What to do when ASIC comes knocking: failure by liquidators to lodge public notifications and other

Key takeaways

In 2013 ASIC wrote to all liquidators to announce the commencement of an industry-wide project to test all registered liquidators’ compliance with the requirement to publish certain notices on ASIC’s “published notices website” and to lodge forms with ASIC. ASIC refers to this initiative as the “PNW Project”.

As a result of the PNW Project, ASIC had commenced at least five formal investigations or enforcement actions concerning liquidator conduct by the end of 2015 (see ASIC Report 479: ASIC regulation of registered liquidators). We are aware of several more investigations commenced in 2016.

Based on our experience, it appears that ASIC will foreshadow disciplinary action where it alleges to have identified, as a result of the PNW Project, systematic non-compliance with lodgement requirements by a liquidator. Such disciplinary action may include referral of the matter to the new committee to be established by ASIC (in replacement of the Companies Auditors and Liquidators Disciplinary Board or CALDB), and could ultimately result in suspension of a liquidator’s registration.  

Typically, the allegations made by ASIC include (among many others):

• failure to lodge annual reports in lieu of holding a meeting of creditors pursuant to s508(1)(b)(ii) of the Corporations Act 2001 (Act);
• failure to publish a notice on the published notices website advertising the holding of a meeting of a committee of inspection; and
• failure to lodge reports pursuant to s533 of the Act.

In some limited circumstances, we have seen ASIC contend for what we consider to be a novel interpretation of the obligations of a liquidator to lodge or publish certain notices.

What should you do if you receive a letter from ASIC containing allegations of breach or threatened disciplinary action?

Urgently:

• Consult other liquidators within your firm (including in other States) to ascertain whether they have also received similar letters from ASIC.
• Review your files to determine whether each of ASIC’s allegations is accurate, and if so, whether there is any explanation for late lodgement or a failure to lodge.
• Seek legal advice prior to responding to ASIC’s letter.

As soon as possible:

• If allegations are made against more than one liquidator within your firm, collate and analyse the allegations made by ASIC against the firm as a whole. It is useful to prepare a spreadsheet listing (and grouping) the different types of allegations made by ASIC, the number of allegations, the liquidator against whom an allegation is made and an explanation for each failure.
• Take steps to remedy any identified non-compliance (for example by making publications, holding meetings, or seeking ratification or approvals where appropriate from creditors or COIs).
• Consider, together with your lawyer, the appointment of an independent accounting/regulatory expert. That expert should be experienced in dealing with ASIC investigations of this nature, and have the skills to conduct an inquiry into your (or your firms’) training, practices, systems, and procedures in order to advise you as to their adequacy or otherwise. That expert should also be able to provide advice as to the steps necessary to be taken to strengthen any flawed systems or procedures.
• Understand and consider the outcome ASIC is seeking. If undertakings are sought, understand how they will be used by ASIC (in particular, whether and how they will be published or publicised) and consider the impact of any negative press on current and future appointments.

Having taken the steps outlined above, you will be well-equipped to engage in discussions with ASIC.