Corporate insolvency: ASIC’s power to appoint reviewing liquidators

This is Information Sheet 296 (INFO 296). It sets out when ASIC may use our power to appoint a reviewing liquidator under Subdivision C of Division 90 of Schedule 2 to the Corporations Act 2001 (Corporations Act), and explains what applicants can expect during the process.

Note: All section references in this information sheet are to Schedule 2 (Insolvency Practice Schedule) to the Corporations Act, unless otherwise specified.

ASIC has a discretionary power to appoint a reviewing liquidator to a company that is in external administration to review a matter that relates to the external administration: see section 90-23.

Note: ‘External administration’ means a company that has an external administrator appointed. An ‘external administrator’ is a voluntary administrator, deed administrator, provisional liquidator or liquidator of a company, restructuring practitioner or a restructuring practitioner for a restructuring plan that has been made in relation to the company: see section 5-20.

Generally, we may appoint a reviewing liquidator when there are concerns about misconduct relating to the company or in the administration of the company. ASIC may also appoint a reviewing liquidator at our own initiative.

How to apply to appoint a reviewing liquidator

After you apply

There is no statutory timeframe imposed on ASIC to make a decision on this type of application. However, we will try to make a decision about your application as soon as we can.

If ASIC decides to appoint a reviewing liquidator based on an application by a person under section 90-23, we will notify the applicant of that appointment.

If we decline your application, you may have rights connected with the decision. Find out more:

Information Sheet 9 ASIC decisions: Your right (INFO 9).

ASIC’s decision-making process

Factors ASIC considers when making a decision about an application

When deciding whether to exercise our discretionary power to appoint a reviewing liquidator, we will consider all the relevant circumstances, including:

• the issues specific to the case
• the nature of the alleged misconduct
• any alternative avenues available to address those concerns.

We consider these factors if we are responding to an application to appoint a reviewing liquidator or if we initiate the potential appointment. See Table 1 for a description of the factors that we generally consider.

Table 1: Factors considered when appointing a reviewing liquidator

Situations when ASIC is less likely to appoint a reviewing liquidator

Generally, we will not exercise our discretionary power to appoint a reviewing liquidator if:

• the company has a provisional liquidator appointed or is in members’ voluntary winding up
• the company is or will soon be deregistered as a result of the liquidator lodging an end of administration return with ASIC (see section 70-6)  
• the company was previously under external administration and is currently in external administration (e.g. liquidation), and the reviewing liquidator, if appointed, would be reviewing matters in relation to the previous external administration

Note: Even though a reviewing liquidator can review the conduct of the previous external administrator, we suggest you notify the current external administrator (e.g. liquidator) of your concerns about the previous external administrator before applying to ASIC. Notifying the current external administrator is not a precondition for the appointment of a reviewing liquidator.

• the reasons for the request to have a reviewing liquidator appointed have been addressed by a court
• the application relates only to a review of the remuneration, costs or expenses of the external administrator unless:
• the remuneration relates to a remuneration determination made in the 6 months before the reviewing liquidator was appointed, or
• the costs or expenses were incurred during the 12 months before the reviewing liquidator was appointed (see sections 90-26(4) and 90-7(2) of the Insolvency Practice Rules (Corporations) 2016 (Insolvency Practice Rules)).

In other cases, it may be more appropriate for the creditors to apply to a court under section 90-23 to appoint a reviewing liquidator.

Situations when ASIC cannot appoint a reviewing liquidator

We will not appoint a reviewing liquidator if:

• the company has made a restructuring plan or is being restructured
• the company only has a receiver, receiver and manager, or controller appointed
• the application is to appoint a reviewing liquidator to an association that is not registered under Part 5B of the Corporations Act.

Appointment of a reviewing liquidator

Costs of a reviewing liquidator

ASIC will specify how the reviewing liquidator’s costs will be determined: see section 90-23(5).

If we initiate the appointment of a reviewing liquidator or appoint a reviewing liquidator because of an application from someone with a financial interest in the external administration or an officer of the company, we may pay the liquidator’s remuneration using funds from the AA Fund.

Funding from the AA Fund will not be available if creditors or members appoint a reviewing liquidator: see section 90-27(1). In that case, the creditors or members referred to in section 90-24(5) must pay the costs of the reviewing liquidator.

The AA Fund is administered by ASIC and was established by the Australian Government to fund a range of preliminary investigations and reporting for external administrations with no assets.

We will consider how best to prioritise and administer the AA Fund across the various activities it is intended to support.

Confirmation of appointment

If we decide to appoint a reviewing liquidator, the liquidator will be appointed from ASIC’s reviewing liquidator panel.

We will contact the selected registered liquidator and ask for their written consent to the appointment. Before giving consent, the liquidator must make a written declaration as to whether they have any conflicts of interest in accepting the appointment: see section 90-18(1) of the Insolvency Practice Rules. That declaration must be given to us and to as many of the company’s creditors as possible after their appointment.

Once we have their consent, we will send the reviewing liquidator a letter of appointment which will specify:

• the matter the reviewing liquidator is appointed to review
• how the cost of the review will be determined.

We will notify the external administrator of the appointment of the reviewing liquidator before the review starts: see section 90-12 of the Insolvency Practice Rules.

Appointing a reviewing liquidator does not mean that the current external administrator will be removed.

Matters that the reviewing liquidator can review

ASIC may require the reviewing liquidator to review the conduct of:

• the company’s officers
• any advisers to the company or its officers
• the current or previous external administrator.

Our expectations of the external administrator

Once we have appointed a reviewing liquidator, we expect the external administrator of the company to help and comply with reasonable requests (including timeframes) by the reviewing liquidator: see section 90-22 of the Insolvency Practice Rules.

ASIC expects the external administrator will not claim remuneration for time spent helping and responding to the reviewing liquidator.

Report by the reviewing liquidator

The reviewing liquidator will prepare a report on its review of the matters specified by ASIC in the letter of appointment: see section 90-26(5).

The reviewing liquidator and ASIC will agree on the manner and content of the report.

The reviewing liquidator must notify the company’s creditors that it has prepared the report. The report must be:

• provided to us
• provided to the external administrator
• provided to a committee of inspection (if any), with ASIC’s approval
• tabled at the next meeting of creditors (if any).

Creditors can ask for a copy of the report from the external administrator: see section 70-45.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.