By Bonnie McMahon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
Recent amendments to the Corporations Act 2001 (“the Act”), introduced by the Insolvency Law Reform Act 2016, now require registered liquidators to renew their registration with ASIC every 3 years: see s 20-75 of Schedule 2 of the Act (“Schedule 2”).
Under the transitional provisions, liquidators who were registered before 1 March 2017 remain registered until the first anniversary date of their existing registrations occurs: see section 1555 of the Act. For example, if a liquidator was registered on 10 November 2001, the date upon which the liquidator’s transitional registration will expire is 10 November 2017.
It is essential that registered liquidators are aware of their first anniversary date and ensure their renewal application is lodged with ASIC before their registration expires. Otherwise the liquidator will need to make the walk of shame to the court for an order extending the time within which to lodge their renewal application.
This very issue occurred in Deppeler, in the matter of Deppeler [2017] FCA 768, in which two experienced insolvency practitioners failed to renew their registrations with ASIC, in accordance with the new reforms. By the time the liquidators became aware that their registration had expired, they had been unregistered for around two months.
In that matter, the Court was willing to extend the time within which the liquidators could apply to ASIC to have their registration renewed under section 20-70(2) of Schedule 2.
However, a further issue arose as to the status of the liquidators’ appointment during the period in which they had not been registered. This later issue was considered by the Court in Deppeler, in the matter of Deppeler (No 2) [2017] FCA 978 (“Deppeler”). The Court found that this issue ultimately depended on whether section 1560 of the Act applied to the liquidators.
The first issue the Court needed to determine was whether the heading of section 1560 of the Act, which states “Old Act registrant choose not to renew”, applies to liquidators who inadvertently fail or forget to renew their registration on time. The Court held that the section heading does not form part of the Act and accordingly, section 1560 applies to liquidators who forget to renew their registration.
The second issue related to section 1560(2) which states that:
“The old Act registrant is taken to be registered as a liquidator under Subdivision B of Division 20 of the Insolvency Practice Schedule (Corporations) after the expiry day, subject to a condition that he or she must not accept any further appointments as external administrator of a company.”
In Deppeler, the liquidators had accepted further appointments after their registrations, the effect of which was uncertain. ASIC made submissions that section 1560, which the Court accepted, “does not operate in such a way that the accepting of further appointments as external administrator of a company by an old Act registrant means that the mere acceptance of those appointments has the consequences that he or she is “not taken to be registered as a liquidator”.
The Court noted that in different circumstances it is possible that ASIC could impose a penalty on the liquidator, provided ASIC deals with the matter pursuant to the show-cause provisions in s 40-41(1)(f) of Schedule 2. This means that the consequences for any future liquidators, who fail to renew their registrations under the new provisions, are uncertain, especially considering the liquidators in Deppeler appear to have been given some leeway by the Court in circumstances where they “were the first liquidators who found themselves in this position.” Future applicants may not be so lucky …
Read the judgments here:
Deppeler, in the matter of Deppeler [2017] FCA 768
Deppeler, in the matter of Deppeler (No 2) [2017] FCA 978
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Bonnie McMahon at bonniem@matthewsfolbigg.com.au or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au
