Important changes to applying for and maintaining registration as a liquidator from 1 January 2021
What are the key changes?
Changes enacted by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 and amendments to the Insolvency Practice Rules (Corporations) 2016:
- affect the requirements to become registered as a liquidator and remain registered; and
- introduce a new ‘class’ of registered liquidator who is registered to practise only as a restructuring practitioner for a company or for a restructuring plan.
The changes affect guidance in Regulatory Guide 258 Registered liquidators: Registration, disciplinary actions and insurance requirements (RG 258). The information set out below highlights how the above changes affect the guidance in RG 258 – Section B Becoming a registered liquidator.
What has changed about continuing professional education for all registered liquidators including those registered only to practise as a restructuring practitioner?
From 1 January 2021, registered liquidators are no longer subject to a condition on their registration that they undertake at least 40 hours of continuing professional education during each year that the person is registered, with at least 10 hours of which must be capable of being objectively verified by a competent source.
From 1 January 2021, a person registered as a liquidator must undertake at least 120 hours of continuing professional education during:
- the period of 3 years starting on the day they are first registered as a liquidator; and
- each subsequent period of 3 years during which the person is registered as a liquidator.
Of the 120 hours of continuing professional education required, at least 30 hours must be capable of being independently verified by a competent source.
How do I apply to be registered as a liquidator after 1 January 2021?
From 1 January 2021, a person may apply to be registered as a liquidator to practise:
- as an external administrator of companies, receiver and receiver and manager;
- only as a receiver, and receiver and manager; or
- only as a restructuring practitioner for a company or for a restructuring plan.
The changes commencing on 1 January 2021 do not affect the guidance in RG 258 about the process to apply for registration.
What has changed for applications to be registered as a liquidator registered to practise as an external administrator of companies, a receiver and a receiver and manager on or after 1 January 2021?
Some changes to applications are not reflected in RG 258, because they are new. These changes are:
- ‘relevant employment’ includes providing advice in relation to the restructuring of company debt outside the external administration of companies, receivership or receivership and management; and
- any other employment that the committee considers relevant.
Some guidance in RG 258 is not affected by the changes. The changes commencing on 1 January 2021 do not affect:
- the guidance provided in RG 258.26 to RG 258.56 dealing with the following eligibility requirements: capacity, fit and proper and residency in Australia or another prescribed country;
- the academic qualifications in RG 258.19 – 258.21
- the guidance in Section E Insurance requirements.
The changes commencing on 1 January 2021 do affect:
- the guidance at RG 258.16 -258.17, because a committee may decide an applicant should be registered if it is satisfied that they are suitable to be registered, notwithstanding the Committee is not satisfied that the applicant:
- possesses the prescribed qualifications, experience, knowledge and abilities;
- has not had their registration as either a liquidator under the Corporations Act 2001 or as a trustee under the Bankruptcy Act 1966 cancelled within 10 years before making the application; or
- is a resident in Australia or in another prescribed country;
Prior to the changes described above, a committee that was not satisfied about the matters above could only decide to register the applicant if the committee was satisfied the applicant would be suitable to be registered as a liquidator if the applicant complied with conditions specified by the committee;
- the guidance at RG 258.23, because under the changes, exposure to processes under the Bankruptcy Act 1966 may now be ‘direct or indirect’ exposure to those processes for the purposes of the ‘relevant employment”.
What qualifications, experience, knowledge and abilities do I need to apply for registration only as a restructuring practitioner?
A person applying for registration to practise only as a restructuring practitioner for a company or for a restructuring plan must satisfy the Committee that they:
- are a recognised accountant,
- have demonstrated the capacity to perform satisfactorily the functions and duties of a restructuring practitioner for a company and for a restructuring plan; and
- are able to satisfy any conditions imposed under the Insolvency Practice Schedule (Corporations) if they are registered as a liquidator.
A recognised accountant is a member of either Chartered Accountants Australia and New Zealand, CPA Australia Ltd or the Institute of Public Accountants who:
- holds a public practising certificate;
- is entitled to use the prescribed post-nominals of that body; and
- is subject to, and complies with, the body’s continuing professional education requirements.
No academic qualifications or hours of experience are prescribed for a person applying to be registered to practise only as a restructuring practitioner.
In order to assist a committee to decide whether an applicant has the demonstrated capacity to perform satisfactorily the functions and duties of a restructuring practitioner for a company and for a restructuring plan, applicants for registration as a liquidator to practise only as a restructuring practitioner are required to detail their relevant experience in their application form.
Examples of the experience a Committee may consider relevant includes whether the applicant is able to (amongst other things):
- conduct a business viability review;
- provide 'safe-harbour' advice under section 588GA of the Corporations Act 2001;
- prepare short, medium and long term cashflow forecasts;
- develop a restructuring plan;
- advise on the ongoing trading of a business with a view to returning it to solvency or selling it as a going concern;
- provide advice on, or negotiate, the sale of assets or terms of trade by essential suppliers to a business;
- conduct investigations into insolvent trading, voidable transactions and fraudulent transactions;
- determine creditor claims for dividend purposes in an external administration; and
- demonstrate skills developed from work undertaken on external administrations or other restructuring arrangements that would enable the applicant to assess the ‘liability test’ for companies that are eligible for restructuring under Part 5.3B – Restructuring of a company of the Corporations Act 2001.