Written by Hiteshi Dekhtawala in April, 2011

With ASIC’s renewed focus in the area of Liquidator compliance; ASIC is continuing to undertake a number of projects to assess Liquidator compliance with their legal obligations and to assist them to improve overall industry performance. Amongst various projects undertaken by ASIC, this article will discuss the Liquidator Surveillance Project.

ASIC is engaging in this project to attempt to raise industry standards, and to seek to protect the interests of Creditors in any Insolvency Administration. As part of this process, ASIC is currently making visits to the insolvency practices and reviewing certain matters of the Liquidators conduct, the details of which are discussed further below.

Since April 2010, ASIC has conducted 18 practice reviews nationally. The focus of these reviews are discussed under the headings listed below:-

A. Practitioner Independence

Part of the review by ASIC seeks to ensure that for the insolvency appointments reviewed, the Liquidator is free from any:-

1. Biases towards any person or group;
2. Close personal or business relationship with any person involved in the insolvency where that relationship would lead someone to suspect that they would favour the interests of that person; and
3. Position where their own personal or private interests conflict with their duties in the insolvency appointment.

B. Remuneration Disclosure and Approval

ASIC is also seeking to ensure that Liquidators adopt sound remuneration practices, and their investigations seek to establish that:-

1. Well-documented files with sufficiently detailed timesheet entries are maintained;
2. Timely and well documented practitioner review procedures are in place to assess reasonableness of time charged and time written off; and
3. Regular reviews of administrations within the first 6 months to ensure timely and efficient completion of tasks.

C. Quality of Investigations

ASIC are also reviewing practitioner conduct to ensure that the quality of investigations conducted by the Liquidator, are correct and are done in a manner which will benefit the Administration.

D. Reporting to Creditors and to ASIC

ASIC is also reviewing the matters to establish if regular updates are being forwarded to Creditors, and ASIC (as may be required), so as to keep the stakeholders abreast of the progress of the matter.

As part of this process, ASIC are also seeking to determine if jobs are being left open for no apparent reason.

In addition to the Practice Reviews, ASIC is also responsible for conducting transactional reviews. Transactional reviews are reviews of matters of grievance which have been reported to ASIC.
In addition to the specific practice visits, since 1 January 2010, ASIC has dealt with, or is dealing with, in excess of 90 transactional reviews.

Transaction reviews typically involve ASIC acting upon complaints received from the public or other sources of information in relation to a practitioner’s conduct in respect to a specific external administration.

Outcomes of transaction reviews can include:

1. Writing to the Liquidator and obtaining an explanation of possible concerns identified by ASIC;
2. Taking action due to the seriousness and immediate nature of the conduct (e.g. independence/conflict concerns, capacity concerns);
3. Commencing a surveillance visit where it appears, on available information, that a Liquidator’s conduct may be of a serious or systemic nature; and
4. Deciding to take no further action where the Liquidator has taken steps to address ASIC’s concerns and/or it appears, based on available information; the liquidator is adequately and properly performing their duties.

It comes as no surprise to many that the conduct of some of our fellow practitioners of recent time has done nothing to foster a positive image of our profession. If the reviews by ASIC result in better practices being adopted across the industry, it can only be seen as a good thing for the profession, creditors, and the stakeholders.

PLEASE NOTE:  All information contained in the articles below was correct at time of publishing.