Insolvency law reform Bill 2013/ Submission by Insolvency Practitioner association
Insolvency Law Reform Bill
The Parliamentary Secretary to the Treasurer and the Attorney-General have released an exposure draft of the primary amendments to be included in the Insolvency Law Reform Bill. This Bill implements reforms previously released in the proposals paper, A modernisation and harmonisation of the regulatory framework applying to insolvency practitioners in Australia.
The proposed amendments are designed to provide a framework for corporate and personal insolvency regulation that promotes a high level of practitioner professionalism and competency, enhances transparency and communication between insolvency practitioners and stakeholders, and promotes increased efficiency in insolvency administration.
A second tranche of the Bill is expected to be released shortly setting out further consequential amendments to the corporate and personal insolvency legislation as a result of these reforms, along with transitional measures. Draft regulations will also be released shortly for public consultation.
Submission from the IPAA
8 March 2013
The Manager
Corporate Governance and Reporting Unit
Corporations and Capital Markets Division
The Treasury
Langton Crescent
PARKES ACT 2600
Email: insolvency@treasury.gov.au
Attention: Mr Aaron Jenkinson
Dear Mr Jenkinson
Exposure Draft – Insolvency Law Reform Bill 2013
The Insolvency Practitioners Association (IPA) is the professional body representing
company liquidators and trustees in bankruptcy, as well as lawyers, financiers, academics
and others practising in or otherwise interested in insolvency law and practice. We make
this submission on the Exposure Draft based on the informed views of the IPA and its
members.
The IPA has given comments and made submissions in response to the options paper and
the proposals paper in the lead up to this Bill. These included comments on the policy that
should be adopted – for example in relation to practitioner regulation, or communication
with creditors – in the proposed law. We do not see a need to repeat those comments in
any detail unless they are relevant to particular provisions. We can say that we think the Bill
addresses the objectives of aligning and modernising the registration and disciplinary
frameworks for practitioners, and of introducing a range of efficiencies in the handling of
personal and corporate insolvencies. The Bill would also improve ASIC’s powers and assist
in allowing the two regulators to cooperate and communicate.
We have also participated in three stakeholder consultation meetings this year where we
gave comments on the Exposure Draft. In this submission we seek to amalgamate all of the
feedback we have previously provided into one document.
We address the Exposure Draft in the same order that it is presented, however, we have,
where the same amendments are proposed to both the Corporations Act and Bankruptcy
Act, addressed these provisions at the same time. We also make the following introductory
comments.
1 General issues
1.1 Qualifiers
Our comments on the Bill are qualified by the fact that we do not yet have the proposed
changes to the Bankruptcy and Corporations Regulations, nor the consequential
amendments to the Corporations Act and the Bankruptcy Act, and transitional measures.
This is important because the approach taken in the Bill is to leave much of the detail to the
regulations, for example as to the committee processes and their procedural fairness
requirements, and as to creditor requests for information. The Bill would also substantially
amend and replace many provisions in the existing insolvency legislation. 1.2 Discipline
In that respect a major change is the replacement of the CALDB by a committee system for
the discipline of practitioners, as contained in Division 16 of the Bill. We have supported
this change based on our experience with the committee system in bankruptcy over a
number of years. At the same time, we want to ensure that any difficulties with the existing
bankruptcy discipline processes are resolved so that the new regime operates as fairly and
efficiently as possible. We have pointed out below a recent issue that has arisen with the
meaning of the word ‘convene’ on which a court has made reform suggestion. We are also
aware that much of the procedural fairness structure in the new process – required by
section 16-65(2) - will be found in the regulations. We make this point to re-emphasise that
we would like to reserve our final comments on Division 16 until we have seen the
supporting regulations. We suggest also that the regulations should contain provisions
governing remuneration to be paid to IPA nominated committee members. The framework
provided for members of the CALDB under Part 11 of the ASIC Act 2001 is a precedent.
1.3 Replacement of practitioners
We have also supported the proposal whereby creditors are given more authority in
insolvency administrations, including, in corporate matters, to be able to vote to remove
and replace a practitioner. This is based on our experience in personal insolvency where
such a power exists though is rarely used. Issues would generally be more complex in
corporate insolvencies and we would like to ensure that there are avenues for redress if the
creditor driven process is abused. The drafting of the relevant provisions, on which we
comment below, provides limited avenue for court intervention. As well, while the process
may be conducted properly, we are concerned to ensure that the replaced incumbent is not
prejudiced by legal complications involving approval or and payment for their remuneration.
The present drafting – that this is to be resolved on a basis that the two practitioners “agree
on” (s 22-65, based on s 164 Bankruptcy Act, but with no equivalent provision in corporate
insolvency) – is not satisfactory.1
We comment on this more below.
1.4 Unfunded work
The laws proposed will impose additional obligations on practitioners, as well as remove
other obligations. These include the notification of creditors of the insolvency, the calling of
meetings, the provision of information and so on. The IPA and its members accept that in
some cases such work must be done even if no funds are available. However, we consider
that a general principle throughout these reforms should be that it is not reasonable for a
practitioner to attend to tasks if there are no funds from which they will be remunerated, or
for which no security can be taken. We note that the term “reasonable” is one commonly
used in respect of such requirements throughout the Exposure Draft, but which is to be
defined in the regulations.
If the law is to require practitioners to undertake work for which they cannot be paid it
should clearly say so. Section 545 of the Corporations Act could be adapted and clarified for
this purpose, for both personal and corporate insolvency.
1.5 Practitioner conduct – remuneration and disbursements (“benefits provisions”)
We make particular comments on these provisions in Subdivision E. There are a range of
issues covered by these benefits provisions, which we divide broadly into four categories:
• Practitioners’ engaged of related parties for work on an insolvency administration;
• The incurring of disbursements;
1
See Section 449E – an unfortunate interpretation by a court?, on the IPA website, which refers to a
deficiency in the last law reforms about replaced practitioners’ remuneration, discussed in Re CMC
Cairns Pty Ltd (in liquidation) [2011] QSC 240. We have previously alerted Treasury to this problem.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 2 • Extra benefits, giving up remuneration etc; and
• The purchase of assets.
We disagree with the general approach taken to these benefits provisions. While the
conduct they appear to proscribe – overcharging, secret commissions, kick-backs, secretly
acquiring company property – is not lawful, there should be a better and more effective way
to state the proscriptions.
We suggest that a parallel can be drawn with the principles-based drafting used in existing
bankruptcy laws. Section 19 of the Bankruptcy Act contains provisions that require a
trustee to administer the estate as efficiently as possible by avoiding unnecessary expense,
and to act in a commercially sound way. Dividends must be paid with all convenient speed:
s 140. There are independence requirements in Schedule 4A to the Bankruptcy Regulations
– reg 2.2 and 2.3 – and there is a general duty imposed in relation to dealings with assets
and their sale, discussed below, in regulation 2.11 - Disposal of property. Other examples
are ss 180-183 of the Corporations Act in relation to directors duties.
