Estate Administrators Amendment Act, 2018 (No. 3 of 2018)

DISTRIBUTED BY VERITAS e-mail: veritas@mango.zw; website: www.veritaszim.net Veritas makes every effort to ensure the provision of reliable information, but cannot take legal responsibility for information supplied. 2018 No.J ZIMBABWE ACT To amend the Estate Administrators Act !Chapter 27:20J and to prO\ 1de for matters connected therewith or incidental thereto. F'.\ACTED by the Parliament and the President or Zimbabwe. 1 Short title This Act may he cited as the Estate Adminbtrators Amendment Act. 2018. 2 Amendment of section 1 of Cap. 27:20 Section 1 ("Shot1 Title") of the Lstate Administrators ,\et f Chapter 27:201 (hereinafter called "the principal Act") is amended b) the insertion after '"Estate Administrators" of "and lnso!vcncy l'ractitiolll'P,". 3 Amendment of section 2 of Cap. 27:20 Section 2 ("Interpretation") of the principal .\rt is amended h) (a) the insertion in the definition of (i) "( :ompensation hmd" after ".\dmimstrators" or "and lnsohency Practitioner,,;"; l'nnted h,· the Government Primer. Hamre 53 Nn.3 (ii) ··c ·ouncil" after ":\dministrators" of"and lnsolYency Practitioners"; (h) the insertion of the folkm ing delinition ""work of an insoh enc) practitioner" means anJ act performed b) a person in a capacity as (a) trustee or provisional tnLstec oLm insoh ent estate appointed under the Insolvency .\et [Chapler 6:041; or (h) liquidator or provisional liquidator or 1udicial manager of a company appointed under thc Insuhcnc) :\et [C '/wpler n:041; or ( c) liquidator or corporate rescue practitioner appoinkd nndcr the lnsoh·ency Act [Chaprer 6:04): or ( d) agent of a trustee, provisional trustee. liquidator, prm isional liquidator, judicial manager, provisional judic·ial manager or corporate rescue practitioner referred to in paragraphs (a) to (c)."; ( c) hy the repeal of the definition of "Register" and the substitution of ""Register" means the Register of (a) Estate Administrators established m terms of section nineteen; and (b) Insolvency Practitioners estahlished in terms of section 25A;"; (d) in the definition of "work of an estate administrator" b) the repeal of (i) paragraph (c) and (d); and (ii) paragraph (e) and the substitution of the following "( e) agent of an executor, tutor or curator refen-ed to in paragraphs ( a) and {b);". 4 Amendment of section 4 of Cap 27:20 Section-+ ("Functions and powers of the C'.ouncil'') of the principal Ad is amt.'.nded in subsection (2) by the insertion after "specified in the" of"First". 5 Amendment of section 19 of Cap 27:20 Section 19 ("Disqualification for membership of Council'') of the principal ,\et is amended by (a) the insertion attcr "Register" of '\)f Estate Administrators" wherever it appears in that section; (h) the deletion of "at all reasonable times" and the substitution of "during working hours". 6 New part inserted in Cap. 27:20 The principal Act is amended hy the insertion after Pai1 III of the following Part 2018 2018 Esv,ff An'\11:,.;1;,TR·\TOR\ .\.'\!E\:DMI0;T No.3 ''PARr Iii:\ RH.isTRAn< );-; ( lF [:-.;srn .\ L'\( ·y l"R.\CT!T!( l'.':FRS 25A Register of Insolvency Practitioners (I) The Council shall estahlish a register. to be known as the Re~rister of Insolvency Practitioners, which shall contain tlw names of all persons who are pnJ\'isionally and finally registered as insol\'ell..:) practitioners as prtwided for in this Part. (2) The secretary of the CounciL subject to any directions gi,·cn to him or her by the CounciL shall he responsible fi.1r maintaining the Register and ensuring that entries arc made in the Register recording (a) the name and such other particulars as may he prescribed of each person \\ hom the Council has directed shall ht' registered, and whether such person has been pro\·isionally or finally registered in tenns of the Insoh enc) .\et I Clwprer 6:041; and (h) that a practising certificate has been issued to a registered person, or that any such practising ce11ificate has ceased to be valid; and (c) particulars of the cancellation or suspension of any person's registration. and or the restoration of any such cancelled registration or the termination of any such suspension; and (d) any necessary corrections or alterations to any particulars or facts referred to in paragraph (a), (b) or (c); and (e) any other particulars that may be preserihed. (3) The secretary of the Council shall provide the \faster of the High ( 'om1 with an updated copy of the Register by the 31 st of January of every year, and shall advise the \faster of ead1 and nery amendment to the Register within seven days of having amended the Register in compliance \Vilh subsection (2)(a) to (e). 25B Register to be open to inspection Any person may inspect the Register and make copies of any entry therein during working hours on payment of such fee as llk'l) he prescribed: Provided that no such fee shall be payable by-· (a) a police officer or member of the Public Service acting in the course of his or her duty as such; or (b) any other person whom the secretary or the Council has authorised to inspect the Register. 25C Qualifications for provisional and final registration (I) Subject lo subsection (6), a person shall be qualilied to apply for pro\'isional registration as an insohency prnctitioncr if (a) he or she is registered as a legal practitioner in terms of the Legal Practitioners Act [Chapter 27:071; or 55 No.3 (h) he or she is regist,·red as a public accountant or public auditor in terms of the Puhlic :\ccountanls and .\uditnrs .