Accountants welcome new funding and rules for insolvency sector

The accounting industry has welcomed proposals for new guidelines introduced for insolvency practitioners by the Government, as part of a suite of reforms that will give the corporate regulator greater powers to remove, replace and penalise liquidators.

The changes were announced today by Parliamentary Secretary to the Treasurer, David Bradbury, who says they will go a long way to reforming the way insolvency professionals are regulated.

“These reforms are about restoring the community’s confidence that there is a system of effective regulation, high professional standards, transparency and accountability and power for creditors to remove liquidators if necessary.”

Small businesses are also set to receive a benefit, with the alignment of personal and corporate insolvency regulation.

“These proposals seek to deliver greater consistency and less complexity, particularly for small business creditors dealing with interrelated corporate and personal insolvencies,” attorney general Robert McClelland said in a statement.

The changes also come after a Senate committee recommended that ASIC be removed of some of its responsibilities overseeing the insolvency practitioners sector.

According to comments made in the Australian Financial Review, the Australian Securities and Investments Commission will receive $11.4 million in funding to help regulate the industry – complete with new powers to suspend and ban insolvency practitioners.

In return, liquidators will be given more money to find phoenix companies.

But some of the moves are designed to make it easier for creditors to deal with insolvency practitioners. They will be able to more easily remove liquidators and administrators from jobs, along with the ability to set a cap for fees.

The Government wants to create a one-stop portal for creditors, complete with a new website that would list insolvency notices that previously have been used in newspapers. This would save the Government several million dollars.

Business policy advisors at CPA Australia, Gavan Ord, says the organisation welcomes the new initiatives, including stricter guidelines for insolvency practitioners to even enter the industry.

The new regulations state practitioners must have a three-year degree in law or accounting, have three years’ experience, insurance, pass a proper person test and must hold no prior convictions for fraud or dishonesty.

They would also need to renew licences every three years, while penalties would be imposed for practitioners who do not take out any insurance.

“We welcome the changes,” Ord told SmartCompany this morning. “It’ll raise the standards of the profession and bring entry requirements into line with the requirements for auditors, and also those for tax agents and financial planners.”

Insolvencies have been in the spotlight this year, with a record number of companies entering some form of administration or receivership.

Part of the reason for the changes is so practitioners can cut down on phoenix activity, with liquidators being given more funding to help expose them. Ord says this is an important measure to have been included.

“It’s important that ASIC and the ATO work together to crack down on phoenix companies. Legitimate taxpayers lose when they succeed.”

“Overall, the intention here is to raise the quality of practitioners and we think that’s a good thing, and consistent with other aspects of the industry.”