Legal Insights

Stage 4 restrictions – Implications for insolvency practitioners

By Marelda Hibberd

• 05 August 2020 • 4 min read

What are the practical implications for insolvency practitioners taking an external administration appointment or continuing to work on a trade-on administration during Stage 4 restrictions?

The Government has issued a list of Permitted Industries but the enforceability of the current restrictions will depend upon directions or orders issued by the Chief Health Officer and/or the Minister of Police under The Public Health and Wellbeing Act 2008 and the Emergency Management Act 1986. We expect this will occur over the coming days.

It is clear that professional services firms, which includes insolvency accountants, are unable to allow staff to work from the office so all investigations and accounting work will need to be done by staff working remotely. On a literal reading of the Permitted Industries Table, it will not be possible to attend the office for any reason after 11.59pm on Wednesday 5 August 2020 other than for the purpose of critical maintenance and safety works including meeting environmental obligations. Whilst this will not be a significant issue for most practitioners who have moved to working from home arrangements over the past four months, practical matters such as collecting hard copy files and checking mail will need to be managed and we understand that ARITA is working on some guidance for members in this regard.

The way in which external administrations are to be managed will otherwise depend upon the category of business involved in the appointment.

Permitted industries

If the business falls into one of the categories of businesses that are able to be open for on-site work with a Covid Safe Plan set out in the Permitted Industries Table, it is likely that the practitioner will be able to attend the business premises within the terms of the Covid Safe Plan to obtain books and records and the practitioner and perhaps a limited number of staff will be able to remain on-site for the purpose of operating the business. This is on the basis that the insolvency practitioner will either be an officer of the company and/or they (together with their staff) will be an ‘ancillary business’ providing services which are necessary to the operation of the business.

However, it may not be the case that the practitioner or practitioner’s staff will be able to remain on-site to carry out the insolvency related investigative and accounting work associated with the appointment.

Businesses required to be closed

If the business is not operating within a permitted industry, in order to secure the assets and books and records of the business it may be necessary to rely on the limited exception to obtain access to the workplace for the purpose of critical maintenance and safety works including meeting environmental obligations.

The Government has announced that those still allowed to attend their workplace during Stage 4 restrictions will need a ‘permit’ signed by their employer to show why they are out of their homes. Permits will need to be issued by the insolvency practitioner to each staff member who will be attending on-site for the purpose of providing the ancillary services or for the purpose of critical maintenance and safety works (which it might be argued, includes securing assets and books and records).

A threshold issue to be considered in relation to any appointment taken during Stage 4 restrictions is whether the business has a COVID Safe Plan and the appropriateness of that plan. The only exception to this is for businesses with fewer than 5 employees.

Of course, insolvency practitioners must also ensure that they have a COVID Safe Plan in place for their own firms.

COVID Safe Plans must set out:

  • The actions to be taken to prevent the introduction of COVID-19 in the workplace.
  • The level of face-coverings or PPE required.
  • A response plan if a case of COVID-19 is detected.
  • How the business will meet all of the requirements of Stage 4 restrictions, particularly those relevant to industries designated to be high risk, including construction, warehousing, meat processing, aged care and warehouse distribution.

No doubt there will be further guidance from the Government, ARITA and the regulators over the coming days however, should you require any assistance with navigating an appointment taken during this period, including assistance with preparing a COVID Safe Plan or Permitted Worker Permits please get in touch.

Get in touch with the Restructuring & Insolvency Team.

By Marelda Hibberd

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