ASIC today released Regulatory Guide 194 Insurance requirements for registered liquidators (RG 194).
Under new section 1284 of the Corporations Act, registered liquidators must have adequate and appropriate professional indemnity (PI) and fidelity insurance. These legislative requirements have applied to liquidators newly registered since 1 January 2008 and they will come into force on 1 July 2008 for all other liquidators.
The new insurance requirements replace the previous requirement for registered liquidators to either lodge and maintain a security with ASIC, or hold both PI insurance and a public practice certificate from one of the professional accounting bodies.
The insurance requirements aim to maximise the funds that are available to compensate creditors and other claimants who suffer loss as a result of misconduct by the external administrator or their staff in connection with a corporate insolvency.
Although registered liquidators will be responsible for ensuring they obtain adequate and appropriate insurance, ASIC’s regulatory guide aims to help them comply with their insurance obligations by explaining how ASIC will administer the new requirements.
In February 2008 ASIC released a consultation paper, Insurance requirements for registered liquidators (CP 96), seeking industry’s views on how the new requirements should be administered. ASIC has taken these views into account when formulating the final policy.
ASIC will take a staged approach to the commencement of the insurance requirements, aligned with existing insurance renewal cycles. ASIC has extended the transitional period for liquidators so that complying insurance arrangements must be in place by 31 July 2009 at the latest.
Because a number of different forms of fidelity insurance could fulfil the policy objective underlying s1284, the guidance provides flexibility and multiple options for registered liquidators in arranging their fidelity insurance to meet the new requirements.
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