Such provisions give guidance on how a general duty could be framed. For example, the
duties of a trustee or liquidator could be stated along these lines, that:
a practitioner must exercise their powers and discharge their duties with care and
diligence; in good faith; and for proper purposes. A practitioner must not
improperly use their position, or use information gained as a liquidator, to gain an
advantage for themselves or someone else or cause detriment to the creditors or
the company.
These could be supplemented by performance standards along the lines of those existing in
Schedule 4A to the Bankruptcy Regulations, and in regulator guidance and professional
guidance such as found in the IPA Code of Professional Practice. The courts have regard to
professional standards in deciding on practitioner conduct.2
These principles based duties and responsibilities may then be enforced under proposed
section 16-50(1)(k) [existing s 1292 CA, s 155H(1)(f) BA] in so far as it may be shown that
the duties of a liquidator or a trustee were not carried out adequately and properly.
We are not aware of liquidators’ conduct being proscribed in the way drafted in section 22-
40 and following of the Bill in comparable New Zealand or English law.3
In fact the existing
law (s 165 Bankruptcy Act) and the proposed provisions (section 22-40 to 22-50) come
from old English bankruptcy law.4
However, if the proposed approach is to be adopted, we wish to make these comments on
the relevant sections. We have previously raised all these issues with you during the
stakeholder consultations and we understand that our comments are being considered.
1.5.1 Use of related entities – s 22-35
At times, a practitioner may wish to engage the services of a related entity in an insolvency
administration. This is normal practice, particularly in multi-disciplinary firms where tax,
accounting or even legal services may be sought in-house. The IPA deals with this practice
in the IPA Code by saying that in situations where the benefit of the engagement fee will be
received by the Practitioner, the Practitioner’s Firm (which has a wide definition in the Code)
or an entity related to the Practitioner or perceived to be related to the Practitioner, the
engagement fee must be treated as remuneration. Thus, it must be reported and approved
in the same way that the Practitioner’s remuneration is reported and approved.
2
Dean-Willcocks v Companies Auditors and Liquidators Disciplinary Board [2006] FCA 1438.
3
Section 164 - Corrupt inducement affecting appointment – is the only example form the Insolvency
Act 1986 (UK)
4
See for example s 82 of the English Bankruptcy Act 1914.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 3 Section 22-35 requires disclosure of such arrangements, but provides no power for creditors
to actual approve the arrangement. By considering the interaction of the proposed s 22-35
and 22-40, a Practitioner will, in our view, be unable to use a related entity on an insolvency
administration.
1.5.2 Charging of disbursements – s 22-40
There has been much discussion around the issue of Practitioners “profiting” from
disbursements. Section 22-40 attempts to proscribe this by prohibiting a Practitioner from
making, directly or indirectly, an profit or advantage from a transaction or conferring such
an advantage on a related entity. This effectively prevents a practitioner from being able to
charge for many internally generated disbursements, such as photocopying, where it can be
difficult to determine accurately the actual cost and any “profit”.
We understand that the intention is to prevent Practitioners from charging inappropriate
amounts for internally generated disbursements. However, we suggest that it would be
better to put in place a process for Practitioners to report to creditors about the rates for
internally generated disbursements (eg. photocopying, postage, telephone calls etc) and for
creditors to have the power to approve the actual amount of the disbursements before they
are paid.
This would not apply to disbursements arising from third parties (ie. travel, accommodation,
legal fees etc) as long as they are charged at cost.
We also suggest that to complement the default remuneration amount under s 22-30, a
small dollar amount be prescribed as a default internally generated disbursement amount,
which would allow practitioners to pay internally generated disbursements to a certain
amount without having to seek creditor approval. This would allow Practitioners to pay a
small amount for disbursements where there are insufficient funds in the administration to
seek approval of creditors.
1.5.3 Extra benefits, giving up remuneration etc – s 22-50
These provisions appear to proscribe secret commissions and kick-backs. Decisions of the
courts have drawn some fine lines in whether a practitioner has given up their
remuneration: see for example Re Dare [1992] FCA 509 and Wenkart v Pantzer [2008] FCA
478. They were recently discussed in ACN 079 638 501 Pty Ltd (in liq) (recs & mgrs apptd)
v Pattison5
where the Court held that although the appointments of the practitioner were
personal appointments in his capacity as liquidator, his work in progress belonged to his
practice company to which he had, in effect, ‘given up’ his remuneration. The proposed
section would simply be re-introducing these legal uncertainties based, as we have said, on
old law.
1.5.4 Purchase of assets
We have made comments earlier about alternative drafting in relation to this item. If the
current drafting is adopted, it would prevent a Practitioner from purchasing assets of the
company without the consent of the Court. However, we suggest this is unreasonable if the
appointment is a retail operation where any assets can be purchased in the ordinary course
at normal retail prices. The IPA Code contains similar prohibitions on practitioners and on
their staff but includes an exception for retail operations. The wording of the IPA Code has
previously been provided to you.
1.5.5 General
As we have said, we raised both these issues with you during the stakeholder consultations.
We would be pleased to offer comments on any redraft of these provisions.
5
[2012] VSC 445
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 4 1.6 Role of Contributories
We have pointed out in earlier submissions that there is generally no policy or legal reason
for involvement of contributories in creditors meetings or committees, unless they have a
financial interest in the administration, which is rare.6
This should particularly be the case
with the convening of committees of creditors under s 548 of the Corporations Act.7
As we
pointed out in our discussions, section 28-15, as one example, retains the need for
contributories to be involved. We understand you are reconsidering this as a general issue.
1.7 Terminology
There should of course be consistency in describing certain terms in the Bill. One example
we raise is in relation to remuneration [of a practitioner] and expenses [or disbursements,
that is, moneys paid by the practitioner for the purposes of the administration such as
advertising costs, search fees, legal costs, agents fees etc] and costs [being legal costs
ordered by a court to be paid].
The Bill is presently inconsistent in the use of these terms. For example section 32-23
refers to “remuneration, costs or expenses which the liquidator is appointed to review ...”.
Section 28-50 refers to “costs in relation to meetings of creditors” but under section 17-5
the court may order that a person’s “costs” of and incidental to a court application be paid
by another person. We make this point here and do not separately comment on the
sections in the Bill where these inconsistencies arise.
Another example is the use and meaning of the word “convene” on which we have
commented in the schedules below.
We agree with the removal of the bankruptcy definition of “working days” and the use of
“business days”; although there can be difficulties with that approach (different states have
different holidays) we ask that this term be used consistently.
