The recently scaled-back commissar of liquidator oversight has contacted his charges to advise of a scaled back proposal for the impending liquidators’ levy.
In an email sent to all registered liquidators yesterday afternoon, ASIC senior executive leader Adrian Brown said that the annual fee they are to pay ASIC to regulate them will be $2500 instead of $5000 under a revised industry funding model.
“Following the consultation process, ASIC worked with Treasury to develop an alternative option for the Minister’s consideration,” Brown said in his email. “The alternative option considered industry’s concerns with the previous model within the constraints of the Cost Recovery Guidelines and principles.”
As well as announcing the halving of the proposed annual fixed fee, the email detailed the other charges to be imposed on liquidators to cover the estimated $9 million a year ASIC says it costs the regulator to keep liquidators in line.
Included is an approximate fee of $110 for every existing external administration as well as every new appointment and $110 for every “notifiable event”, the definition of which is as follows:
The following notices published on ASIC’s Published Notices Website:
- notice of meetings;
- notice of disclaimer of property;
- notice to submit particulars of debt or claim;
- notice to creditors to submit formal proof;
- notice of intention to declare a dividend; and
the following lodgements with ASIC:
- notice of the outcome of a proposal to pass a resolution without a meeting;
- execution of a deed of company arrangement.
And, for the purpose of calculating the number of notifiable events, the following lodgements are considered a single lodgement:
- where more than one proposal to pass a resolution without a meeting for a company is decided on a particular date; and
- a deed of company arrangement involves more than one company under external administration.
Brown said that the amended proposal has a number of advantages, including:
- The metric recognises the underlying, and fundamental, principle that the regulated population bears the cost of their regulation;
- The metric is more consistent with the model’s objectives of simplicity and proportionality; and
- A lower fixed levy addresses concerns about the impact on smaller entities and is less likely to act as a barrier to entry for new participants.
ARITA chief executive John Winter said the amendments, while welcome, amounted to no more than extra lipstick on the same pig. The industry funding model would remain broken until it accounted for all the unpaid work insolvency practitioners performed for ASIC, a figure he said ARITA was about to disclose.
“We are about to reveal the results of a recent survey that shows insolvency firms have to write off about $100 million a year in unrecoverable remuneration,” Winter said last night.
“Worse still, you won’t know what this cost is until up to more than a year after you incur it. Because of the delay in being able to crystallise what the cost is, it’s unlikely you will be able to pass it through to an appointment, so the cost will need to be absorbed through rate increases and every practitioner knows that they are under pressure from judges on down to reduce, not increase, rates,” he said.
As for the new industry levy model spurring competition and lowering barriers to entry, Winter said the industry view could not be more pessimistic.
“We still expect that this will force close to 30% of registered liquidators to hand back their tickets in the first couple of years of operation. It’s going to gut competition, where, perversely, increasing competitions was one of the themes of the Insolvency Law Reform Act,” he said.
“It’s going to hit small and regional firms the hardest. Chances for future generations of registered liquidators will be stamped on. Most significantly, we think it’s going to turbocharge the dodgy pre-insolvency market and ramp up phoenixing just as the government claims they are trying to act on it.”
Perhaps it’s no wonder that Brown, who SiN recently revealed was reducing his work commitments as head of liquidator enforcement to three days a week, is “scaling back”.