\et [Chapter 27:121: or (c) he or she isa mcmhcrofthc l nstitute of( 'hartcrcd Secrctaties and Administrators in Zimha h\\ c cstahl ishc<l in tcnm, of the Chartered Secretaries (Private) Ad [Chap/er 27:031, or (d) any related field the Council may consider. (2) SnhJect to suh:-ettion (6), a person shall he qualified to 2.ppl) for final registration as an msolvency practitioner if he or she qualifies in terms of subsection ( 1) and in addition (a) has pa"sed an e,;amination in insolvency hm as sd and approved by a sn!x:ommittec of the Council established for this purpose; an<l (h) has completed a period ,if no less than 2,500 hour;, of supervision under the guidance of an experiem:ed insolvcnc: practitioner covering a period of no less than two years and no more than three years. (3) Subsections ( 1) and (2) shall only apply toa person applying for registration as an insolvency practitioner afterthc coming into operation of this Act, orto a person who is already rq,~islered as an estate administrator hut docs not meet the transitional requirements set out in subsection P). (-+) A person who hefr>re the coming into operation of this section was a licensed estate administrator, and ·whose suhscri ptions are fully paid up, does not have to comply with the requirements of subsections ( I ) and (2) in order to be finally registered to act as an insolvency practitioner {S) A person refen-ed to in subsection (-+) shall submit such information tot he Council as it may require in order to determine whether such person is suitable fr>r appointment as an insolvency practitioner. ((J) , application made in terms of this section shall he suhmitted to tht· Council as prescrihcd within a period of 6 months from the corning into operation of this Act. (7) The Council shall have the right to deny any such applicant the right to be registered and licensed under this provision iJ it is of the opinion that such person is not a fit and proper persou for the purposes of acting as a duly registered and licensed insolvency practitioner. (8) Any existing estate administrator who without good eausc fo.ils to apply for registration under subsection (-+) within the specified time limit, will he required to meet the requirements of subsections ( 1) and (2) in order to be registered as au insolvency practitioner. (9) :\ person shall not he qualified for provisional or1inal registration if (a) he or she has beenadjudgc<lorotherwisedeclared insolvent or bankrupt in tcnns of a law in force in any country. and has not been rehabilitated or discharged; or 56 2018 Nn.3 (h) made an assignment to or arrangement or composition with his creditors in terms of a law in force in any niunlr), and the assignment, ammgement or composition has not been rescinded or set aside: or (c) within the period or li\e years immediately preceding his application for registration (i) hcorshe hasheenconvictedinsideoroutside/,imhahwe of a niminal offern..:e which, in the opinion of the Council, is of a disgraceful or tfo,honourablc nature: or (ii) he or she has behaved ina manner which, in thl' opinion or the CounciL is of a disgraceful or ,fo,honournhlc nature; or (d) he or she has bccncertificdeithcrinsideoroutside Zimbabwe to he mentallydisorderedorintdlcctua!ly handicapped orof unsound mind in tern1s of the ~dental l lcalth Act. [Chaprcr !5:12j or an equivalent law in a foreign country. and the certification remains in force. ( l 0) Hcforc reaching a decision as to whether or not a pcrsou docs not qualify for registration in terms of subsection (-1-), or is disquali tied for registration in terms of subsection (9), the Council sha!l (a) inl'onn him in writing of the grounds on which it might reach such a decision and afford him or htT a reasonable opportunity to make representations in the matter. in writing or in person as the Council thinks tit; and (b) pay due regard to any representatinns made by him or her in tenns or paragrnph (a). 25D Application for registration Any person who wishes to be proYisionally or linally registered as an insolvency practitioner shall submit to the secretary of the Council an application therefor in the form and manner presc1ihed, together with the presCtibcd registration foe. and the secretary shall forthwith cause the application to he laid before the Council. 25E Registration ( l) The Council shall consider e\'ery application for prm isional and final registration laid hefoH.' it in terms of section 25D. auJ (2) if the Council is (a) satisfied that the applicant is qualified for rtg:istration. the Council shall direct the secretary of the Council to register the applicant: or (h) not so satisfied. the ( :ouncil shall refuse the application and direct the secretary of the ( 'ouncil to not iry the applicant in writing of its decision. 57 2018 2018 No.3 0) \Vhene,·er the secretary or the Council registers a person in tem1s of this section, he or she shall issue that person "ith a certificate of provisional or tinal registration in the fonn prescribed. 25F Cancellation or suspension of registration (I) S uhject to subsection (2), the ( ·oum:il shall direct the secretary of the Council to cancel the registration of an) registered person who (a) having been qualified for registration in terms of section 25C( I )(a) to (c).ceases to he so qualified; or (h) hasheenadjudgedllrotherwise<leclaredinsol\'entorhankrupl in terms of a Im, in force in an) country; or (c) has made an assignment to or aITangemcnt nr comJXlsition with his or her creditors in terms of a law in force in an) country; or (d) is certified either inside or outside /imhahwe to be mental!) disordered or intellectually handicapped orof 1111sound mind in terms of the .\1cntal Health .