We now have guidance as to what the minimum standards and conditions for the licensing of insolvency practitioners will likely look like under the IPRA.

Under s22 of the IPRA, the Registrar of Companies may prescribe:

• the minimum standards for licensing (including standards relating to required competence, qualifications, and experience);
• conditions, or the kinds of conditions, to which licences must be subject; and
• requirements for ongoing competence that must be complied with by persons who are issued with a licence.

The Ministry of Business, Innovation & Employment (MBIE) has released a discussion paper outlining the proposed minimum standards and conditions for the licensing of insolvency practitioners.

Minimum standards for licensing of insolvency practitioners

MBIE proposes the following minimum standards for licensing of practitioners:

• Minimum hours: Practitioners who are CA ANZ members and hold a certificate of public practice (CPP) (or equivalent) will be required to have 1,000 hours of practical insolvency experience at a ‘senior level’ on insolvency engagements over the five years immediately prior to their application for accreditation. Practitioners who do not hold a CPP will be required to have 2,000 hours of practical insolvency experience at a ‘senior level’ in the five years prior to their accreditation application. The proposed minimum hours requirement differs to the current CA ANZ/RITANZ accreditation scheme, which requires the hours requirements to be completed over three years (not five). However, the assessment of ‘senior level’ work will be an activity–based assessment on work completed, rather than determined by a person’s level at a firm – i.e. partner, director, or manager (which is the current requirement under the CA ANZ/RITANZ accreditation scheme).
• General experience: In addition to the minimum hours requirement, practitioners will also need to have at least five years of general insolvency experience.
• Qualifications: No minimum formal qualifications (i.e. degree qualifications) are proposed. MBIE considers that introducing such a requirement would unnecessarily restrict the licensing of insolvency practitioners. Nevertheless, minimum formal qualifications or compulsory courses could be required in the future.
• Minimum insurance requirements: It is proposed that accredited bodies set minimum professional indemnity insurance requirements as they are best placed to determine what level of minimum cover is adequate.
• Alternative pathway: An accredited body will have the discretion to waive some or all of the minimum standards if it is satisfied that the practitioner is otherwise competent to act as an insolvency practitioner.

Proposed conditions

The following licence conditions are proposed:

• Rules, code of ethics, and standards: Licensed practitioners will need to comply with their accredited body’s rules, code of ethics, and professional standards.
• Practice reviews: Licencees will be subject to a condition requiring that they meet practice review requirements set by an accredited body.
• Reports and notifications: It will be mandatory to provide reports and notifications to the accredited body in relation to any matters relevant to the practitioner’s licence.

Ongoing competence

The current CA ANZ/RITANZ accreditation scheme requires accredited practitioners to complete continuing professional development (CPD) training of 120 hours over three years with at least 30 hours being related to insolvency training. MBIE proposes that where an accredited body is a member of the International Federation of Accountants (IFAC), such as CA ANZ, practitioners will be required to meet IFAC requirements. Where a practitioner is licensed by an accredited body that is required to meet IFAC standards, the practitioner will be required to:

• comply with the CPD standard set by the accredited body; and
• complete at least 20 hours of verifiable training in relation to insolvency practice over three years.

Practitioners who belong to an accredited body that is not a member of IFAC will be required to complete at least 120 hours of CPD training over three years. At least 60 hours of that training will need to be verifiable, of which at least 20 hours must be related to insolvency practice, and a minimum of 20 hours must be completed each year.

Fit and proper person requirements

It will be up to accredited bodies to prescribe fit and proper person requirements for applicants for a licence. The Registrar of Companies will nevertheless consider an accredited body’s overall approach to assessing whether an applicant for an insolvency practitioner licence (and/or membership of the body) is a ‘fit and proper’ person to hold a licence as part of the Registrar’s assessment of the accredited body’s application for accreditation. The Registrar will also monitor how accredited bodies are applying fit and proper person tests.

The Registrar, has indicated in the discussion paper, matters that will likely be relevant to whether a person is ‘fit and proper’. These include:

• convictions involving dishonesty;
• convictions, sanctions, penalties, fines, declarations, orders, reprimands, or undertakings for any offence under financial markets legislation;
• being banned from acting as a director of a company;
• being subject to an adverse disciplinary finding by any professional body, disciplinary tribunal, or court;
• having an adverse court ruling in respect of a civil case relating to the quality of the practitioner’s professional work or judgement;
• having been declined membership of any professional body, or had their membership cancelled or suspended;
• having been dismissed, or asked to resign, from a position of trust, fiduciary appointment, or similar appointment;
• being placed into statutory management, or being the director of a company placed in statutory management;
• having, in the last 10 years:
  • been made bankrupt, filed for bankruptcy, or subject to a personal insolvency procedure; or
  • been a director or senior manager of any entity, which has:
    • been placed into insolvent liquidation, administration, or receivership; or
    • entered into any compromise agreement, moratorium, or other restructuring to avoid insolvency; or
• the person is subject to proceedings, which if any adverse finding is reached, will result in one or more of the above matters set out above applying to that person.

The Registrar considers that the presence of one of the above matters should not automatically disqualify an applicant from obtaining a licence. Nevertheless, where one or more of the above matters exist, an applicant will need to persuade an accredited body as to their suitability. Where an accredited body declines to issue a licence to a person, or makes it subject to conditions, the person may appeal that decision to the Court.

Our comments

The proposed standards are sensible and are leveraged off the existing CA ANZ/RITANZ voluntary self-regulation scheme with some modifications.  Practitioners who are already accredited CA ANZ/RITANZ practitioners should not be concerned about the proposed standards. For practitioners who do not meet the minimum standards, there is some flexibility for accredited bodies to waive some or all of the requirements in appropriate cases.

How do I have my say?

Submissions on the proposed minimum standards are open until 13 December 2019 and can be made here. MBIE will then consider submissions and publish a Gazette notice setting out the minimum standards for insolvency practitioners in March 2020. The IPRA will come into force on 17 June 2020.