporate or personal insolvency estate. But this commonality ends this month as we look at the government bodies that regulate the industry.
Every reader should already know that the Australian Securities and Investment Commission (ASIC) regulates corporate insolvencies, and the Insolvent Trustee Service Australia (ITSA) regulates personal insolvencies. These are two completely separate bodies with apparently little joint involvement.
These two bodies regulate the industry despite:
- most insolvency practitioners being involved in both areas
- both areas being within the Federal jurisdiction
- the legal principles applied in each area being almost identical
- the daily practice of insolvency being almost the same in each area
Historically ITSA has been more proactive in their regulation of practitioners, particularly with the annual review process of trustees. They respond quickly to complaints, understand the practice of insolvency as they conduct estates themselves, and understand the difficulties faced by practitioners. But, when necessary, they take action.
The ASIC has now all but caught up, with a review process commencing recently (we have just been through it). They have always prosecuted errant liquidators when issues have been raised, but until the recent review process had little proactive system to find problems. ASIC does not conduct insolvency estates themselves, but for many years have employed people with work history and experience in the industry.
But both bodies have policies and processes for investigating complaints against practitioners.
ASIC and Corporate Insolvency
The ASIC will look at (according to their website) “How company administrators, liquidators or auditors perform their duties”. People aggrieved by the actions of administrators or liquidators can lodge their complaints with this regulator. The ASIC says:
We weigh every complaint we receive against four basic questions:
- What legal action can we take?
- Is the evidence likely to be sufficient?
- Which complaint is the most urgent and serious?
- If we succeed, will people behave better in the future?
We often receive complaints from consumers who want help getting their money back. Even if we believe there has been misconduct, we generally won’t be able to recover money for you. Often you will need to get your own professional advice.
ASIC has limited resources (like everyone) and will determine whether the complaint has a sound basis or is just someone venting their frustration. Over the last years they have taken action against and suspended liquidators who have not performed their duties adequately. But, as ASIC states, there is little that they can do to recover money for complainants.
What they can do is utilize sections like 536 of the Corporations Act – Supervision of liquidators
(a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:
(i) a requirement of the Court; or
(ii) a requirement of this Act, of the regulations or of the rules; or
(b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties;
the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.
ITSA and Personal Insolvency
Personal Insolvency and the conduct of trustees is regulated through Bankruptcy Regulation. This is the group that conducts the annual reviews of trustees and handles all complaints against trustees.
If a person is concerned about the action or decisions of a trustee, and they cannot resolve their concern directly with the Trustee, they may seek a review of those decisions by:
- Bankruptcy Regulation
- The Administrative Appeals Tribunal (only after a request for a review has been made to Bankruptcy Regulation)
- The Federal or Federal Magistrates Court
Bankruptcy Regulation can review Trustee’s decisions that involve:
- Objecting to the discharge of a bankrupt;
- Income contribution assessments (including hardship applications);
- Decisions involving the Supervised Account regime; and
- Trustee’s Remuneration
They cannot review decisions on the selling of assets or admitting or rejecting a proof of debt. These must handled by the courts upon the proper application.
Both government bodies have the power to review certain actions and decisions by practitioners. They are one of the cogs in the whole process, but play an important role and they can look directly at a specific decision and its results, as opposed the ‘conduct’ of the practitioner and whether it lies within ethical guidelines.