2 Schedule 1 – Uniform insolvency practice rules
2.1 Schedule 2 – Insolvency practice rules
2.1.1 Part 2 – Registering and disciplining practitioners
Section IPA Comment
Division 8 – Registering Trustees / Liquidators
8-15, 8-50 The word “convene” should be defined and its meaning made clear given that
the convening of a committee must happen within a set period of time. See
Burke v IGB [2013] FMCA 2.
8-20, 8-55 Six months is too long. We suggest 3 months.
8-25 We suggest 45 business days is too long; we suggest 20 days.
We query how the committee may be satisfied that insurance will be taken
out; we suggest it is enough that this insurance is in fact taken out when the
practitioner is registered – see 8-35. We therefore suggest that (4)(b) be
deleted.
Division 10 - Insurance
10-5 (2)(b) we suggest this should say “specified class of registered
trustees/registered liquidators”?
6
See s 514 Corporations Act and following sections.
7
See the decision on s 548 in Jindal Transworld Pty Ltd, ScottsdaleHomesNo 10 Pty Ltd [2010] SASC 210.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 5 Division 14 – Notice requirements
14-5 (1)(i) – we suggest this should be limited to “material” information, otherwise
minor inaccuracies would need to be notified. In fact we think it more
appropriate that this issue – incorrect information in an annual return - be
either dealt with in Division 12, or removed to a separate provision other than
“Notice of significant events” in this Division.
Division 16 – Disciplinary and other action
16-10 While the Inspector-General in Bankruptcy (IGB) may withdraw a notice, if
the practitioner is for good reason unable to comply within 10 days, we
suggest it would be preferable to say “or such longer time as the IGB allows”?
16-50 This allows all acts of bankruptcy – see s 40(1)(a)-(o) BA – to potentially be
the subject of the IGB’s belief? If so, this is too broad.
16-55 The IGB should be required to convene a committee within a specified time,
say 1 month.
16-70 We suggest it is not reasonable to impose a condition on all other registered
liquidators or trustees as a disciplinary outcome of a particular liquidator or
trustee. Also, it does not serve rehabilitation of the banned practitioner
although we understand it may be used rarely. However, if the section is to
remain, we suggest that ASIC and ITSA would need to establish and maintain
a public register of those on a ‘banned’ list in order to assist practitioners to
comply with this requirement.
16-85 The referring industry body, which we assume would include IPA, should also
be notified by ASIC or IGB if any action is taken, and the outcome of that
action.
2.1.2 Part 3 – General Rules relating to estate/external administrations
Section IPA Comment
Division 22 – Remuneration and other benefits
22-10 (2) This section provides that the person first appointed as external administrator
is entitled to accrue remuneration not exceeding the default remuneration
amount of $5,500. There will be many instances where the person first
appointed will reasonably accrue remuneration in excess of the current $5,500
default amount. This limit should be removed.
22-10(3) We do not understand why the first appointed external administrator should be
entitled to a minimum of the default remuneration amount even if they have
not accrued that much remuneration prior to their replacement. An external
administrator should only be entitled to remuneration for work done which was
necessary and proper. If this is less than the default amount, then they are
only entitled to that lower amount.
22-20 (1)(d) – the word “external” is missing before the word “administration”?
22-30 The default amount should be expressed as $5,000 plus GST if applicable; or
use the wording in Bankruptcy Act s 161B.
Division 22 – Subdivision E – Duties relating to remuneration and benefits
General See opening comments at 1.5
Division 24 – Funds handling
24-10 An external administrator should not be limited to opening only a single bank
account. The word single should be removed.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 6 The account should be required to be opened within 5 days of moneys coming
into the administration, not 5 days of appointment.
24-20 The law should not go to the detail of allowing payment by cheque, requiring
the company name on it, and then requiring the administrator to personally
sign it: we suggest delete (2) and (3).
24-35 The law should not go to the detail of requiring a receipt to be issued and
obtained: we suggest delete the section.
24-40 This section does not accord with the nature and definition of ‘securities’ [s 9].
We suggest delete and leave it as a matter of good financial practice.
Division 26 - Information
26-10 (3) More time should be allowed for completion of the annual return for
eed to notify if this is an annual requirement. In any
vent, we assume that (4) means that no notice need be given if no further
tistical purposes.
corporate insolvencies.
(4) There should be no n
e
communications are needed with members, creditors etc.
Receivers should also be required to lodge annual administration returns to
ensure completeness of information for public record and sta
26-15 )(a) The law should not go to the detail of where the books are to be kept – (2
they may be stored off-site, or may be in a cloud. We suggest delete.
26-25 The costs are incurred because of a decision by ASIC – they are not expenses
incurred by a relevant authority under s 556(1)(dd). (5) gives them no
priority. We suggest that this provision be redrafted.
26-40 We suggest “5 business days or such further period as agreed”, or “as soon as
practicable”. This would align with section 26-42(3)(4) which allows ASIC to
transfer books “as soon as practicable”.
26-45 (3) We do not agree that the company is the correct party to approve the
early destruction of books and records in a Voluntary Administration or Deed
of Company Arrangement. On conclusion of a successful Deed, the books and
records will largely be returned to the company to do with as it wishes. Any
books retained by the Practitioner should be subject to the direction of the
creditors.
Subdiv D Giving information to creditors
General of
ill be in the regulations, which we have not seen.
Generally, any comments we make here are qualified by the fact that much
the detail w
26-50 –
26-60
The term ‘provide a report’ probably means ‘prepare and provide a report’
It would be
better to say "... prepare a report; or (c) produce a document". This needs to
e
although the clearer wording of ‘prepare a report’ is used for example in
section 421A Corporations Act and section 189A Bankruptcy Act.
be made clear also because the cost of providing / preparing a report may b
payable – 26-60.
26-50 and
26-55
These two sections could be folded into one section.
26-57 and could be folded into one section.
26-59
These two sections
26-60 (3) There needs to be a “reasonableness” test in relation to the alterations
that can be made to the requirements under the regulations by the creditors
or members.
26-65 The section should say who must pay for the work done in providing the
information.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 7 Division 28 - Meetings
General ince
are already prescribed in Part 5.3A?
We query whether this Division should apply to voluntary administrations s
two meetings
28-10 “Convene” should be defined – see Burke v IGB [2013] FMCA 2.
28-15 A “reasonableness” qualification should be introduced similar to 26-50(3) for
situations where the administration is without funds and/or the practitioner
e
g new to
tary
e
bers’ voluntary liquidations.
considers that the request being made by the creditors/COI is unreasonabl
(for example a meeting was only recently held and there is nothin
report to creditors). There needs to be a balance between the rights of
creditors and not allowing those rights to be abused to the detriment of the
administration and the practitioner.
