The 2010 Senate Inquiry into the corporate insolvency profession, highlighted not only unprofessional conduct by limited number of practitioners, but also real concerns about ASIC’s effectiveness in regulating liquidators and administrators.
The Senate Inquiry recommended that ASIC’s regulatory powers over corporate insolvency be removed. But this recommendation has not been adopted in the Insolvency Law Reform Bill 2013 (the Bill) rather the appropriate professional bodies will act as co-regulators in the sense that under the proposed legislation a prescribed professional body may refer concerns regarding a member’s conduct to ASIC.
In such cases, ASIC would be required to conduct a preliminary conduct within 60 days.
Currently the law dictates that any party may lodge a complaint with ASIC (and could still do so), however there is nothing compelling ASIC to act within any specific time period, or at all.
In addition to having the power to refer complaints, the proposed legislation would remove disciplinary powers from Companies Auditors Liquidators Disciplinary Board and instead adopt a show cause notice and committee referral approach (similar to the model currently used under the Bankruptcy Act). This approach would give ASIC the power to issue a show cause notice to a registered liquidators if it suspects that the practitioner has failed to properly carry out their duties or is otherwise unsuitable to be registered as liquidator.
ASIC may then refer the matter to a committee. There are to be three members of the committee consisting of a practitioner appointed by the IPA, an ASIC officer and a person appointed by the minister.
Where the committee hears a matter and is satisfied that disciplinary action is necessary, the committee may:
· Deregister or suspend the practitioner’s registration.
· Prevent the practitioner from accepting new appointments or impose conditions on the practitioner’s registration.
· Issue public reprimand.
· Impose a restriction on practicing in the capacity of employee, consultant, advisor or otherwise for up to ten years.
The committee model would also be used to consider applications for registration as a liquidator. Accordingly, the IPA will have a role in determining who is registered as a liquidator and disciplining liquidators if the proposed new law is adopted.
In an article published in the March 2011 edition of the Australian Insolvency Journal, Ron Harmer (Author of the 1988 Harmer Report which lead to the introduction of Voluntary Administration) made the following comment:
“It may be best in Australia to endeavour to break the mould of a rigid sole government agency control system. Unless the IPA wants to remain as some kind of concerned bystander about regulation and discipline, it should be at the forefront of improving the system by advancing, as far as possible, a fused regulatory system in which it would play a significant part… And clearly, it will be better done sooner rather than later.”
The two aspects of the Insolvency Law Reform Bill 2013 discussed above indicate a definite shift away from so-called “rigid sole government agency control” to a collaborative approach to regulation. It seems Mr Harmer’s insight when it comes to Australian insolvency law reform knows no bounds.
The Australian Government Treasury’s website indicates that a second tranche of the Bill and draft regulations are expected to be released shortly setting out further proposed amendments to the corporate and personal insolvency legislation. We will continue to monitor the developments, watch this space.