The end of the role of Official Liquidators

ARITA noted with interest the article by Michael Murray, former ARITA Legal Director, in CCH's Australian Commercial Law Tracker on 26 July 2016.

The issues associated with the removal of the role of the official liquidator were originally raised by Kim Arnold of ARITA in confidential consultations with Treasury and ASIC on the Insolvency Law Reform Act earlier this year.

The removal of the role of official liquidator will remove the obligation for official liquidators to consent to unfunded court liquidation appointments where they don't have a conflict. It is ARITA's view that this may result in:

  • Creditors being unable to find liquidators willing to consent to a court liquidation appointment. This is magnified by the fact that the success of creditors being able to obtain consents may largely rely on a referral network of their solicitor, which is under significant pressure due to fears of conflict and lack of independence of liquidators. The alternative is the liquidator requiring upfront payment to cover at least part of the cost of the winding up (noting that this is currently a problem faced by directors when seeking a liquidator for a creditors' voluntary winding up of their company).
  • ASIC having difficulties obtaining consents from liquidators to act as replacement liquidator where the original appointee is removed for misconduct or other reasons, without meeting all or a part of the replacement liquidator's costs.
  • It may be difficult to find replacement liquidators where an incumbent resigns or dies. This issue will affect ASIC, creditors and the courts.

This is an issue for all of our members that are  liquidators. On removal of the official liquidator status on commencement of the ILRA in 2017, all registered liquidator will be able to consent to court appointments, so all liquidators will need to think about their policy for accepting such appointments.

We also note the referral to Amanda Coneyworth's (nee Phillips) excellent work on unfunded court liquidation work as part of ARITA's Terry Taylor Scholarship: A analysis of official liquidations in Australia.