\et IClwpter 15:12] (or an equirnlent law in a foreign count1'): or (e) has been found guilty of a breach of the professional code of conduct contained in the Second Schedule, and the disciplinary conuuittee of the C 'ounc ii has imposed a sanction of cancellation of registration, and all avenues of appeal or review have been exhausted. (2) Before reaching a decision as to \\ hethcr or not a regi~tercd person's registration should he cancelled in tenns ofsuhsection (1). the Council shall ( a) inform him or her in writing of the grounds on \\hich it might reach such a decision and afford him a reasonable opportunity to make representations in the matter. in writing or in person as the Council thinks tit; an<l (b) pay due regard to any representations ma<le by him in tenns of paragraph (a) (3) Subject to section 55(2), the secretary of the Council shall (a) cancel the registration; or (b) record the suspension from practice in the Register; or the registered person when directed to do so by the C '.ouncil following an inquiry in terms of that section. (-l.) Whenever the secretary cancels or suspends a person's registration in terms of this section, he or she shall ( a) notify that person,in writing. oft he cancellationorsuspension: and ( h) cause notice of the cancellation or suspension to be published in the Ga::,etre; and (c) update the Register and inform the \!aster in accordance with section 25A(3): No.3 an<l such person shall henceforth be ineligible for appointment as an insolvency practitioner un<ler the Companies Act I Chaprer 24:03 I or the Insolvency Act [ Clwpler 6:041. 25G Restoration of registration A person whose registration has hecn cancelled in tenns of section 25F may apply for his or her registrntion to he restored, and sections 25(', 25D and 25E shall apply, with necessary changes, as if he or she were applying for registration. 25H Code of ethics for insolvency practitioners (I) The C<Xk of ethics set out in the Second Schedule shal I regulate the conduct of insoh·ency practitioners. (2) The co<lc of ethics referred to in subsection (I) shall apply, with necessary changes, to the conduct of the estate administrators. (3) The .\linister may, by statutory instrument, amend the code of ethics referred to in subsection ( l ). ". 7 Amendment of section 26 of Cap. 27:20 Section 26 ("Prohibition against practice without practising ce11iticatc ")( l )(a) of the principal Act is amended by the insertion after "administrator" of "or of an insolvency practitioner". 8 New section inserted after section 29 of Cap. 27:20 The principal Act is amended by the insertion after section 29 of the following section "29A Renewal and refusal to renew practising certificates for insolvency practitioners (I) A practising certificate issued to an insolvency practitioner under section 28 shall be renewed annually in line with the period of validity referred to in section 29. (2) l 'pon application for renewal by an insolvency practitioner in terms of subsection (I), the secretary of the Council shall. prior to renewing the practising certificate, ensure that (a) the subscription fee of the applicant is fully paid up; and (b) a copy of the audit statement refeITed to in section 34 has been filed with the secretary of the Council; and ( c) the applicant has provided proofthat he or she has completed at least 15 hours of appropriate continuing professional development during the prc,·ious calendar year: Pn.)vided that in the case ofan insolvency practitioner whose registration as an insolvency practitioner has not endured for a full calendar year, this requirement may he dispensed with. 59 2018 2018 No.3 n) An insolvency practitioner who docs not comply v,ith subsection (2) shall not he issued with a renewed practising certificate until such time as he or she has complied with the requirements of that suhscction. (-+) An iusolYcncy practitioner applying for the renewal of a practising ccrtilkatc shall appl:, to the '-ccretai) of the ( 'otmcil in the fonn and manner prescrihcd.'·. 9 Insertion of new section to Part VII The principal .\et is amended hy the insertion of ne\\ section after seclion 53 as follows "53A This part to apply to insolvency practitioners This part shall. in addition to estate administrators. ab(i appl:,. \\ ith necessary changes to the insoh·ern.:y practitioners". 1 0 Amendment of section 54 of Cap. 27:20 Section 5-t ("Improper of disgraceful conduct")( I) of the principal Ad is amended hy the insertion of the following paragraphs after paragraph (g) "(h) demands front any client. employee or prospective employee any SC\:ual favour as a condition of (i) the rendering of any service in his or her capacity as a registered person; (ii) the mitigation or waiver of any fee for any professional service in his or her capacity as a registered person; (iii) doing any thing in relation to an employee or potential employee of the registered person that ,vould constitute an unfair lahour practice hy an employer in tenns of section 8(g) of the I ,abour Act lChapter 28:01 j; (iv) engaging in unwelcome sex.ually-dctem1ined heh;wiour towards any client or employee, whether verbal or othenvisc, such as making physical contact or advances, sexually coloured remarks. or displaying pornographic materials in the place where tht' registered person carries on his or her work.;". 11 New section inserted in Cap: 27:20 The principal ,\et is amended by the insertion after section 58 of the following section "58A Part VIII also to apply to insolvency practitioners This part shall. in addition to estate administrators apply to i11solve11C) practitioners\\ ith necessary changes.". 12 Insertion of new schedule to Cap 27:20 The principal Act is amended by the insertion after the e'i.isting Schedule of the following new Schedule 60 No.3 "SH'O'.