FAQs Code of Professional Practice (2nd edition)

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Separation of Resolutions

The IPA Code specifically notes that separate and distinct summary of major tasks tables must be provided for each fee request (retrospective and prospective).  For the purposes of clarification, it is also expected that separate resolutions be proposed for each of the tables provided.  This requirement applies to both corporate and personal appointments.

Prospective fee approval relates to any approval sought for time based fees where details of the actual time spent cannot be provided at the time of reporting to creditors (i.e. future from the date of reporting not the date of the meeting).  Specifically this includes Voluntary Administration fees from the end the retrospective fee period (i.e. when the report was prepared) to the date of the s439A meeting. 

In practical terms, this means that a remuneration report issued by a Voluntary Administrator may encompass up to five resolutions as follows:

• Time Based charging (retrospective) from commencement to s439A report;
• Time Based charging (prospective):
  • Voluntary Administrator fees from s439A report to s439A meeting;
  • Voluntary Administrator fees from s439A meeting to execution of DOCA (if one proposed) (It is not appropriate to combine this with the prospective approval to the s439A meeting as the specified major tasks and remuneration will only be applicable if a DOCA is accepted);
  • Future Liquidator fees; and
  • Future Deed Administrator fees (if one proposed).

Each of these resolutions must comply with the reporting requirements (including a summary of the major tasks), despite the fact that not all resolutions may be proposed at the meeting. 

Added: 15 May 2013

Disclosure of relationships in Consents for appointment as Liquidator by the Court

Liquidators are required to provide a consent to the Court when consenting to act as liquidator in a Court Liquidation.  As part of that consent, the liquidator is either required to make a declaration that either:

• he or she is not aware of any relevant relationships mentioned in section 60(2) of the Corporations Act (which are essentially the relationships required to be disclosed by a CVL liquidator in their DIRRI), or
• he or she has had within the preceding 24 months, the relevant relationships mentioned in subsection 60(2) of the Corporations Act (and disclose details of any such relevant relationships).

So although a DIRRI itself is not required to be lodged, the same information as is required in the DIRRI, needs to be provided by a prospective liquidator when consent to act in a court liquidation.  As such, the full independence check needs to be done, and the information identified as part of that process incorporated into the consent.

A DIRRI is required to be provided by the court liquidator after his or her appointment in their first communication with creditors pursuant to 6.15 of the Code.  For further information about the nature of disclosure in DIRRIs for Court Liquidations, refer to the FAQ below "Court Appointments and Disclosure in the DIRRI".

Added: 10 December 2012


GEERS Remuneration 

For the purposes of clarification, the IPA takes the view that the funding received from the Department of Education, Employment and Workplace Relations (DEEWR) in relation to GEERS distributions undertaken by appointees is a limited or partial funding agreement.  As such, where higher fees are incurred than the amount agreed with DEEWR there is no restriction in the administration being charged for the shortfall on the basis that all remuneration claimed is necessary and properly incurred in accordance with the IPA Code. 

While the money received from DEEWR is not subject to creditor approval and can be paid directly to the practitioner (without the need to report it on the administration’s Form 524), any shortfall must be appropriately approved in accordance with the Corporations Act prior to drawing.  In seeking creditor approval for any shortfall, the IPA recommends that specific disclosure of the total time charged, DEEWR receipt(s) and shortfall amount be made in the remuneration report.

Practitioners must ensure that they do not “double dip” in relation to GEERS remuneration and that the amount received from DEEWR is allocated to the administration.  To facilitate this the IPA recommends that members ensure that any work undertaken in relation GEERS distributions is appropriately identified in their time recording system, including an adjustment for any direct payments from DEEWR. 

Future Remuneration – calculation of remuneration matrix for corporate matters

Clarification was requested regarding the inclusion of a remuneration matrix detailing the time to be spent by each staff member at each task category in a remuneration reports when seeking prospective fee approval (“remuneration matrix”).

