ARITA chief executive John Winter
In correspondence obtained by SiN, Ten Network Holdings’ administrator Mark Korda expressed his view that the ARITA Code of Professional Practice (COPP) required an upgrade if it was to adequately accommodate the realities of modern restructuring, particularly the realities represented by his firm’s work for Ten’s stakeholders in the months prior to its appointment as voluntary administrators (VAs) of the Ten Group.
“KordaMentha recognises the important roles ARITA plays in our profession,” Korda said in a letter to ARITA chief executive John Winter dated July 13.
“However, we would have preferred a more consultative approach to a bespoke, modern day restructuring issue which has arisen in circumstances where you acknowledge that at all times KordaMentha and the Administrators have acted with the utmost good faith,” Korda said.
“In our respectful view, what is required of ARITA is a re-examination of the Code by reference to not only legislative amendment but also the modern restructuring processes.”
The correspondence was in response to concerns expressed by ARITA and ASIC in the wake of the Ten appointment that the VA’s Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) had not been sufficiently compliant with the COPP to allay concerns about a potential perception of bias, something KordaMentha rejected.
Ten Group VA Mark Korda: called for a COPP makeover that was already underway.
But the thing is, Korda was well aware that ARITA is presently in the middle of just such a review of the COPP.
On page 39 of his July 13 affidavit in support of an application to extend the convening period for the second meeting of Ten’s creditors, Korda told the Federal Court: “It is the intention of ARITA to amend the ARITA Code to ensure it embraces restructuring and turnaround activities, however this has not yet been completed”.
In fact ARITA had sought input on the issue in an email to members on May 17. ” … we are seeking expressions of interest from senior, technically minded members to contribute to our review working group,” it said.
“We want to ensure the working group covers those from small to large practice, restructuring and turnaround practitioners who aren’t involved in formal appointments, both personal and corporate insolvency practitioners and lenders.
“To express your interest, please send a short email explaining what you’d bring to the table and a link to your LinkedIn profile or a bio to help us choose the right mix. We expect the life of the working group to be quite short, but members would need to be prepared to commit time to developing and reviewing key sections of the Code.”
ARITA also alerted members to that fact that the COPP review would seek to tackle important questions such as “what is “enforceable” versus what is “guidance”?; how prescriptive should we be?; how much can/should we simplify?; and current issues re independence”.
Independence? Well well. It almost looks like the issues generated by the work KordaMentha performed prior to its appointment as VAs of the Ten Group might turn out to be no more than unfortunate timing. But until the current COPP revamp is concluded, the existing COPP prevails.
Further reading:
Original Ten DIRRI “Substantially Deficient”
Ferrier’s Gothard Appointed Ten SPA
Excellent!!! If ARITA lets Korda Mentha off the hook there will be three terrific precedents:
1. Even if you do a completely deficient and non-compliant DIRRI, you just fix it up by doing a new one when someone complains;
2. If you do something completely against the Independence COPP, no problem if there is a possible unspecified change mooted at some indeterminate time in the future;
3. 50 pre-appointment meetings and $1m in fees is no longer indicative of a lack of independence.
I’m struggling to think of a situation where there will be an independence issue going forward. Happy days.
The Gothard appointment may address the Corps Act independence isssue but it cannot and does not address the breach of ARITA’s COPP requirements. Will ARITA apply the same rules to KM that it applies to the little guys or will it ignore the issue?