(2) There should be no role for contributories except in a members’ volun
liquidation, in which case the term members should be used and the referenc
should be specifically limited to mem
28-25 he term “signed writing” is old practice and terminology – the appointment T
may for example be by email. We suggest “in writing”.
28-40
e it is
of remuneration.
the
We suggest this should be broadened to say that a notice may include a
proposal about remuneration plus another proposal. This is becaus
current practice for a Practitioner to always deal with remuneration whenever
he or she is calling a creditors’ meeting, so that another meeting does not
have to be held in the future simply to deal with the issue
The same principle applies in respect of meetings by resolution.
There should be a requirement for creditors to lodge a statement of claim prior
to being able to vote and a process for the practitioner to be able to assess
creditor’s right to vote, just as there is with a physical meeting.
28-42 and
28-43
eeting the
asons for the use or not using the casting vote. The requirement in the
regulations is merely to include reasons in the minutes (reg 5.6.21(4A)). The
The current section does not require the chair to explain to the m
re
section should require the chair to give reasons to the meeting to assist
creditors with decision to challenge a resolution under these sections.
Division 30 – Committees of creditors
30-10 There is no need for separate or any meetings of contributories.
Is it intended that these requirements for a Committee of Inspection (CO
replace the current requirements for a committee of creditors in a volu
I) will
ntary
administration? If not, then voluntary administrations should be excluded
from 30-10.
30-30 This is unwise – it allows the committee to incur expenses and then have
ose expenses given priority over creditors under s 556. This could also
se available to pay a dividend to creditors are used for
e
oner has no involvement in the COI advice process.
th
mean that funds otherwi
COI expenses. The practitioner may be put in a position where they have
advised creditors that a dividend is to be paid, and then be unable to pay it
due to outstanding COI expenses. The practitioner may be unaware of thes
as the practiti
Further, what is the position if there are insufficient funds in the external
administration to cover these costs? We suggest that there be a
reasonableness test associated with these expenses.
30-35
tor
ho has a member on a committee. Both 30-35(5) and (8) prohibit, without
eave of the Court, the purchase of administration assets. However, there is
There should be a general duty provision.
30-35(5) deals with a member of a committee. 30-35(8) deals with a credi
w
l
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 8 an exception for members under (5) set out in (6) and (7) which allows th
creditors to resolve otherwise but the member of the COI cannot v
is no exception like this for the creditor under 30-35(8) – there s
e
ote. There
hould be no
difference in treatment.
Division 32 - Review
32-15(4),
p 148, p
69
ty is more appropriate.
ote also the issue of COI expenses referred to above at 30-30.
It is not clear whose expenses are associated with the request but we assume
it is meant to be the committee member’s.
In bankruptcy [p 69 of the Bill], the expenses are taken to be expenses of the
administration of the estate, which have high priority under s 109(1)(a). In
corporate [p 149] the expenses are taken to be expenses incurred by a person
as a member of the committee, which have lesser priority under s 556(1)(df).
We think the lower priori
There should be a “reasonableness” qualification on the amount and type of
expenses.
N
32-20
n the issue of COI expenses referred to above at 30-30.
This is expressed very broadly – it should be narrowed to deal only with
practitioner conduct issues.
Para (4)(e) “any other order ...” is superfluous
(6) Note agai
32-20A This should apply also in bankruptcy, for the sake of alignment.
32-22 d include not only the cost of the review [if this refers to
on and expenses] but also from where the costs are to be paid
(4)(8) This shoul
remunerati
32-23 A reviewing liquidator should be required to sign a consent to act and provide
a DIRRI prior to being appointed by creditors.
32-24 We will need to see the regulations to comment on this properly, however,
do note that the review period of 6 mo
we
nths at (4)(d) is probably not sufficient.
here will be many instances where the Practitioner may be seeking
six months. The entirety of
ew while the
dministration is ongoing. However, once the administration has been
view
.
T
remuneration approval for a period of more than
the appointment should be potentially subject to revi
a
completed, there should only be a limited time for any application to re
remuneration to be made. This is where 6 months may be appropriate
32-35 (1) To ensure continuity of the external administration, the removal of the
be
ator
must be voted in immediately at the same meeting (ie. the meeting cannot be
ting prior to any resolutions
incumbent liquidator and appointment of the replacement liquidator should
made in the same resolution. If this is not possible, the replacement liquid
adjourned). The replacement liquidator must have already consented and
must provide a DIRRI which is tabled at the mee
being passed. If a replacement cannot be made at the immediately at the
same meeting, the incumbent remains in place until a replacement liquidator
can be appointed. The incumbent and proposed replacement liquidators
should have the right to speak at the meeting.
(3) a creditor should also be able to apply.
(4) do costs include remuneration and expenses?
Division 42 Other matters
42-4 (1) Contributories should not have a role.
Para (a) and (b) may be read as confining the range of directions that may be
given, which we assume was not intended. The equivalent bankruptcy section
(p 74) simply and correctly says, “in relation to the administration of the
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 9 estate”. Comparable wording should be used in corporate, ie, “in relation to
the external administration”.
42-10
lation to family law claims to
Law Act.
(1) We assume it is not meant to be confined to rights to sue under the
Corporations Act?
Consideration should be given as to whether the consent of creditors is
required prior to assignment.
An unintended consequence could arise in re
which a trustee is a party under s 79 of the Family
3 dments
3.1.1 u
Section
Schedule 2 – Further Amen
Part 1 – Reg lator Powers
IPA Comment
Bankruptcy
Act at the
end of s 12
rmation in the same way as ASIC.
We suggest to add “(5)(c) a prescribed professional body” to allow the
Inspector-General to share info
3.1.2 Part 2 – State of affairs etc
Section
ments and reports
IPA Comment
206BB dge
of information
and funds, thereby releasing the director from any period of disqualification.
Also, the extended period of time to undertake the process under the section
means that the director would not even reach the point of being disqualified in
We consider that this is flawed at subs (7) in that if a director refuses to lo
a RATA, the administration may be finalised early due to a lack
such a case.
3.1.3 Part 3 – Miscellaneous
Section IPA Comment
497 The liquidator is required to send to each creditor various information,
including a summary of the company’s affairs, within 5 business days after
their appointment (497(1)). However, the directors are only required to
provide a report as to the company’s affairs (RATA) to the liquidator also
ointment of the liquidator. The liquidator will
require access to the directors’ RATA in order to complete their summary of
ffairs and yet insufficient time is currently provided in the
within 5 business days of the app
the company’s a
proposed new s 497. The timing requirements need to be altered to allow the
liquidator sufficient time to prepare and send the summary after receipt of the
RATA.