\D SClll:Dt Lii (Sections 251!) PART A I Jejinirions and scope I. l. nlcss otherwise stated the following deti nitions apply "closc or immediate lamil)" includes a spouse (including pcrsnns !i,·ing together as man and\\ ife where there is no legal marriage). dependent, parent, brother, sister, child; '\:!use relationship" includes lmth a close professional and personal relationship. "cnlity" mean~ a corporate bod}; "fundamental principles" means the fundamental principles sd out in Part B of this Code: "indi\·idual within the practice" means the insoh ency practitioner. an~ principals 111 the practice and any employees,, ithin the pradKc: "insolvency practitioner" has the same meaning as under this AcL "insolvency practitioner appointment" means formal appointment in tcnns of the provisions of the Act: "insolvency practitioner's team" means any person under 1 he control of the insolvency practitioner in the carrying out of his or her functions; "practice" means the organisation in which the insolvency praditioncr practices; "principal'· in respect of a partnership, means a partner or any P'~rson who is held out to he a partner: in respect of a sole practitioner; and "professional ho<ly" means a professional bod) to which the insolvency practitioner belongs. 2. Failure to observe this Code may not constitute professional misconduct, hut will be taken into account in assessing the conduct of an insolvency practitioner. PART B Inregn1v 3. An insolvency practitioner shall be hone::-t in all professional and husiness relationships. Obju·/iri!Y i .. insolvency practitioner shall not allow bias. ctmflict of interest or m11Juc intluencc to override professional or business judgment. Prr:/essionaf nm1petence and due care 5 (I) An insolvency practitioner has a continuing duty to maintain professional kno\'vledge and skill at the level requireJ to ensnrc that a client or employer receives 61 2018 2018 No.3 competent professional service based oncmTCnt developments in prat:ticc, legislation and kchniqucs, including international best practices. (2) . insol\'ency practitioner shall act diligent!:, and in accordance with applicable technical and professional standards when providing professional serYices Conjidentialitv fr (I) An insolvency practitioner shall respect the confidentiality of information acquired as a result of professional and business relationships and shall not disclose any such information to third patties without proper and specific authorit) unless there is a legal or professional right or dut~ to disclose. (2) Confidential information acquired as a result of profc;.-.,1onal and business relationships shall not he used for the personal adnmtage of the in-;olHncy practitioner or third pa1ties. Professional bdwriour 7. An insoh ency practitioner shall (a) comply with relevant laivs and re !!ulations; and (b) anlid any action that discredits the profession; and (c) conduct him or herself with courtesy and consideration to\\arJ,; all with whom he or she comes into contact with when performing his or her work. m RTC Framework approar'h 8. ( 1) The framework approach is a method that insoh·enc) practitioners can use to identify actual or potential threats to the fundamental principles and determine whether there are any safeguards that might be available lo offset them. (2) The framc\York approach requires an insolvency practitioner to (a) take reasonable steps to identify any threats to compliarn:e with the fundamental principles; and (b) eYaluatc any such threats; and (c) respond in an appropriate manner to those threats. ldenT(fication of threats to the fundumenral principles 9. (I) . insolvency practitioner shall take reasonable steps to identify the e:,;:istcnce of any threats to compliance with the fundamental principles that arise during the course of his or her professional work. (2) An insoh'Cncy practitioner shall take particular care to identify the e'i.istcnce of threats ,vhich e:,;:ist prior to, or at the time of. taking an insol\'ency practitioner appointment or which, at that stage. may reasonably be c:\peded to arise during the course of such an insolvency practitioner appointment. (3) In identifying the existence of any threats, an insoh·cncy practitioner shall have regard to relationships whereby the practice is held out as being part of a national or an international association. (-1-) Threats may fall into one or more of live categories 62 No.3 (a) self-interest threats: which may occur as a result nf the financial or other interests of a practice or an insolvency practitioner, or of a close or immediate family member of an iudi, idual within the prat:tice; (h) self-re,·ie,, threats: which may ocrnr when a preYious judgment made by an individual \\ ithin tlw practice needs to he re-ernluateJ by the insohency practitioner: (c) athocacy threats: wluch may occur \\ hen an irnJi, idual ,,ithin the pradice promote'> a position or opinion to the point that suhse4ucnt ohjectivil) llla) he compromised; (d) familiarity threats: which may occur when. because of a dose relationship. an indi,·idual within the practice becomes too s;- mpathetic or antagonistic to the interests of others: (e) intimidation threats: which may cx:cur when an insolwncy practitioner may he deterred from acting o~jectin:ly hy threats, actual or perceived. (5) The following are c,amples of the possible threat'> that an insoh ency practitioner may face (a) self-interest threats (i) an individual \\ithin the practice having an interest in a creditor or potential creditnr with a claim that requires suhjectin: adjudication; or (ii) concerns alxlut the possihility of <.lamaging a business relationship: or (iii) concerns about potential future employment. (h) self-review threats (i) the acceptance of an insolvency practitioner appointment 111 respect of an entity where an indiYidual within the practice has recently been employed by or seconded to that entity: or (ii) an insolvency practitioner or the practice having carri.;J out professional work of any description. rncluding sequential