ASIC warns number of faulty liquidators’ reports is on the rise

The number of inadequate declarations by Australian liquidators increased by 10% last year, a new report from the corporate watchdog has revealed.

The Australian Securities and Investment Commission’s annual report into the supervision of registered liquidators found more than half of all declarations made were considered” inadequate”, which means they failed to disclose certain information.

However, industry experts say many of the mistakes made would have been minor.

JP Downey and Co principal Jim Downey told SmartCompany the number of inadequate declarations has increased in line with greater surveillance.

“A lot of the problems would have been minor technical matters,” he says.

“Disclosure can be a matter of judgment until something is pointed out, but doesn’t hurt to have the feeling that someone is reviewing you and that you’re accountable,” he says.

In total, ASIC reviewed 48 declarations and found 56.3% of these were inadequate.

ASIC Commissioner John Price said in a statement the increase in inadequate declarations is a concern.

“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,” Price says.

Insolvency expert and liquidator at Dissolve Cliff Sanderson told SmartCompany many of the issues would have been to do with filling out the forms, but said the number of inadequate declarations was still too high.

“More than half is too many so work can be done in this area,” he says.

In December 2007, the Insolvency Practitioners Association of Australia issued a code of professional practice which Downey says was a “comprehensive and lengthy document” and has led to better standards within the industry and increased surveillance.

“Speaking to my fellow practitioners, we’re all very welcoming of ASICs increased surveillance of practitioners to lift the bar,” Downey says.

“You’ll see ASICs surveillance is targeted, often using market intelligence and the level of complaints from creditors and other practitioners to guide them toward people that require more surveillance and this may skew some of the statistics,” he says.

In 2012, ASIC received 437 complaints alleging misconduct of registered liquidators and in 94 matters ASIC determined a legitimate concern.

ASIC investigations led to 19 registered liquidators being subjected to formal investigations or enforcement last year and five liquidators either voluntarily or through court action have either lost or may lose their license.

Sanderson says these numbers “aren’t great, but in context they’re not a disaster either”.

Sanderson says when considering the statistics in the report, readers should keep in mind that in 2012 there were around 10,000 liquidations and 682 registered liquidators.

“Another consideration is that in liquidations, no one is ever happy. Directors have lost their business and creditors have lost their money. The best a liquidator can do is make them less unhappy, so this leads to a lot of complaints,” he says.