4 Contact
these comments and to have assisted in the earlier discussions. The
IPA remains available and interested to assist in the finalisation of the Bill, and in the
We are pleased to offer
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 10 Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 11
consideration al
President
of the regulations and subsequent legislation. Please contact the IPA’s Leg
ael Murray, 02 9080 5826, for this purpose.
y
Director, Mich
Yours sincerel
Robyn Erskine
The proposed amendments are designed to provide a framework for corporate and personal insolvency regulation that promotes a high level of practitioner professionalism and competency, enhances transparency and communication between insolvency practitioners and stakeholders, and promotes increased efficiency in insolvency administration.
A second tranche of the Bill is expected to be released shortly setting out further consequential amendments to the corporate and personal insolvency legislation as a result of these reforms, along with transitional measures. Draft regulations will also be released shortly for public consultation.
Submission from the IPAA
8 March 2013
The Manager
Corporate Governance and Reporting Unit
Corporations and Capital Markets Division
The Treasury
Langton Crescent
PARKES ACT 2600
Email: insolvency@treasury.gov.au
Attention: Mr Aaron Jenkinson
Dear Mr Jenkinson
Exposure Draft – Insolvency Law Reform Bill 2013
The Insolvency Practitioners Association (IPA) is the professional body representing
company liquidators and trustees in bankruptcy, as well as lawyers, financiers, academics
and others practising in or otherwise interested in insolvency law and practice. We make
this submission on the Exposure Draft based on the informed views of the IPA and its
members.
The IPA has given comments and made submissions in response to the options paper and
the proposals paper in the lead up to this Bill. These included comments on the policy that
should be adopted – for example in relation to practitioner regulation, or communication
with creditors – in the proposed law. We do not see a need to repeat those comments in
any detail unless they are relevant to particular provisions. We can say that we think the Bill
addresses the objectives of aligning and modernising the registration and disciplinary
frameworks for practitioners, and of introducing a range of efficiencies in the handling of
personal and corporate insolvencies. The Bill would also improve ASIC’s powers and assist
in allowing the two regulators to cooperate and communicate.
We have also participated in three stakeholder consultation meetings this year where we
gave comments on the Exposure Draft. In this submission we seek to amalgamate all of the
feedback we have previously provided into one document.
We address the Exposure Draft in the same order that it is presented, however, we have,
where the same amendments are proposed to both the Corporations Act and Bankruptcy
Act, addressed these provisions at the same time. We also make the following introductory
comments.
1 General issues
1.1 Qualifiers
Our comments on the Bill are qualified by the fact that we do not yet have the proposed
changes to the Bankruptcy and Corporations Regulations, nor the consequential
amendments to the Corporations Act and the Bankruptcy Act, and transitional measures.
This is important because the approach taken in the Bill is to leave much of the detail to the
regulations, for example as to the committee processes and their procedural fairness
requirements, and as to creditor requests for information. The Bill would also substantially
amend and replace many provisions in the existing insolvency legislation. 1.2 Discipline
In that respect a major change is the replacement of the CALDB by a committee system for
the discipline of practitioners, as contained in Division 16 of the Bill. We have supported
this change based on our experience with the committee system in bankruptcy over a
number of years. At the same time, we want to ensure that any difficulties with the existing
bankruptcy discipline processes are resolved so that the new regime operates as fairly and
efficiently as possible. We have pointed out below a recent issue that has arisen with the
meaning of the word ‘convene’ on which a court has made reform suggestion. We are also
aware that much of the procedural fairness structure in the new process – required by
section 16-65(2) - will be found in the regulations. We make this point to re-emphasise that
we would like to reserve our final comments on Division 16 until we have seen the
supporting regulations. We suggest also that the regulations should contain provisions
governing remuneration to be paid to IPA nominated committee members. The framework
provided for members of the CALDB under Part 11 of the ASIC Act 2001 is a precedent.
1.3 Replacement of practitioners
We have also supported the proposal whereby creditors are given more authority in
insolvency administrations, including, in corporate matters, to be able to vote to remove
and replace a practitioner. This is based on our experience in personal insolvency where
such a power exists though is rarely used. Issues would generally be more complex in
corporate insolvencies and we would like to ensure that there are avenues for redress if the
creditor driven process is abused. The drafting of the relevant provisions, on which we
comment below, provides limited avenue for court intervention. As well, while the process
may be conducted properly, we are concerned to ensure that the replaced incumbent is not
prejudiced by legal complications involving approval or and payment for their remuneration.
The present drafting – that this is to be resolved on a basis that the two practitioners “agree
on” (s 22-65, based on s 164 Bankruptcy Act, but with no equivalent provision in corporate
insolvency) – is not satisfactory.1
We comment on this more below.
1.4 Unfunded work
The laws proposed will impose additional obligations on practitioners, as well as remove
other obligations. These include the notification of creditors of the insolvency, the calling of
meetings, the provision of information and so on. The IPA and its members accept that in
some cases such work must be done even if no funds are available. However, we consider
that a general principle throughout these reforms should be that it is not reasonable for a
practitioner to attend to tasks if there are no funds from which they will be remunerated, or
for which no security can be taken. We note that the term “reasonable” is one commonly
used in respect of such requirements throughout the Exposure Draft, but which is to be
defined in the regulations.
If the law is to require practitioners to undertake work for which they cannot be paid it
should clearly say so. Section 545 of the Corporations Act could be adapted and clarified for
this purpose, for both personal and corporate insolvency.
1.5 Practitioner conduct – remuneration and disbursements (“benefits provisions”)
We make particular comments on these provisions in Subdivision E. There are a range of
issues covered by these benefits provisions, which we divide broadly into four categories:
• Practitioners’ engaged of related parties for work on an insolvency administration;
• The incurring of disbursements;
1
See Section 449E – an unfortunate interpretation by a court?, on the IPA website, which refers to a
deficiency in the last law reforms about replaced practitioners’ remuneration, discussed in Re CMC
Cairns Pty Ltd (in liquidation) [2011] QSC 240. We have previously alerted Treasury to this problem.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 2 • Extra benefits, giving up remuneration etc; and
• The purchase of assets.
We disagree with the general approach taken to these benefits provisions. While the
conduct they appear to proscribe – overcharging, secret commissions, kick-backs, secretly
acquiring company property – is not lawful, there should be a better and more effective way
to state the proscriptions.
We suggest that a parallel can be drawn with the principles-based drafting used in existing
bankruptcy laws. Section 19 of the Bankruptcy Act contains provisions that require a
trustee to administer the estate as efficiently as possible by avoiding unnecessary expense,
and to act in a commercially sound way. Dividends must be paid with all convenient speed:
s 140. There are independence requirements in Schedule 4A to the Bankruptcy Regulations
– reg 2.2 and 2.3 – and there is a general duty imposed in relation to dealings with assets
and their sale, discussed below, in regulation 2.11 - Disposal of property. Other examples
are ss 180-183 of the Corporations Act in relation to directors duties.
