ASIC Corporate Insolvency Update - Issue 14

Issue 14, December 2019


Complying with DIRRI lodgement obligations

Last year we reported that some registered liquidators (RLs) were not lodging their Declarations of Independence and Relevant Relationships and Declarations of Indemnities (DIRRIs) with us when required by the Corporations Act 2001 (Corporations Act).

We are currently identifying RLs who have not lodged Form 531 with a copy of their DIRRI. Subject to further review, we have identified approximately 150 instances of non-lodgement. 

RLs who were previously identified will be issued with a 'Direction to remedy failure to lodge documents’. If they do not comply with the direction, we may issue them with a ‘Direction not to accept appointments’ that will remain in force until the outstanding lodgements are remedied. 

We will write to RLs who were not previously identified, requesting they lodge the outstanding DIRRIs and explain why they had not lodged them. 

A voluntary administrator or liquidator must lodge a copy of their DIRRI with us ‘as soon as practicable’ after making the DIRRI: s436DA(4A) and s506A(3) of the Corporations Act, respectively. 

We believe 'as soon as practicable' should not be more than two business days after signing it.

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Reporting your remuneration in Form 5603

We have noticed inconsistencies in how registered liquidators (RLs) are reporting remuneration approved and drawn in Form 5603 End of administration return.

Consistent reporting is crucial to the quality of information. We suggest RLs consider including in the remuneration table: 

  • the remuneration that was determined/fixed by creditors, committee or court for the entire period of the appointment of the person lodging the form for each appointment type (including GST)
  • the remuneration paid for the entire period of the appointment of the person lodging the form for each appointment type (including GST)
  • disbursements paid for the entire period of the relevant appointment type (including GST).

We have seen RLs submit Form 5603 where:

  • only the remuneration and disbursements paid columns were completed, with a nil amount for the remuneration determined/fixed column. This gives the impression that remuneration has been drawn by an external administrator without proper approval and may be subject to review.

Note: Approval of creditors, a committee of inspection or the court is not required where the only remuneration drawn is the statutory maximum default amount or is funded through the Assetless Administration Fund (AAF) or by the Fair Entitlements Guarantee. In these circumstances, funds drawn will be greater than remuneration determined.

  • all remuneration is recorded against only one appointment type, when it should have been split between separate appointments. For example, if you paid voluntary administration and liquidation fees during the liquidation period, you should disclose these fees separately.

Where you are lodging Form 5603 as a controller (including receivers, receivers and managers and managing controllers), we request that you include the amount:

  • of remuneration paid in the ‘remuneration paid to date’ column
  • the appointor authorises you to draw in the ‘amount of remuneration determined/fixed’ column.

Regulatory Guide 109 Assetless Administration Fund: Funding criteria and guidelines provides further guidance to RLs about how to account for AAF remuneration.

While MYOB and Core software assists by automating much of the reporting and lodging requirements, RLs and their staff should also check the accuracy of their information before submitting it to us.

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On-charging IFM levy

Registered liquidators (RLs) are using different arrangements to recover the cost of the industry funding model (IFM) levy from external administrations.

It is important that RLs clearly explain to creditors the charging method(s) used, including how the amount claimed has been determined, so that creditors have enough information to decide whether the amount is reasonable in the circumstances of the external administration.

When seeking to recover the cost of the graduated component of the IFM levy, RLs are encouraged to consider:

  • providing enough information about how the amount being claimed is calculated and not simply state that an amount is to be recovered to cover the increased cost of the IFM
  • if the amount is reasonable given the circumstances of the particular external administration. For example, the number of metrics included in the graduated component of the levy will be different depending on the anticipated tasks to be performed for a particular external administration
  • obtaining creditor approval where the amount the RL seeks to recover is an estimate which may include a profit element, before they draw this amount
  • reviewing future years’ amounts (where the estimate includes amounts for the current and future years) at the time they are drawn against the costs for the relevant year. If published before drawing the expense, RLs should ensure the amount drawn is reasonable and reflects the actual cost or expense incurred.

Transparency in charging of the IFM levy will increase the likelihood of creditors approving it and decrease reports to ASIC regarding the validity or otherwise of the charges.

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Assetless Administration Fund

Assetless Administration Funding – Variations

Registered liquidators (RLs) are reminded to request a variation of a report due date or additional funding as soon as possible and before due date or additional funding is incurred. This will ensure that we consider and deal with the request in accordance with the terms of the agreement.

