ASIC Corporate Insolvency Update - Issue 33

Issue 33, September 2024

ASIC appoints 15 members to new Reviewing Liquidator Panel

We have appointed 15 suitably qualified and experienced registered liquidators to ASIC’s new Reviewing Liquidator Panel, effective from 1 July 2024. This follows the expiration of term of the previous panel, which was in place from January 2019 to June 2024.

ASIC can appoint registered liquidators to act as a reviewing liquidator to a company in external administration under section 90-23 of Schedule 2 of the Corporations Act 2001. These appointments are funded through the Assetless Administration Fund (AAF). We advertised the AAF grant opportunity in December 2023, seeking between 10 and 20 registered liquidators to be appointed to a new Reviewing Liquidator Panel under rigorous eligibility and selection criteria. Applications closed in February 2024 and we received some very strong applications.

The Reviewing Liquidator Panel will run over five years from July 2024 to July 2029. ASIC has two options at its sole and absolute discretion to extend the panel. Each option allows ASIC to extend the panel for 12 months.

For more details, please see the Reviewing Liquidator Panel members page on the ASIC website.

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Stay alert for signs of family and domestic violence when conducting external administrations

Content warning: The following article discusses family and domestic violence. We encourage you to use your discretion whether you wish to continue reading.

It is important for registered liquidators to be mindful of signs of potential family and domestic violence when conducting an external administration.

Any behaviour that is violent, threatening, controlling, or is intended to make a person or that person’s family feel scared and unsafe, can be considered as family and domestic violence.

During your work, you or your staff may identify economic abuse. This type of abuse goes largely unreported. The victims are primarily women, and such abuse can occur through company directorship. Abusive partners can coerce their spouse or partner into becoming a co-director or sole director of a company and signing documents while denying them any decision-making powers or access to financial information. Victim survivors are often left to bear liability for breaches of directors’ duties, including severe penalties, significant debts (incurred without their knowledge) and bankruptcy.

To find support, information and counselling for anyone who may be experiencing family and domestic violence, please visit the Help and Support page on the Department of Social Services website.

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Liquidators should understand and comply with any registration conditions imposed

Liquidators may have specific conditions imposed on their registration in addition to the conditions imposed on all registered liquidators. We monitor all specific conditions imposed by a committee, whether imposed on initial registration or because of disciplinary decisions.

For example, a registered liquidator may have the specific condition imposed that they can only consent to and take appointments on a joint, or joint and several basis. A registered liquidator with this condition needs to understand, for instance, how the condition interacts with the definition of ‘external administrator’ under section 5-20 of Schedule 2 of the Corporations Act 2001 and only accept appointments on a joint or joint and several basis.

We expect all registered liquidators to have sufficient knowledge to understand and comply with all registration conditions, including any specific condition imposed by a committee. Under section 40-40(1)(e) of Schedule 2, we may issue a show cause notice to a registered liquidator if they breach a current condition imposed on their registration.

If registered liquidators are uncertain how any of their registration conditions operate, they should seek independent advice on the proper operation of the conditions.

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Appropriate quoting process for assetless administration funding agreements

When considering an application for assetless administration funding that is not an application for director banning funding (fixed fee), we will send a draft agreement (including a draft scope of work) to the applicant for consideration and provision of quotes.

We require sufficient information to assess the quote and determine whether it is fair, reasonable, appropriate and well considered. The draft agreement contains a list of high-level tasks to be completed. However, we expect the applicant to also carefully and individually consider time cost when preparing the quote, including the amount of time and the appropriate level of staff required to complete each task. 

We also require the applicant to provide sufficient detail in the quote about any disbursements being sought, including providing an explanation about the need for the disbursements and how the relevant amounts were determined. Where disbursements include legal disbursements and quotes from the applicant’s proposed legal team, providing the details of the legal team’s quote (and any legal disbursements that they include) will enable ASIC to properly consider the funding request.

Providing this information will help ASIC determine in a timely manner whether the quote should be approved. We appreciate applicants providing these details in response to the initial request for a quote without additional prompting, as it will help expedite the process.

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Common lodgement queries from registered liquidators

Below are some common lodgement queries we have received from registered liquidators.

The liquidator portal is not working, and I am concerned my paper lodgement will incur late fees due to postage delays.

Portal outages are generally momentary. We recommend you wait for a short time and try lodging again. If the outage persists, making it necessary to make a paper lodgement, you should:

• keep a soft copy of the posted lodgement
• keep a record of when the lodgement was posted (including any tracking information), and
• email RLQueries@asic.gov.au to notify us.

