Readers may be aware that on 22 May 2012 the Australian Securities and Investments Commission (ASIC) released its first of what is to be an Annual Report in relation to its monitoring and enforcement of standards among registered and official liquidators.
The report “spelt out the three key features of the regulator’s work in 2011, namely: examining the competence of liquidators, including the adequacy of their investigations into failed companies and the way they kept books and records; the independence of liquidators appointed to manage a failed company; and what the regulator called ‘inappropriate self-gain’. The latter involves concerns about how much liquidators charge or liquidators agreeing to strike inappropriate deals with related parties.” Sydney Morning Herald.
As a firm we support the role of the ASIC in this regard.
Our concern is that the ASIC seems to be limiting its investigation to liquidators. We believe that its investigations need to be broadened to include the activities of receivers.
We say this because in liquidations and voluntary administrations all of the actions and the fees of the appointee are subject to close scrutiny by all creditors. Detailed fee reports must be provided and accepted before payment can be made, and full explanations regarding the conduct of the insolvency can be demanded. This disclosure process, or breaches of it, provides creditors with the basis to complain to the ASIC.
This is not the position with receivers. Receivers only provide a detailed accounting to their appointors. Other than filing a six monthly statement of the receipts and payments to the ASIC receivers are under no obligation to inform unsecured creditors about anything. A creditor cannot even seek a court review of the fees charged.
The truth is, in nearly all administrations where a receiver and liquidator are both appointed to the same company, the receiver’s fees will be far greater than those of the liquidator.
We are not saying that receivers are doing the wrong thing or are charging inappropriately, rather their conduct also needs to be monitored to ensure the ASIC`s strategic priorities are truly being met.