A Disciplinary Committee has imposed conditions on the registration of registered liquidator, Mitchell Warren Ball of BPS Recovery.

The conditions, delivered in a decision on 25 November 2019, are in summary:

• Mr Ball must not take further appointments as a registered liquidator until 1 December 2020;
• for the period from 1 December 2020 until 1 December 2022, all appointments he takes are joint or joint and several with another registered liquidator;
• he reports to ASIC on the status of each of his appointments every six months, commencing on 20 December 2019 until 20 December 2021. The costs incurred in compliance with this condition must not be recovered from the appointments which are subject of the registered liquidator’s reports to ASIC.

The Committee’s sanctions follow an ASIC referral to the Committee about Mr Ball’s conduct in five liquidations to which he had been appointed, which in ASIC’s view, Mr Ball had not adequately explained or accounted for in 20 of the 27 concerns set out in ASIC’s show cause notice.

The Committee found Mr Ball’s conduct was serious and well below the standard expected of a registered liquidator; was not an isolated event and involved an ongoing failure to adequately and properly perform the duties of a liquidator, including to supervise his staff.

The Committee was also concerned that all five liquidations had involved replacement directors by the same initial referrer and with evidence suggesting the appointment of ‘jump-on directors’ but Mr Ball failed to ensure that a proper investigation was conducted.

The Committee found ‘Mr Ball acknowledged that although he did not intentionally do so, his actions either potentially facilitated, or could have facilitated, illegal phoenix activity. As such, his actions could have undermined the integrity of insolvency practitioners as a profession.’

Mr Ball also acknowledged that he:

• failed to adequately supervise his staff;
• failed to adequately investigate the affairs of the subject entity;
• failed to close a bank account of the company to which he was appointed and then failed to investigate post appointment transactions;
• failed to obtain the books and records and failed to request ASIC assistance; and
• failed to lodge documents with ASIC.

‘The Committee’s decision sends a clear message about the duties of all registered liquidators in investigating the affairs of a company, and supervising staff in their investigations. This includes investigating the involvement of pre-insolvency advisers, changes of officers, who is controlling the changes, and importantly, for what reason,’ said ASIC Commissioner John Price. 

‘Such behaviours are the minimum expected and demonstrate that registered liquidators are acting independently and competently to meet both their statutory duties and professional standards,’ Commissioner Price said.

Download

The Committee’s Report and reasons for decision, handed down on 25 November 2019 here.

Background

The Liquidator Disciplinary Committee was convened on 18 March 2019 after ASIC’s consideration of Mr Ball’s response to a ‘Notice to explain why liquidator registration should continue’, issued under s40-40(1) of the Insolvency Practice Schedule (Corporations) (show cause notice) which is Schedule 2 of the Corporations Act 2001 (the Act) sent to him by ASIC on 31 October 2018 asking Mr Ball give a written explanation why his liquidator registration should continue.

Commencing from 1 March 2017, the Corporations Act was amended to provide for a disciplinary committee to determine sanctions against registered liquidators where alleged misconduct has been identified.  The Committee replaced the former Companies Auditors & Liquidators Disciplinary Board.

Committees are comprised of an ASIC delegate, a registered liquidator nominated by the Australian Restructuring Insolvency & Turnaround Association (ARITA) and the Minister’s delegate. ASIC’s delegate chairs each Committee. The Committee acts independently of each of these entities. Further, the representatives are selected from a pool, so each Committee has different representatives each time it is formed.

The Committee’s role is to consider whether the registered liquidator’s registration is to continue and where it is determined that it should, whether any other sanctions should be imposed. The Committee may determine to cancel or suspend the person’s registration, impose additional conditions, issue a reprimand or admonishment or other sanctions defined in the Act.

ASIC is a member of the Phoenix Taskforce, which comprises federal, state and territory government agencies who collaborate to combat illegal phoenix activity. The aim of the Phoenix Taskforce is to provide a whole-of-government approach to identify, disrupt and prosecute those who engage in or facilitate illegal phoenix activity.

More information about ASIC’s work in combatting illegal phoenix activity is here.

Suspected phoenix activity can be reported to ASIC or the ATO by calling 1800 060 062, online at the ATO website or by emailing PhoenixReferrals@ATO.gov.au.