If a late fee is incurred, you may consider seeking a fee waiver. 

What are my lodgement obligations in relation to Deeds of Company Arrangement involving a group of companies?

Unlike in a liquidation, there is no statutory provision to allow pooling of companies subject to Deeds of Company Arrangement (DOCA). While each company in a group may be subject to the same deed, with assets and liabilities pooled for the purpose of the deed, each company is a separate external administration. In these circumstances, registered liquidators must lodge an individual Form 5602 Annual administration return for each company in the group, even if all the forms contain the same information.

Registered liquidators should maintain adequate systems to notify them when lodgements are due and to identify any outstanding lodgements so they can be addressed in a timely manner.

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ASIC action to disqualify company directors

ASIC’s power to disqualify directors is set out in section 206F of the Corporations Act 2001. The provision protects the public and companies from the conduct of a person who has demonstrated an inability to manage corporations.

We contributed an article on this topic to the Credit Management in Australia magazine. The article, titled ‘ASIC action to disqualify company directors’, can be found in our Newsroom.

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Useful resources for small business

In January 2024, the Australian Taxation Office (ATO) launched free online resources to support the learning needs of small business.

There are over 30 short courses for small businesses and taxation professionals to share with their staff and clients. Registered liquidators and their staff may also find the resources useful to share with their networks.

The self-paced courses contain accurate, timely information to improve taxation and superannuation knowledge and day-to-day business and financial understanding. The courses cover the different lifecycle stages, from start-up through to changing or closing a business.

For more information, visit the Essentials to strengthen your small business page on the ATO website.

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ASIC updates misconduct reporting guidance for external administrators and controllers

On 5 September 2024, we released our updated Regulatory Guide 16 External administrators and controllers: Reporting of possible offences and misconduct (RG 16).

The updates to RG 16 follow an extensive consultation process that included targeted industry roundtables to seek input into our proposed changes.  

Report 793 Response to submissions on CP 377 Guidance for reporting by external administrators and controllers (REP 793) provides detail on responses to the submissions received during the consultation process.

Our responses to the key issues raised by respondents in CP 377 included:  

• creating a dedicated contact point for external administrators and controllers to raise questions with ASIC about the preparation and lodgement of reports of misconduct. We encourage external administrators and controllers to raise questions through our new dedicated e-mail address – ISRandSSR.questions@asic.gov.au
• retaining ASIC’s existing guidance that external administrators and controllers can lodge multiple initial statutory reports to enable flexibility in reporting
• retaining indicative timeframes, given the importance of timely reporting. While we do not require lodgement within these timeframes, we encourage this approach, and 
• clarifying in the guidance that an external administrator or controller may use their professional judgement to form the view that it is necessary to undertake further inquiries to meet their reporting obligations in the particular circumstances. Our guidance is now focused on the minimum steps required to comply with the reporting obligations, and we have not included prescriptive guidance through checklists or examples for that reason. 

We will support members of the profession as they transition to the updated guidance through ongoing industry liaison. We will also continue to monitor whether we need to make any additional updates to RG 16 in response to law reform, case law or stakeholder feedback.

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Media releases

Below are our most recent releases related to corporate insolvency:

24-179MR Sydney labour hire services director disqualified for five years

24-178MR ASIC disqualifies VIC director for maximum five years

24-175MR ASIC reports low take up of simplified liquidations since 2021 reforms

24-171MR ASIC disqualifies Sydney director Dominique Grubisa from managing corporations for 18 months

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Insolvency statistics

ASIC’s annual insolvency data shows 11,053 companies entered external administration for the first time during the 2023–24 financial year. While this is slightly higher than prior peaks seen in 2011–12 and 2012–13, it is proportionately smaller given the number of companies in Australia has now risen to 3.4 million from around 2 million in 2012. When compared to 2022–23, the number of external administrations grew by 39% in 2023–24.

The upward trend in appointments has continued into the new financial year with appointments to 8 September 2024 (2,694) up 34% compared to the same period for the previous financial year (2,011).

Restructuring appointments jumped more than two-fold in 2023–24 when compared to 2022–23, representing 12.9% of all external administrations.

Court liquidations also rose to 2,118 in 2023–24, representing 93% of pre-pandemic levels after staying close to the pandemic lows during 2022–23.

For more information, please see ASIC insolvency statistics and Annual ASIC insolvency data reveals increase in companies failing.

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Contacts

Email support and contact details for ASIC team members for each state and territory are available on the Contacts page.

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