Parliamentary Joint Committee: Inquiry into Corporate Insolvency in Australia Opening Statement - 1 March 2023
Speech by ASIC Chief of Operations, Warren Day at the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into Corporate Insolvency in Australia, Wednesday 1 March 2023.
ASIC thanks the Committee for the opportunity to appear today. I am joined today by Greg Yanco, Executive Director, Market and Thea Eszenyi, Senior Executive Leader, Registered Liquidators and Financial Reporting and Audit.
We note the significant volume of material submitted by over 70 parties to this Inquiry to assist the Committee deliberate on the future course of Australia’s corporate insolvency regime.
Before responding to the Committee’s questions, we would like to comment on two issues raised by witnesses at the public hearings before the Committee on 13 and 14 December 2022 and inform the Committee about the publication in January of an updated series of insolvency statistics and a report on the small business restructuring regime.
First the issues from the December public hearings.
1.The gender gap
Witnesses to the Inquiry noted that the low representation of women at senior levels in insolvency and restructuring firms, with only about 9% of registered liquidators being women, does not reflect society or the significant role women fulfil in other areas of business endeavour.
One reason cited for this was the need to demonstrate at least 4000 hours of insolvency experience within the five years prior to making the application to become a registered liquidator. This requirement can be challenging for applicants who have, or anticipate having, parental leave or other carers duties and it was suggested that this acted as a barrier to suitable female applicants from applying for registration.
More can be done, and ASIC is doing more, to promote diversity and the role of women in the insolvency and restructuring profession.
ASIC notes that, from 1 January 2021, amendments to the registration requirements provide members of the liquidator registration committees greater scope when considering what work experience is relevant and will be considered when deciding if an applicant has the required relevant work experience to be registered as a liquidator.
ASIC continues to engage with registered liquidators encouraging them to sponsor their senior female staff who are good candidates for registration as a liquidator to lodge an application for registration. ASIC notes that some successful applicants (both male and female) that applied following the 2021 amendments did not have 4000 hours experience directly related to formal external administration and controller appointments during the previous five years but were otherwise suitable applicants for registration, and the committees decided they should be registered as a liquidator.
2. Simplified liquidation process
ASIC understands witnesses generally support the underlying policy objective of the simplified liquidation process that commenced on 1 January 2021 but noted the very low uptake of this reform.
Some reasons cited for this were that the process is not simple enough, it does not reduce cost, the timeframes to adopt the simplified liquidation process are tight, and the eligibility criteria limit its application to many small businesses.
ASIC notes that the decision to adopt the simplified liquidation process is made by the registered liquidator (not the directors) after they have been appointed as liquidator of the company in a creditors voluntary winding up.
Consideration might be given to the directors electing whether the appointment should commence using the simplified liquidation process with the appointed liquidator then converting it to a full liquidation if the director’s judgment that the company satisfies the eligibility criteria for simplified liquidation is incorrect.
We also wanted to let the Committee know that since our appearance before this Committee in December 2022, we have released our latest insolvency statistics and a report on small business restructuring.
On 13 January 2023, ASIC released on its website excel workbooks covering the three-year period 2019-20, 2020-21 and 2021-22 updating existing published statistical series data.
The workbooks profile corporate insolvency in Australia from initial reports lodged by external administrators and receivers (Form EX01 up to 27 March 2020 then the Initial Statutory Report (ISR) from 28 March 2020).
The statistical series provide information to the market about such things as the industries in which company operated, the size of the company, the company assets and liabilities including amounts owed for unpaid employee entitlements and for unpaid taxes, the reasons for failure, and nature of alleged misconduct.
Small business restructuring report
On 17 January 2023, ASIC published REP 756 Review of small business restructuring process.
The report outlines the findings from ASIC’s review of lodgements data for all 82 small business restructuring practitioner appointments which commenced in the period 1 January 2021 to 30 June 2022, and the outcomes of those restructurings to 30 September 2022.
We note that during the period 1 July 2022 to 30 January 2023 there were a further 197 appointments of a restructuring practitioner to a company.
We look forward to taking your questions.