insolvency practitioner appointments. for that entity. (c) advocacy threats (i) acting in an advisory capacity for a credik»r of an entity: or (ii) acting as an advocate for a dicnt in litigation or dispute ,vith an entity. (J) familiarity thrcats (i) an individual \Vithin the practice having a dose relationship with any individual having a financial interest in the insoh ent entity; (ii) an indi,;idual within the practice ha,·ing a close relationship with a potentiai purchaser of an insolvent's assets or business. (c) intimidation threats (i) the threat of dismissal or replacement being used to (a) apply pressure not to follow rele\'ant laws and regulations made under this Code. any other applicable guidelines or tcchnit:al or professional standards; 63 2018 2018 No.3 (b) exert influence over an insolvency practitioner appointment where the insoh·ency practitioner is an employee rather than a principal of the prattice; (ii) being threatened with litigation; or (iii) the threat of a complaint being made to the insolvency practitioner's professional body. Ernlualion of threars I 0. ( l) : insol,ency practitioner shall take reasonable steps to e, al nate any threats to compliance with the fundamental principles that he or she has identified. (2) In complying with suhparagraph (I). an insolvency practitioner shall consider what a reasonable and informed third party, having knowledgl' of all relevant information, including the significance of the threat would conclude to be acceptable. Possible safeguards l l. ( l) Ha,·ing identified and ernluated a threat to the fundamental princi pies an insolvency practitioner shall consider whether there are any safcguan.ls that mil: he available to reduce the threat to an acceptable level. (2) Generally, the releYant safeguards which vary depending on the circumstances fall into the follmving l\.\'o broad categories (a) safeguards created hy the profession and legislation; and (h) safeguards in the work environment. (3) In the insolvency context, safeguards in the work environment can include safeguards specific to an insolvency practitioner ap1x1intment, which safeguards seek to create a work environment in which threats are identified and the introduction of appropriate safeguards is encournged. Such safeguards indude (a) leadership that stresses the importance of compliance \\ ith the fundamental principles; (b) policies and procedures to implement and monitor quality control of engagements; (c) documented policies regarding the identification of threats to compliance with the fundamental principles, the evaluation of the significance of these threats and the identification and application of safcgmmJs to eliminate or reduce threats, other than those that arc triYiaL to an acceptable Je,,e!; (d) documented internal policies aud procedures requiring compliance with the fundamental principles; (e) policies and procedures tu consider the fundamental principles he fore the acceptance of an insoh ency practitioner appointment; (f) policies and procedures regarding the identification of interests or relationships bet,veen indiYiduals within the practice and third parties; (g) policies and procedures to prohibit indiYiduals from inappropriately influencing the outcome of an insolvency practitioner appointment: (h) timely communication of a practice's JX>licies and procedures, including any changes to them, and appropriate training and education on such policies and procedures to all individuals within the practice; 6-1 No. 3 I:, [ \TI' : :...n~bTR \TORS ,\\!E'\J)\!E:-.T (i) designatmg a member of senior management to he responsihk for overseeing the adequate functioning of the safeguards system; (J) a disciplinary mechanism to promote compliance \\Ith polit:ics and procedures; (k) puhlished po!Icies and procedures to encourage and cmpm, er individuals within the practice to communicate to senior le, eis within the practice or the insolvency practitioner any issue relating to compliance with the fundamental principles that concerns them, PART D SP!'l'B,1c .\PPUC,\Tlo'\ or TIiis Corn Jnso/vo1cv praC!ifioner appoin{Jnenis 12. (I) Before agreeing to accept any insolvency practitioner appointment (including a joint appointment), an insoln:ncy practitioner shall consider\\ hcther acceptance would create any threats to compliance\\ ith the fundamc11tal principles. Of pa11icular importance \\ ill be any threats to the fundamental principle of objectivity ncated by conHicts or interest, or hy an) signilicant professional or personal relationships. (2) In considering whether ohjectivit) or integrity may he threatened, an insolvency practitioner shall identify and evaluate any professional or personal relationship that may affect compliance with the fundamental principles. The appropriate re<sponse to the threats arising from any such relationships shall then be considered, together with the introduction of any possihlc safeguards. Generally, it will be inappropriate for an inso!Yency practitioner to accept an insohe1icy practitioner appointment where a threat to the fundamental principles exists, or may reasonably be expected to a1ise, during the period for which the insolvency practitioner is appointed, unlcss (a) disclosure is made, prior to the insolvency practitioner appointment, of the existence of such a threat to the Com1 or to the creditors on whose he half the insolvency practitioner would be appointed to act and no objection is made to the insolvency practitioner heing appointed; and (h) safeguards arc or will be available to eliminate or reduce that threat to an acceptable level. If the threat is other than trivial, safeguards should he considered and applied as necessary to reduce them to an acceptable level, where possible. (3) The following "afcguards may he