Such provisions give guidance on how a general duty could be framed. For example, the
duties of a trustee or liquidator could be stated along these lines, that:
a practitioner must exercise their powers and discharge their duties with care and
diligence; in good faith; and for proper purposes. A practitioner must not
improperly use their position, or use information gained as a liquidator, to gain an
advantage for themselves or someone else or cause detriment to the creditors or
the company.
These could be supplemented by performance standards along the lines of those existing in
Schedule 4A to the Bankruptcy Regulations, and in regulator guidance and professional
guidance such as found in the IPA Code of Professional Practice. The courts have regard to
professional standards in deciding on practitioner conduct.2
These principles based duties and responsibilities may then be enforced under proposed
section 16-50(1)(k) [existing s 1292 CA, s 155H(1)(f) BA] in so far as it may be shown that
the duties of a liquidator or a trustee were not carried out adequately and properly.
We are not aware of liquidators’ conduct being proscribed in the way drafted in section 22-
40 and following of the Bill in comparable New Zealand or English law.3
In fact the existing
law (s 165 Bankruptcy Act) and the proposed provisions (section 22-40 to 22-50) come
from old English bankruptcy law.4
However, if the proposed approach is to be adopted, we wish to make these comments on
the relevant sections. We have previously raised all these issues with you during the
stakeholder consultations and we understand that our comments are being considered.
1.5.1 Use of related entities – s 22-35
At times, a practitioner may wish to engage the services of a related entity in an insolvency
administration. This is normal practice, particularly in multi-disciplinary firms where tax,
accounting or even legal services may be sought in-house. The IPA deals with this practice
in the IPA Code by saying that in situations where the benefit of the engagement fee will be
received by the Practitioner, the Practitioner’s Firm (which has a wide definition in the Code)
or an entity related to the Practitioner or perceived to be related to the Practitioner, the
engagement fee must be treated as remuneration. Thus, it must be reported and approved
in the same way that the Practitioner’s remuneration is reported and approved.
2
Dean-Willcocks v Companies Auditors and Liquidators Disciplinary Board [2006] FCA 1438.
3
Section 164 - Corrupt inducement affecting appointment – is the only example form the Insolvency
Act 1986 (UK)
4
See for example s 82 of the English Bankruptcy Act 1914.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 3 Section 22-35 requires disclosure of such arrangements, but provides no power for creditors
to actual approve the arrangement. By considering the interaction of the proposed s 22-35
and 22-40, a Practitioner will, in our view, be unable to use a related entity on an insolvency
administration.
1.5.2 Charging of disbursements – s 22-40
There has been much discussion around the issue of Practitioners “profiting” from
disbursements. Section 22-40 attempts to proscribe this by prohibiting a Practitioner from
making, directly or indirectly, an profit or advantage from a transaction or conferring such
an advantage on a related entity. This effectively prevents a practitioner from being able to
charge for many internally generated disbursements, such as photocopying, where it can be
difficult to determine accurately the actual cost and any “profit”.
We understand that the intention is to prevent Practitioners from charging inappropriate
amounts for internally generated disbursements. However, we suggest that it would be
better to put in place a process for Practitioners to report to creditors about the rates for
internally generated disbursements (eg. photocopying, postage, telephone calls etc) and for
creditors to have the power to approve the actual amount of the disbursements before they
are paid.
This would not apply to disbursements arising from third parties (ie. travel, accommodation,
legal fees etc) as long as they are charged at cost.
We also suggest that to complement the default remuneration amount under s 22-30, a
small dollar amount be prescribed as a default internally generated disbursement amount,
which would allow practitioners to pay internally generated disbursements to a certain
amount without having to seek creditor approval. This would allow Practitioners to pay a
small amount for disbursements where there are insufficient funds in the administration to
seek approval of creditors.
1.5.3 Extra benefits, giving up remuneration etc – s 22-50
These provisions appear to proscribe secret commissions and kick-backs. Decisions of the
courts have drawn some fine lines in whether a practitioner has given up their
remuneration: see for example Re Dare [1992] FCA 509 and Wenkart v Pantzer [2008] FCA
478. They were recently discussed in ACN 079 638 501 Pty Ltd (in liq) (recs & mgrs apptd)
v Pattison5
where the Court held that although the appointments of the practitioner were
personal appointments in his capacity as liquidator, his work in progress belonged to his
practice company to which he had, in effect, ‘given up’ his remuneration. The proposed
section would simply be re-introducing these legal uncertainties based, as we have said, on
old law.
1.5.4 Purchase of assets
We have made comments earlier about alternative drafting in relation to this item. If the
current drafting is adopted, it would prevent a Practitioner from purchasing assets of the
company without the consent of the Court. However, we suggest this is unreasonable if the
appointment is a retail operation where any assets can be purchased in the ordinary course
at normal retail prices. The IPA Code contains similar prohibitions on practitioners and on
their staff but includes an exception for retail operations. The wording of the IPA Code has
previously been provided to you.
1.5.5 General
As we have said, we raised both these issues with you during the stakeholder consultations.
We would be pleased to offer comments on any redraft of these provisions.
5
[2012] VSC 445
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 4 1.6 Role of Contributories
We have pointed out in earlier submissions that there is generally no policy or legal reason
for involvement of contributories in creditors meetings or committees, unless they have a
financial interest in the administration, which is rare.6
This should particularly be the case
with the convening of committees of creditors under s 548 of the Corporations Act.7
As we
pointed out in our discussions, section 28-15, as one example, retains the need for
contributories to be involved. We understand you are reconsidering this as a general issue.
1.7 Terminology
There should of course be consistency in describing certain terms in the Bill. One example
we raise is in relation to remuneration [of a practitioner] and expenses [or disbursements,
that is, moneys paid by the practitioner for the purposes of the administration such as
advertising costs, search fees, legal costs, agents fees etc] and costs [being legal costs
ordered by a court to be paid].
The Bill is presently inconsistent in the use of these terms. For example section 32-23
refers to “remuneration, costs or expenses which the liquidator is appointed to review ...”.
Section 28-50 refers to “costs in relation to meetings of creditors” but under section 17-5
the court may order that a person’s “costs” of and incidental to a court application be paid
by another person. We make this point here and do not separately comment on the
sections in the Bill where these inconsistencies arise.
Another example is the use and meaning of the word “convene” on which we have
commented in the schedules below.
We agree with the removal of the bankruptcy definition of “working days” and the use of
“business days”; although there can be difficulties with that approach (different states have
different holidays) we ask that this term be used consistently.
2 Schedule 1 – Uniform insolvency practice rules
2.1 Schedule 2 – Insolvency practice rules
2.1.1 Part 2 – Registering and disciplining practitioners
Section IPA Comment
Division 8 – Registering Trustees / Liquidators
8-15, 8-50 The word “convene” should be defined and its meaning made clear given that
the convening of a committee must happen within a set period of time. See
Burke v IGB [2013] FMCA 2.