The Corporations Act requirements in relation to fee approval only requires a summary description of the major tasks performed, or likely to be performed, in the administration and does not refer to the inclusion of a remuneration matrix.  The pro-forma Remuneration Report included in the IPA Code provides a recommended format for the description of the work completed/to be completed (noting that this must be specifically tailored for each resolution) and mandates the use of the remuneration matrix only for retrospective fee approval.  The use of the remuneration matrix for prospective fees is optional.

Clarification of pro-forma Remuneration Report

Based on feedback received regarding the Approval Request Report Pro-forma document included in section 23.2.2 of the Code of Professional Practice, the following changes are now recommended for inclusion when issuing remuneration reports to creditors:

• Declaration updated to more accurately declare account for prospective fee approval by referring to work properly performed, or to be properly performed;
• Inclusion of an executive summary detailing past approval obtained and an easy to understand summary of the resolutions covered by the report.

 The suggested format for both of these changes in provided below.

Part 1: Declaration

I, [name, firm] have undertaken a proper assessment of this remuneration claim for my appointment as [liquidator/administrator/trustee] of [company/bankrupt], in accordance with the law and applicable professional standards. I am satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the Administration.

Part 2: Executive Summary

To date, [no remuneration/remuneration totalling $[amount]] has been approved in this administration.  This remuneration report details approval sought for the following fees:

Period [Suggestion only – delete or add details as appropriate]	Report Reference	Amount (ex GST)
Past remuneration approved		$[amount]
Current remuneration approval sought:
Voluntary Administration
Resolution [#]: [date from] – [date to]	[X]	$[amount]
Resolution [#]: [date from] – [date to]*	[X]	$[amount]
Resolution [#]: [date from] – signing of the Deed of Company Arrangement (if applicable)*	[X]	$[amount]
Total Remuneration – Voluntary Administration *		$[amount]
Deed of Company Arrangement (if applicable)
Resolution [#]: Commencement of Deed of Company Arrangement to [completion/milestone/date] *	[X]	$[amount]
Liquidation (if applicable)
Resolution [#]: Commencement of liquidation to[completion/milestone/date] *	[X]	$[amount]
* Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the administration.  Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors.

 
Please refer to report section references detailed above for full details of the calculation and composition of the remuneration approval sought.

This is consistent with the estimate of costs provided in the Initial Advice to Creditors dated [date], which estimated a cost to completion of the administration of $[amount](excluding GST).

Added 9 August 2012

Risk Management

The reference to N3 in Chapter 20 Risk Management should be replaced by APES 325 which comes into effect on 1 January 2013.

^{Added: 23 February 2012}

The reference to Australian Standard AS 4360 in Chapter 20 Risk Management should be replaced by AS/NZS ISO 31000:2009.

^{Added: 24 January 2011}

Court Appointments and disclosure in the DIRRI

The DIRRI requires disclosure of the circumstances of the appointment.  The Code focuses on appointments by directors and does not provide any guidance on situations where a Practitioner is appointed by the Court.

It is suggested that in the “circumstances of appointment” section of the DIRRI that the following points are addressed for Court appointments:

·        The name of the petitioning creditor;

·        When you consented to act; and

·        The reason that the consent does not result in a conflict of interest or duty.

Examples of disclosure wording:

I was appointed Liquidator of ABC Pty Ltd (in Liquidation) by the Court on the application of Creditor Pty Ltd.  I consented to act as liquidator on the request of Creditor Pty Ltd’s solicitor on 1 January 2011.  This consent does not affect my independence for the reason that the mere giving of consent to act, which is required by the law, does not result in any duty owed to that creditor that would conflict with my interests or duties under the Act.

OR

I am on the ATO panel to act as liquidator where the ATO is a creditor.  On 2 January I received the form of consent from the ATO which I signed and returned to the ATO.  This does not affect my independence for the reason that the mere being on a panel and giving of consent to act to a creditor, which is required by the law, does not result in any duty owed to that creditor that would conflict with my interests or duties under the Act.