considercd (a) involving or consulting another insolvency practitioner from within the practice to rcvievv the work done; or (h) consulting an independent third party, such as a committee of creditors. a professional lx)dy or another insolvem:y practitioner; or (c) involving another insoh'ency practitioner to perform pa1i of the wrnk, which may include such insolvency practitioner taking a joint appointment where the conflict arises during the course of the inso!Ycncy practitioner appointment or (d) obtaining legal advice from a legal practitioner with appropriate experience and expertise; or 6.:'i 2018 2018 No.3 (c) changing the members of the insolvc11C) practitioner's team: or (f) procedures to prnent access lo information by the use of information barriers (for instance, strict physical separation of such teams, confidential and secure data filing); or (g) clear guidelines li.)r individuals \Vithin the practice on issues of securit) and confidentiality; or (h) the use of conii<lentiality agreements signed by indi\'idua!s \\ ithin the practice: or (i) regular re\'iew of the application of safeguards by a senior indi\idual \\ ithin the practice not invohc<l with the insolvency practitioner appointment; or (k) terminating the financial or business relationship that gives rise to the threat; or (l) seeking directions from the \faster or the Com1. (-l-) As regards joint appointments, where an insolvenc) practitioner is specifically precluded by this Code from accepting an insolvency practitioner appointment as an individual, a joint appointment wi 11 not he an appropriate safe guard and will not make accepting the insolvency practitioner appointment appropriate. (5) In deciding whether to take an insolvency practitioner appointment in circumstances where a threat to the fundamental principles has been ideutitied, the insolvency practitioner shall consider whether the interests of those on whose behalf he or she would he appointed to act would best be served by the appointment of another insolvency practitioner who did not face the same threat and, if so, whether any such appropriately qualified and experienced other insoh·ency practitioner is likely to be available to be appointed. (6) An insolvency prnctitioncr will encounter situations where no safeguards can reduce a threat to an acceptable level. \Vhere this is the case, an insolvency practitioner shall conclude that it is not appropriate to accept an insolvency practitioner appointment. (7) Following acceptance, any threats shall continue to be kept under appropriate review and an insolvency practitioner shall be mindful that other threats may come to light or arise. There may be occasions when the insolvency practitioner is no longer in compliance with these guidelines because of changed circumstances or something which has been inadve11ently overlooked. This would generally not be an issue provided the insolvency practitioner has appropriate quality control policies and procedures in place to deal with such matters and, once disccn-cred, the matter is corrected promptly and any necessary safeguards arc applied. In deciding whether to continue an insoh:cncy practitioner appointment, the insoh·cncy practitioner may take into account the wishes of the creditors who, after full disclosure has been made, have the right to retain or replace the insolvency practitioner. (8) In all cases an insolvency practitioner will need to exercise his or her judgment to dctennine how best to deal with an identified threat. In exercising his or her judgmcnt, an insolve11C) practitioner shall consider what a reasonable and informed third part), having knowledge of all relernnt information, including the significance of the threat and the safeguards applied, would conclude to be acceptable. This consideration will he affected by factors wch as the siguificaucc of the threat, the nature of the work and the structure of the practice. 66 No.3 Conflicts (d interest B. (I) An insolvency practitioner shall take reasonable steps to identify circumstances that could pose a conflict of interest. Such circumstances may gi,e rise to threats to compliance with the fundamental principles. (2) Examples of where a conflict of interest may arise arc wherc (a) an insoh·ency practitioner has to deal with claims between the separate and conflicting interests of entities <wer whom he or she is appointed: or (h) there is a succession of or sequential insohcncy practitioner appointments: or (c) a significant relationship has existed with the entity or someone connected with the entity. (3) Where a conflict of interest arises, the preservation of conlidentiality \\ ill he of paramount importance; therefore, the safeguards used should generally include the use of effective information barriers. Practice mergers 1-1-. (I) \Vhere practices merge, they shall be treated as one for the purposes of assessing threats to the fundamental principles. (2) At the time of the merger (a) existing insolvency practitioner appointments shall be revie\\ ed and any threats identified: and (h) principals and employees of the merged practice become subject tu conunon ethical constraints in relation to accepting new insoh'enc) practitioner appointments to clients of either of the 1ixmer practices. (3) However. existing insolvency practitioner appointments that are rendered in apparent breach of this Code by a merger need not be determined automatically, pTTwided that a considered review of the situation by the practice discloses no obvi ous and immediate ethical conflict. (-1-) \rhere an individual within the practice has, in any former practice, undertaken work upon the affairs of an entity in a capacity that is incompatible ,vith an insolvency practitioner appointment of the new practice, the individual shall not work or be employed on that assignment. Professional comperence and due care 15. (I) Prior to accepting an insolvency practitioner apJX>intment the insoh'ency practitioner shall ensure that he or she is satisfied that the following rnatters han: heen considered (a) knowledge and understanding of the entity, its owners, managers and those responsihle for its governance and business activities; and (h) an appropriate understanding of the nature of the entity's business. the complexity of its operations, the specific requirements of the engagement and the purpose, nature and scope of the work to he pe1formed; and (c) knowledge of relevant industries or subject matters: and 67 2018 2018 Es-r,:r1, AD\fL"il~TRXI'ORs .