ASIC Corporate Insolvency Update - Issue 27
ASIC reports on small business restructuring
Small business restructuring guidance
Statistics from external administrators’ and receivers’ reports updated
ASIC reports on small business restructuring
On 17 January 2023, ASIC published REP 756 Review of small business restructuring process which relates to restructuring practitioner appointments from 1 January 2021 to 30 June 2022 (review period).
The report outlines the findings from ASIC’s review of the ASIC company register and ASIC lodgement data/information for all 82 small business restructuring practitioner appointments which commenced in the review period, and the outcomes of those restructurings to 30 September 2022.
For more information, please see Media Release (23-007MR) ASIC reports on small business restructuring.
Small business restructuring guidance
For ASIC systems to correctly record the transition from acting as a restructuring practitioner of a company (RP) to the restructuring practitioner of a restructuring plan (Plan Practitioner) relevant forms need to be lodged in a certain order.
When transitioning from acting as an RP to a Plan Practitioner, the RP should only lodge Form 505 Notification of appointment or cessation of an external administrator to record their appointment as a Plan Practitioner. The Form 505 will automatically cease the previous role as RP and record the new role as a Plan Practitioner on the same day.
The appointment as Plan Practitioner must be recorded in ASIC’s database before the Plan Practitioner can lodge Form 5612. Once the RP has lodged Form 505 to commence the role as a Plan Practitioner, they will be able to lodge Form 5612 Notice of making of restructuring plan.
The Plan Practitioner must include a copy of the restructuring plan when they submit Form 5612 — otherwise they may not be able to proceed with the lodgement.
Following the cessation of the restructuring, RPs must lodge Form 5603 End of administration return within one month after ceasing the role of RP. Any funds the RP received and paid out are recorded in this form. Typically, this could include funds received for remuneration and the subsequent payment of remuneration. Where an RP’s software doesn’t capture these transactions, the RP should use the Microsoft Excel template to populate the form. If there were no such transactions, the return would be a nil return.
Similarly, when a Plan Practitioner ceases the restructuring plan, they must lodge a Form 5603 End of administration return within one month after ceasing the role of Plan Practitioner. In compiling REP 756 Review of small business restructuring process, we noted that there were instances where entries did not match—for example, disclosing in the remuneration section of the form that the Plan Practitioner was paid remuneration when there were no corresponding entries in the receipts and payments section, or the dividend section did not disclose that a dividend was paid but there were entries in the receipts and payments section. When completing the form, the Plan Practitioner should take care to ensure the amounts in the form reconcile to each other.
Statistics from external administrators’ and receivers’ reports updated
On 13 January we released on our website Excel workbooks covering the three-year period 2019–20, 2020–21 and 2021–22 for the following statistical series:
- Series 3.1: External administrators’ and receivers’ reports for Australia—selected tables are provided by region and all industries
- Series 3.2: External administrators’ and receivers’ reports for selected industries
- Series 3.3: External administrators’ and receivers’ reports time series—a comparison of the totals for selected tables are provided as a time series by financial year, from 1 July 2004 to current.
The workbooks profile corporate insolvency in Australia from reports lodged by external administrators and receivers (Form EX01 up to 27 March 2020 then the initial statutory report (ISR) from 28 March 2020).
As part of ASIC’s priorities for the supervision of registered liquidators in 2022–23 we are reviewing further currently unpublished data with a view to publishing additional tables for these statistical series in the 2022–23 financial year.
Notice of significant events
Registered liquidators (RLs) must notify ASIC by lodging paper Form RL30 if any of the following events occur:
- the liquidator becomes an insolvent under administration
- a bankruptcy notice is issued to the liquidator as a debtor under the Bankruptcy Act 1966 (Bankruptcy Act) or a corresponding notice is issued to the liquidator as a debtor under a law of an external Territory or a law of a foreign country
- the liquidator is convicted of an offence involving fraud or dishonesty
- the liquidator is disqualified from managing corporations under Part 2D.6 of the Corporations Act 2001 or under a law of an external Territory or a law of a foreign country
- the liquidator ceases to have adequate and appropriate professional indemnity and fidelity insurance against the liabilities they may incur working as a registered liquidator
- the liquidator is issued with a notice under section 40-40 of Schedule 2 to the Bankruptcy Act (a show-cause notice) by the Inspector-General
- the liquidator’s registration as a trustee under the Bankruptcy Act is suspended or cancelled
- any other event prescribed (at present there are no events prescribed).
See section 35-1 of the Insolvency Practice Schedule (Corporations).
Form RL30 must be lodged within five business days after the registered liquidator could reasonably be expected to be aware that the event has occurred. It is an offence if a person intentionally or recklessly fails to comply with the requirements of section 35-1.
A Form RL30 lodged with ASIC is not publicly available.
Creditor participation using virtual meeting technology
ASIC has received reports from creditors who are concerned that they have been unable to fully participate in meetings held using virtual meeting technology (VMT). This is a requirement for meetings held using VMT: see section 75-75(1) of Insolvency Practice Rules (Corporations) 2016 (the Rules).
Section 9 of the Corporations Act 2001 defines VMT as ‘any technology that allows a person to participate in a meeting without being physically present at the meeting’. So if any person attends the meeting by telephone, the meeting would be held using VMT.
Section 75-75(3) of the Rules permits voting at meetings using VMT to be taken on a show of hands unless either:
- the notice of meeting specifies that votes taken at the meeting must be taken on a poll, or
- a poll is requested by the person presiding at the meeting or by a person participating and entitled to vote at the meeting.
Section 5-5 of the Rules defines a vote taken on a show of hands to include a vote taken using any electronic mechanism that indicates the intention of a person in respect of the vote.
We ask registered liquidators (RLs) to consider how meetings they are conducting using VMT allow creditors to fully participate when they are not physically present.
Questions to consider include:
- are all creditors being given adequate opportunity during the meeting to ask questions about the conduct of the external administration? If so, when and how are creditors being given an opportunity to ask questions?
- if discussion is brought to an end by the person presiding at the meeting, what processes are in place to respond to any further questions creditors might have?
- are all creditors being given the opportunity to ask questions about resolutions put to a meeting and informed of the process about requesting a poll before the vote is taken?
- how are creditors provided with the opportunity to view documents that are tabled at the meeting?
Section 75-75(7) of the Rules gives some examples of how documents can be tabled and made available to creditors attending the meeting, including:
- giving a copy of the document before the meeting
- giving a copy of the document during the meeting
- screencasting the document to attendees.
To avoid potential future challenge to business conducted at a meeting held using VMT, RLs should ensure all creditors are given the opportunity to fully participate in the meeting, including having appropriate access to tabled documents.
Media releases
Below are our most recent media releases related to corporate insolvency:
23-039MR ASIC prosecutes 81 individuals for failing to assist registered liquidators
23-014MR Victorian director disqualified from managing corporations for three years
22-372MR ASIC seeks to preserve property of former Youpla Group director
Insolvency statistics
Insolvencies have increased 66.2% for the current financial year to 26 February 2023 compared to the same period last financial year.
Comparing 2022–23 financial year to 26 February 2023 to the equivalent base year period (an average of the three financial years 2017, 2018 and 2019, pre-COVID), we see that insolvencies are down 6.2% on base level.
All appointment types other than court appointed liquidations are now at or above base level. Court liquidations remain only marginally above the lows experienced during COVID.
More information about ASIC insolvency statistics is available.
Contacts
Email support and contact details for ASIC team members for each state are available on the Contacts page.