THE problem of insolvent trading is being addressed by ASIC as it counsels lawyers on how to advise clients.
A newly released ASIC report sets out the key messages and outcomes of its national insolvent trading program.
The report, National Insolvent Trading Program Report, advises lawyers and accountants, and company directors, in a bid to help them understand and comply with their duty under the Corporations Act 2001 to prevent insolvent trading.
The report comes after news, reported in The New Lawyer, this week that the next year will see high levels of mid-sized insolvencies.
A global survey by law firm Norton Rose found that retail and real estate will be the most vulnerable sectors.
“I suspect that we have already seen most of the very large collapses, although I have little doubt that there are a couple more to come,” Steven Palmer, Norton Rose insolvency and restructuring partner said.
Palmer said continued upward pressure on interest rates could affect mid-sized businesses.
“And while the new found strength of the Australian dollar may deliver a windfall to some, it will be catastrophic for others, particularly if they have not hedged adequately,” he said.
The ASIC report comes as part of its oversight responsibility in monitoring compliance and conduct by company officers in relation to their obligations and behaviour where corporate failure occurs.
The program focuses on companies that are in financial distress or nearing insolvency.
The report urges lawyers’ clients to maintain appropriate books and records, identify insolvency concerns and assess available option, seek professional advice, and act in a timely manner.
“Where a director follows these key messages, they are less likely to breach their duties under the Corporations Act and by seeking advice at an early stage, better results may be achieved for external stakeholders, including employees and creditors', ASIC commissioner, Michael Dwyer said.
ASIC's forward plan for Insolvency Practitioners and Liquidators will focus on the conduct of liquidators and insolvency practices, particularly in relation to independence and remuneration, it said in a statement.