Code FAQ: What are other relevant entities covered by the extended definition of 'Firm' which must be disclosed in your DIRRI? (4th edition)

COPP: Insolvency Services clause 4.2 requires members to make a statement in the DIRRI setting out as to whom the DIRRI is being made in respect of.

A DIRRI must necessarily be made in respect of the 'Firm' (as defined in the Code) as the COPP: Insolvency Services requires consideration of whether the following impact on the member's independence:

  • interests and relationships of the Member’s Firm (clause 3.4), and
  • prior professional services provided by the Member or their Firm (clause 3.7).

Practice Statement Insolvency 2: Declarations of Independence, Relevant Relationships and Indemnities (PSI2) provides guidance on the content of the DIRRI (section 2.3) and states that the DIRRI should list any other relevant entities that would be included in the extended definition of Firm under the ARITA Code.

So, what is the Firm? Firm is defined in COPP: Introduction as:

  1. a sole practitioner, partnership, corporation or other Entity of professionals;
  2. an entity that controls such parties through ownership, management or other means;
  3. an entity controlled or influenced by such parties through ownership, management or other means, or which they share in the profits; or
  4. practices operating under the same or substantially the same business name, whatever the financial arrangement.

As such, the Code mandates disclosure of the practice entity, any entities controlling the practice entity, any entities controlled by the practice entity along with practices that operate under the same or substantially similar business name.

Examples of relevant entities to disclosure would include, but are not limited to:

  • service entities of the practice
  • entities in which the partnership has ownership, control or influence over or obtain a share of the profits (ie. restructuring practice run in a different entity)
  • affiliated practices operating under similar names, including global organisations.

Entities that would not fall within the extended definition of Firm:

  • entities that have a direct or indirect interest in the Firm for the sole purpose of distributing profits to the Member (eg family trusts).