\~ff''..1)1'.lli'd (d) experience \\ith relevant regulatory or reporting requirements; and (e) assignment of sufficient staff with the necessary competencies: and (!) use of experts where necessary: and No.3 (g) complianu: with quality nJntml policies and pron.'dure.., designed 1o provide reasonable assurance that specifit: engagements arl' acccpkd on!) when the) can be performed competently (2) The fundamental principle of professional competem:c and due care requires that an insoh ency practitioner should on!) accept an insolveney practitioner appointment when the insolvency practitioner has sufficient expertise. Pn!fessional and personal re!c11ions/11ps l (,. (I) The cm ironmcnt iu which insolvency practitioners work. and !he relationships formed in their professional and JX:rsonal lives, can lead to threats to the f undarnental principle of ohjectivity. In particular, the p1i11ciplc of objectivit: ma) be threatened if any individual \Yi thin the practice, the close or immediate family of an indi\'idual within the practic:e or the practice itself, has or has had a professional or personal relationship that relates to the insolvenc:y practitioner appointment hcin!,! considered. (2) Proft:ssional or personal relationships ma) include (but arc not restricted to) relationships with (a) the entity; or (h) any director, shadow director, fom1cr director or fom1cr shadow director of the entity; or (c) shareholders of the entity; or (d) any principal or employee of the entity: or (e) business partners of the entity; or (t) companies or entities controlled by the entity; or (g) companies which arc under common control; or (h) creditors (including debenture holders) of the entity; or (i) debtors of the entity; or (i) close or immediate family or the officers of the entity; or (k) others with commercial relationships with the praclicc n) \\"here a professional or personal relationship of the type described in subparagraph (:?,) has been identified. the insolvency practitioner shall evaluate the impact of the relationship in the context of the insohcnc) practit inner appointment being sought or considered. Issues to consider in crnluating whether a relationship creates a threat to the fundamental principles may include the following (a) the nature of the prc\'ious duties undertaken by a practice during an earlier relationship with the entity; (b) the impact of the work couductcd by the practice on the financial state or the financial stability of the entity in respect of which the insolvency practitioner appointment is being considered; 68 No. 3 (c) whether the Ice received for the work by the prnctice is or\\'a~ significant to the practice itself or is or was substantial; (d) the time elapsed since professional work was last caITied out hy the practice for the entity; (e) ,vhelher the insolverK) praditioner appointment being considere<l inYolves consideration of any work previous!) undertaken h) the practice for that entity; (f) the nature of any personal relationship and the pro\.imitj of the insPlvcni.:y practitioner lo the individual with whom the relationship exists and, \\ here appropnate, the proximil) of that individual to the entity in relation to whi,:h the insoh cncy practitioner appointment relates; (g) whether any reporting obligations will arise in respect ol the relevant indi\·idual with whom the relationship exists; (h) !he nature of any previous duties undertaken hy an indiYidual within the practice during any earlier relationship with the entity: (i) the extent of the insolvency practition..:r's team's familiarity with the indi,·iduals connected with the entity. (-l-) Ilm ing identified and evaluated a relationship that may u·eate a threat to the fundamental principles, the insoh ency practitioner shall consider his or her response including the introduction of any possible sakguards to n:ducc the threat to an acceptable lcYel. Such safeguards may include (a) withdrawing from the insohcncy practitioner's team; (h) terminating (where possible) the financial or business relationship giving ris,· to the threat; (c) disclosure of the relationship and any financial bcnctit received h:, the practice (whether directly or indirectly) to the entity or to those un whose behalf tlw insolvency practitioner would be appointed to act. 17. (l) An insoh enq practitioner may encounter situations m which no reasonable safeguards can be introduced to eliminate a threat arising from a professional or personal relationship, or to reduce it to an acceptable k, el. In such situations, the relationship in question will constitute a signiticanl professional or personal relationship. Where this is the case the insolvency practitioner shall conclude that it is not appropriate to take the insohcncy practitioner appointment. (2) Consideratim1 should alwa) s be gi\ en to the perception of others\\ hen deciding whether to accept an insolvency practitioner appointment. Whilst an insohency practitioner may regard a relationship as not heing significant to the insolvenq practitioner appointment, the