ASIC today released its annual report for the 2012 calendar year into the supervision of registered liquidators. ASIC released its first annual report for the 2011 calendar year.
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Key points:
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‘Registered liquidators must be independent, competent and efficient. Creditors expect a liquidator to act in the creditors' interests in winding up an insolvent company in an orderly and fair way so they receive the maximum possible return of their money as soon as practicable’, ASIC Commissioner John Price said.
‘The increase in inadequate declarations concerns ASIC. Liquidators must make full disclosure to creditors when it comes to their independence. Given our guidance, and education programs through the IPA, there is no good reason for such a failure rate’, Mr Price said.
Report 342 ASIC regulation of registered liquidators: January to December 2012 (REP 342) outlines the supervisory, enforcement and educative work ASIC was involved in throughout 2012.
REP342 highlights that in 2012, as part of the review process, ASIC initiated a new, proactive transactional review program. These reviews target company failures where ASIC is concerned directors may have engaged in phoenix type activities.
‘By proactively contacting registered liquidators, we get a good understanding of the issues early on’, Mr Price said.
The report also shows ASIC maintained its higher level of surveillance activities for 2012.
‘While there was an increase in the number of practitioners under investigation or subject to some type of enforcement action, it is pleasing for ASIC, and the industry itself, that serious complaints against registered liquidators fell last year.
‘This is a good sign for the industry, however, we have shown in the past that we will not tolerate misconduct and we will take strong action against those who neglect their responsibilities and obligations’, Mr Price said.
REP 342 also highlights the importance of educating both liquidators and creditors.
The release of the report is part of ASIC’s commitment to improving transparency, and follows on from the release of REP 287 ASIC regulation of registered liquidators: January to December 2011 (REP 287)
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Background
At the end of 2012 there were 682 registered liquidators (of which 557 were also official liquidators).
Proactive transaction reviews target external administrations that appear to exhibit risk criteria suggesting potential illegal phoenix activity, related party transactions, possible director misconduct and/or independence concerns.
ASIC also conducted project work, including checking compliance with independence declarations, remuneration disclosure and compliance with relief provisions for preparing accounts for public and certain large proprietary companies.
ASIC will continue to focus on maintaining surveillance intensity in the three main areas of independence, competence and improper gain. This includes compliance visits for registered liquidators based on risk assessment and market intelligence, as well as information and complaints from the public and the profession itself.
69% of reports of alleged misconduct against registered liquidators resulted in educative outcomes for those making the report. ‘Educational’ outcomes are those involving circumstances where the outcome or resolution of the inquiry or allegation of misconduct is educating the person (often a creditor) about the applicable law or practice, or providing information about the normal practice of the insolvency process.