RLs should contact the action officer listed in the executed funding agreement if they have any inquiries. If the action officer is on extended leave, please contact Angela Mantas by emailing

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Changes to lodging statutory reports and Assetless Administration Funding requests

Lodging statutory reports with us and applications for Assetless Administration Funding and requests for ASIC’s assistance in an external
administration will move to the ASIC Regulatory Portal around March 2020, where you can access, complete, review and submit these forms.

The existing forms that will move to the ASIC Regulatory Portal are:

  • EX01 Initial ss533(1)/438D/422 report (initial statutory report)
  • EX02 Assetless administration funding request (s206 F ­- Director banning)
  • EX03 Assetless administration funding request (matters other than Section 206F - Director banning)

Other forms registered liquidators commonly use will remain in the Liquidator Portal.

The new initial statutory report will allow you to report illegal phoenix activity or suspicions about possible illegal phoenix activity.

We will provide guidance on how to submit the new forms within the ASIC Regulatory Portal.

Supplementary statutory report under sections 533(2)/438D/422 of the Corporations Act 2001 (supplementary report)

The supplementary reports you currently lodge with us as a free-form report (either as a funded report under the AAF or an unfunded report) will become an online form submitted in the Regulatory Portal. There will be a new form to enable you to provide notice you do not intend to supply a supplementary report.

There will be a new form to lodge your request for ASIC’s assistance in an external administration.

We consulted on changing the EX01 with ARITA, other government agencies, an academic and a group of technical directors in July 2018. This was followed by further consultation with ARITA on the initial statutory report and the supplementary report. We are currently working with our Regulatory Transformation Team who are finalising the building of the new forms.

We will provide further updates before the forms are launched.

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Pre-insolvency adviser jailed for money laundering

Former pre-insolvency adviser John Narramore has been sentenced to four-and-a-half years in prison, with a non-parole period of 20 months, at Brisbane District Court.

In October 2014, Mr Narramore, along with Stephen O’Neill of SME’s R Us, advised Richard Ludwig, a former director of Cap Coast Telecoms Pty Ltd, to engage in activity that would involve the illegal removal of company assets to prevent creditors from having access to these assets.

Mr Narramore and Mr O’Neill issued fictitious invoices from companies under their control to Cap Coast Telecoms and arranged for $743,050 to be transferred from Cap Coast Telecoms bank accounts to the bank accounts of companies under their control. Mr Narramore and Mr O’Neill then transferred the funds to Ludwig or his associates.

Once funds had been transferred by Mr Narramore and Mr O’Neill, Cap Coast Telecoms was wound up on 19 January 2019. At the time, it owed creditors $2,955,128.

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Liquidator Disciplinary Committee decisions

Committee referrals and decisions can be viewed here.

Recent reports and decisions include:

  • Michell Warren Ball – the Liquidator Disciplinary Committee sanctioned liquidator Mitchell Ball by imposing conditions on his registration
  • David Nicholas Iannuzzi’s liquidator registration was cancelled by ASIC on 12 November 2019 following ASIC’s receipt of sealed orders made by the Federal Court on 7 November 2019 in the matter of Commissioner of Taxation v Iannuzzi (No 2) [2019] FCA 1818. As a result of the cancellation the Committee is not able to make a decision on a referral ASIC made to the Committee with respect to Mr. Iannuzzi and will not consider the matter.

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Results of funds handling controls survey

The recent survey on risk management and control of business and bank accounts was completed by over half (55.4%) of registered liquidators (RLs) and indicates a high level of fraud awareness and training.

Seventy two percent of respondents indicated they would report actual or suspected fraud to ASIC.

The survey identified detection of fraud as an area of improvement for RLs. We encourage RLs to:

  • engage with their software provides to understand functionality and consider trialling add-ons that may enhance fraud detection capabilities
  • maintain training and engagement with the issues surrounding risks to EXAD funds.

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Quarterly insolvency statistics

Our insolvency statistics for the September quarter of 2019–20 financial year shows an increase in companies entering external administration (EXAD) of 10.2% from the previous quarter. Appointments totalled 2,309 compared to 2,095 in the previous quarter. The quarterly total was 5.8% higher than the 2018–19 September quarter (2,182).

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Last updated: 10/08/2021 08:53