8-20, 8-55 Six months is too long. We suggest 3 months.
8-25 We suggest 45 business days is too long; we suggest 20 days.
We query how the committee may be satisfied that insurance will be taken
out; we suggest it is enough that this insurance is in fact taken out when the
practitioner is registered – see 8-35. We therefore suggest that (4)(b) be
deleted.
Division 10 - Insurance
10-5 (2)(b) we suggest this should say “specified class of registered
trustees/registered liquidators”?
6
See s 514 Corporations Act and following sections.
7
See the decision on s 548 in Jindal Transworld Pty Ltd, ScottsdaleHomesNo 10 Pty Ltd [2010] SASC 210.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 5 Division 14 – Notice requirements
14-5 (1)(i) – we suggest this should be limited to “material” information, otherwise
minor inaccuracies would need to be notified. In fact we think it more
appropriate that this issue – incorrect information in an annual return - be
either dealt with in Division 12, or removed to a separate provision other than
“Notice of significant events” in this Division.
Division 16 – Disciplinary and other action
16-10 While the Inspector-General in Bankruptcy (IGB) may withdraw a notice, if
the practitioner is for good reason unable to comply within 10 days, we
suggest it would be preferable to say “or such longer time as the IGB allows”?
16-50 This allows all acts of bankruptcy – see s 40(1)(a)-(o) BA – to potentially be
the subject of the IGB’s belief? If so, this is too broad.
16-55 The IGB should be required to convene a committee within a specified time,
say 1 month.
16-70 We suggest it is not reasonable to impose a condition on all other registered
liquidators or trustees as a disciplinary outcome of a particular liquidator or
trustee. Also, it does not serve rehabilitation of the banned practitioner
although we understand it may be used rarely. However, if the section is to
remain, we suggest that ASIC and ITSA would need to establish and maintain
a public register of those on a ‘banned’ list in order to assist practitioners to
comply with this requirement.
16-85 The referring industry body, which we assume would include IPA, should also
be notified by ASIC or IGB if any action is taken, and the outcome of that
action.
2.1.2 Part 3 – General Rules relating to estate/external administrations
Section IPA Comment
Division 22 – Remuneration and other benefits
22-10 (2) This section provides that the person first appointed as external administrator
is entitled to accrue remuneration not exceeding the default remuneration
amount of $5,500. There will be many instances where the person first
appointed will reasonably accrue remuneration in excess of the current $5,500
default amount. This limit should be removed.
22-10(3) We do not understand why the first appointed external administrator should be
entitled to a minimum of the default remuneration amount even if they have
not accrued that much remuneration prior to their replacement. An external
administrator should only be entitled to remuneration for work done which was
necessary and proper. If this is less than the default amount, then they are
only entitled to that lower amount.
22-20 (1)(d) – the word “external” is missing before the word “administration”?
22-30 The default amount should be expressed as $5,000 plus GST if applicable; or
use the wording in Bankruptcy Act s 161B.
Division 22 – Subdivision E – Duties relating to remuneration and benefits
General See opening comments at 1.5
Division 24 – Funds handling
24-10 An external administrator should not be limited to opening only a single bank
account. The word single should be removed.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 6 The account should be required to be opened within 5 days of moneys coming
into the administration, not 5 days of appointment.
24-20 The law should not go to the detail of allowing payment by cheque, requiring
the company name on it, and then requiring the administrator to personally
sign it: we suggest delete (2) and (3).
24-35 The law should not go to the detail of requiring a receipt to be issued and
obtained: we suggest delete the section.
24-40 This section does not accord with the nature and definition of ‘securities’ [s 9].
We suggest delete and leave it as a matter of good financial practice.
Division 26 - Information
26-10 (3) More time should be allowed for completion of the annual return for
eed to notify if this is an annual requirement. In any
vent, we assume that (4) means that no notice need be given if no further
tistical purposes.
corporate insolvencies.
(4) There should be no n
e
communications are needed with members, creditors etc.
Receivers should also be required to lodge annual administration returns to
ensure completeness of information for public record and sta
26-15 )(a) The law should not go to the detail of where the books are to be kept – (2
they may be stored off-site, or may be in a cloud. We suggest delete.
26-25 The costs are incurred because of a decision by ASIC – they are not expenses
incurred by a relevant authority under s 556(1)(dd). (5) gives them no
priority. We suggest that this provision be redrafted.
26-40 We suggest “5 business days or such further period as agreed”, or “as soon as
practicable”. This would align with section 26-42(3)(4) which allows ASIC to
transfer books “as soon as practicable”.
26-45 (3) We do not agree that the company is the correct party to approve the
early destruction of books and records in a Voluntary Administration or Deed
of Company Arrangement. On conclusion of a successful Deed, the books and
records will largely be returned to the company to do with as it wishes. Any
books retained by the Practitioner should be subject to the direction of the
creditors.
Subdiv D Giving information to creditors
General of
ill be in the regulations, which we have not seen.
Generally, any comments we make here are qualified by the fact that much
the detail w
26-50 –
26-60
The term ‘provide a report’ probably means ‘prepare and provide a report’
It would be
better to say "... prepare a report; or (c) produce a document". This needs to
e
although the clearer wording of ‘prepare a report’ is used for example in
section 421A Corporations Act and section 189A Bankruptcy Act.
be made clear also because the cost of providing / preparing a report may b
payable – 26-60.
26-50 and
26-55
These two sections could be folded into one section.
26-57 and could be folded into one section.
26-59
These two sections
26-60 (3) There needs to be a “reasonableness” test in relation to the alterations
that can be made to the requirements under the regulations by the creditors
or members.
26-65 The section should say who must pay for the work done in providing the
information.
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 7 Division 28 - Meetings
General ince
are already prescribed in Part 5.3A?
We query whether this Division should apply to voluntary administrations s
two meetings
28-10 “Convene” should be defined – see Burke v IGB [2013] FMCA 2.
28-15 A “reasonableness” qualification should be introduced similar to 26-50(3) for
situations where the administration is without funds and/or the practitioner
e
g new to
tary
e
bers’ voluntary liquidations.
considers that the request being made by the creditors/COI is unreasonabl
(for example a meeting was only recently held and there is nothin
report to creditors). There needs to be a balance between the rights of
creditors and not allowing those rights to be abused to the detriment of the
administration and the practitioner.
(2) There should be no role for contributories except in a members’ volun
liquidation, in which case the term members should be used and the referenc
should be specifically limited to mem
28-25 he term “signed writing” is old practice and terminology – the appointment T
may for example be by email. We suggest “in writing”.
