Accountants warned on catch in new Insolvency Act changes

Accountants warned on catch in new Insolvency Act changes

Warning, new Insolvency Act changes

The recently rolled out second tranche of the Insolvency Law Reform Act has an amendment that may catch accountants off guard, says one insolvency firm.

Following the rollout of the second tranche of amendments on 1 September, Jirsch Sutherland partner Lloyd Kerr said the new requirements for Members Voluntary Liquidations (MVLs), including agreement fees, could catch out accountants who are unaware of changes.

“At first we thought the (then) mooted changes were an error, but unfortunately that’s not the case,” said Mr Kerr.

“MVLs have long been an option for a solvent company to liquidate the company’s assets and wind up its affairs. Some can be straightforward and you don’t necessarily need the expertise of an insolvency specialist to undertake them. Indeed, a number of accounting firms offer this service.

“However, following the September 1 changes, the strict new reporting requirements are now quite onerous – and we’re concerned there may be some who aren’t aware of the new requirements for MVLs and may unwittingly not comply and be in breach. And the consequences could be major.”

One of the key changes concerns agreeing fees before an MVL is undertaken, according to Mr Kerr.

“Prior to a determination being made regarding fees for an insolvency specialist or accountant to undertake an MVL, a report must now be prepared for shareholders to enable them to assess if the fees are reasonable,” Mr Kerr said.

“That’s never had to be done before. Even if there’s just one creditor, you are still required to adhere to the regulations. And that could be a huge impost on smaller accountancy firms or sole practitioners.”

According to Mr Kerr, several key timings for MVLs include the pre-appointment in MVL remuneration report to be issued to shareholders; the initial notice to be issued within 10 business days; and the report to creditors to be issued and lodged with ASIC within three months of appointment.

Accountants warned on catch in new Insolvency Act changes
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