28-40
e it is
of remuneration.
the
We suggest this should be broadened to say that a notice may include a
proposal about remuneration plus another proposal. This is becaus
current practice for a Practitioner to always deal with remuneration whenever
he or she is calling a creditors’ meeting, so that another meeting does not
have to be held in the future simply to deal with the issue
The same principle applies in respect of meetings by resolution.
There should be a requirement for creditors to lodge a statement of claim prior
to being able to vote and a process for the practitioner to be able to assess
creditor’s right to vote, just as there is with a physical meeting.
28-42 and
28-43
eeting the
asons for the use or not using the casting vote. The requirement in the
regulations is merely to include reasons in the minutes (reg 5.6.21(4A)). The
The current section does not require the chair to explain to the m
re
section should require the chair to give reasons to the meeting to assist
creditors with decision to challenge a resolution under these sections.
Division 30 – Committees of creditors
30-10 There is no need for separate or any meetings of contributories.
Is it intended that these requirements for a Committee of Inspection (CO
replace the current requirements for a committee of creditors in a volu
I) will
ntary
administration? If not, then voluntary administrations should be excluded
from 30-10.
30-30 This is unwise – it allows the committee to incur expenses and then have
ose expenses given priority over creditors under s 556. This could also
se available to pay a dividend to creditors are used for
e
oner has no involvement in the COI advice process.
th
mean that funds otherwi
COI expenses. The practitioner may be put in a position where they have
advised creditors that a dividend is to be paid, and then be unable to pay it
due to outstanding COI expenses. The practitioner may be unaware of thes
as the practiti
Further, what is the position if there are insufficient funds in the external
administration to cover these costs? We suggest that there be a
reasonableness test associated with these expenses.
30-35
tor
ho has a member on a committee. Both 30-35(5) and (8) prohibit, without
eave of the Court, the purchase of administration assets. However, there is
There should be a general duty provision.
30-35(5) deals with a member of a committee. 30-35(8) deals with a credi
w
l
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 8 an exception for members under (5) set out in (6) and (7) which allows th
creditors to resolve otherwise but the member of the COI cannot v
is no exception like this for the creditor under 30-35(8) – there s
e
ote. There
hould be no
difference in treatment.
Division 32 - Review
32-15(4),
p 148, p
69
ty is more appropriate.
ote also the issue of COI expenses referred to above at 30-30.
It is not clear whose expenses are associated with the request but we assume
it is meant to be the committee member’s.
In bankruptcy [p 69 of the Bill], the expenses are taken to be expenses of the
administration of the estate, which have high priority under s 109(1)(a). In
corporate [p 149] the expenses are taken to be expenses incurred by a person
as a member of the committee, which have lesser priority under s 556(1)(df).
We think the lower priori
There should be a “reasonableness” qualification on the amount and type of
expenses.
N
32-20
n the issue of COI expenses referred to above at 30-30.
This is expressed very broadly – it should be narrowed to deal only with
practitioner conduct issues.
Para (4)(e) “any other order ...” is superfluous
(6) Note agai
32-20A This should apply also in bankruptcy, for the sake of alignment.
32-22 d include not only the cost of the review [if this refers to
on and expenses] but also from where the costs are to be paid
(4)(8) This shoul
remunerati
32-23 A reviewing liquidator should be required to sign a consent to act and provide
a DIRRI prior to being appointed by creditors.
32-24 We will need to see the regulations to comment on this properly, however,
do note that the review period of 6 mo
we
nths at (4)(d) is probably not sufficient.
here will be many instances where the Practitioner may be seeking
six months. The entirety of
ew while the
dministration is ongoing. However, once the administration has been
view
.
T
remuneration approval for a period of more than
the appointment should be potentially subject to revi
a
completed, there should only be a limited time for any application to re
remuneration to be made. This is where 6 months may be appropriate
32-35 (1) To ensure continuity of the external administration, the removal of the
be
ator
must be voted in immediately at the same meeting (ie. the meeting cannot be
ting prior to any resolutions
incumbent liquidator and appointment of the replacement liquidator should
made in the same resolution. If this is not possible, the replacement liquid
adjourned). The replacement liquidator must have already consented and
must provide a DIRRI which is tabled at the mee
being passed. If a replacement cannot be made at the immediately at the
same meeting, the incumbent remains in place until a replacement liquidator
can be appointed. The incumbent and proposed replacement liquidators
should have the right to speak at the meeting.
(3) a creditor should also be able to apply.
(4) do costs include remuneration and expenses?
Division 42 Other matters
42-4 (1) Contributories should not have a role.
Para (a) and (b) may be read as confining the range of directions that may be
given, which we assume was not intended. The equivalent bankruptcy section
(p 74) simply and correctly says, “in relation to the administration of the
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 9 estate”. Comparable wording should be used in corporate, ie, “in relation to
the external administration”.
42-10
lation to family law claims to
Law Act.
(1) We assume it is not meant to be confined to rights to sue under the
Corporations Act?
Consideration should be given as to whether the consent of creditors is
required prior to assignment.
An unintended consequence could arise in re
which a trustee is a party under s 79 of the Family
3 dments
3.1.1 u
Section
Schedule 2 – Further Amen
Part 1 – Reg lator Powers
IPA Comment
Bankruptcy
Act at the
end of s 12
rmation in the same way as ASIC.
We suggest to add “(5)(c) a prescribed professional body” to allow the
Inspector-General to share info
3.1.2 Part 2 – State of affairs etc
Section
ments and reports
IPA Comment
206BB dge
of information
and funds, thereby releasing the director from any period of disqualification.
Also, the extended period of time to undertake the process under the section
means that the director would not even reach the point of being disqualified in
We consider that this is flawed at subs (7) in that if a director refuses to lo
a RATA, the administration may be finalised early due to a lack
such a case.
3.1.3 Part 3 – Miscellaneous
Section IPA Comment
497 The liquidator is required to send to each creditor various information,
including a summary of the company’s affairs, within 5 business days after
their appointment (497(1)). However, the directors are only required to
provide a report as to the company’s affairs (RATA) to the liquidator also
ointment of the liquidator. The liquidator will
require access to the directors’ RATA in order to complete their summary of
ffairs and yet insufficient time is currently provided in the
within 5 business days of the app
the company’s a
proposed new s 497. The timing requirements need to be altered to allow the
liquidator sufficient time to prepare and send the summary after receipt of the
RATA.
4 Contact
these comments and to have assisted in the earlier discussions. The
IPA remains available and interested to assist in the finalisation of the Bill, and in the
We are pleased to offer
Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 10 Insolvency Practitioners Association – Submission – Insolvency Law Reform Bill 2013 - Page 11
consideration al
President
of the regulations and subsequent legislation. Please contact the IPA’s Leg
ael Murray, 02 9080 5826, for this purpose.
y
Director, Mich
Yours sincerel
Robyn Erskine
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