perception of others may differ and this may iu some circumstances be sufficient to make the relationship significant JJectling 1rillt !he assets of an entity 18. ( 1) SaYe in circumstam.:es which clearly do not impair the insol\'Cl1C) practitioner's objectivity, insolvency practitioners shall not themselves acquire, direct!: or indirectly, any of the assets of an entit), nor knowingly pemlit any individual within the practice, or any close or immediate family member of the insolvency practitione: or of an individual within the practice, directly or indirectly, to do so. 2018 2018 ESTAl'E ,\m.nl\.'ISTR \ToRs A~usD~ll-;NT No.3 (2) Where the insol\'ency practitioner sells the assets and busines~ ur an insol\'ent company sh011ly after appointment on pre-agreed terms. this could lead to an actual or ,~rccivcd threat to objectivity. Creditors or others not im ohwl in the prior agrecm1int may also sec the sak as a threat to o~jecti,·ity. The threat 10 objcdi\'ity may be eliminated or reduced tu an acceptable level by safeguards such as obtaining an independent valuation of the assets or business being sold. or the consideration of other potential purchasers. (3) lt is also particularly important for an insoh enc: practitioner to take care to ensure\ where to do so does not conflict with any legal or professional obligation) that his or her decision-making processes are transparent. understandable and readil) identifiable to all third pai1ies who may he affected hy the sale or proposed sale. Ohwining specir1/isr adi'ice and se1T1ces 19. (I) \Vhen an insol\'ency practitioner intends to rely on the advice or \\ ork of another, the insoh-ency practitioner shall evaluate whether such reliance 1s warranted. The insolvency practitioner shall consider factors such as reputation. e.\pertisc, arnilable resources and the applicable professional and ethical standard~. Any payment to the third party should reflect the, alue of the work undertaken. (2) Threats to the fundamental principles (for e.\ample familiarity threat.; and self-interest threats) can arise if services arc provided by a regular source independent of the practice. Safeguards should he introduced to reduce such threats to an acceptable lc,·cJ. (3) Where services are pnwided from within the practice, or hy a part) "ith whom the practice (or an individual within the practice) has a business or personal relationship, an insolvency practitioner shall take particular care to ensure that the best value and service is being provided. Fees and other t,;pes of remunerarion 20. (1) \Vhere an engagement may lead to an insohency practitioner appointment, an insolvency practitioner shall make any party to the work aware of the terms of the work and, in particular, the basis on which any fees are charged and which services are co\'ered by those fees. (2) After accepting an insolvency practitioner appointment, an insolvency practitioner must not accept referral fees or commissions unless where to do so is for the benefit of the insolvent estate. (3) Where an insoh·ency practitioner has accepted such fees or commissions. he or she must make disclosure lo creditors. G(lis and hospita!itv 21. (I) An insolvency practitioner, or a close or immediate family member, may be offered gifts and hospitality. In relation to an insoh·ency practitioner appointment, such an offer will give 1isc to threats to compliance with the fundamental principles. For e.\ample, self-interest threats may arise if a gift is accepted and intimidation threats may arise from the possibility of such offers being made public. (2) Jn deciding whether to accept any offer of a gift or hospitality the insolvency practitioner shall have regard to what a reasonable and informed third pm1y ha\'ing knowledge of all rclcnmt infonnation would consider to be appropriate. 70 No.3 Where such a reasonahlc and informed third party would consider the gift to be made in the normal course of business without the specific intent to influence decision making or ohtain information. the insoh·cncy practitioner may generally conclude that there is no significant threat to compliance with the fuwJarnental p1inciples, (3) Iran insolvency practitioner encounters a situation in which no reasonable safeguards can he introduced to reduce a threat arising from offers of gifts or hospitality to an acceptahlc lcYel he or she should conclude that it is not appropriate to accept the offer. (-+) An insolvency practitioner shall not offer or pnwide gifts or hospitality where this would give rise to an unacceptable threat to compliance with the fundamental principles, Rerord keeping 22. (1) An insolvency practitioner ,,ill he ex.pected to he able to demonstrate the steps that he or she took and the conclusions that he or she reached in identifying. c, aluating and responding to any threats. both leading up to and dming an insoh·enc) practitioner appointment, by reference to written up to date records. (2) The records an insolvency practitioner maintains, in relation to the steps that he or she took and the conclusions that he or she reached, must be sufficient to enable a reasonable and informed third party to reach a Yiew on the appropriateness of his or her actions, nmeliness 23 (I) ln the interests of minimising costs. administrations should be conducted in a timely manner. To ensure that statutory requirements arc met insolYellC) practitioners should use and maintain a .:hecklist or other systems that alert them to critical dates such as (a) statutory obligations and notifications; and (h) meetings; and (c) rep011ing: Provided that where an ex.tension of tirnc is required, the insolvency prnctitioner will need to give reasons ft)r the need for additional time. ('.2) An insolYency practitioner may claim remuneration and costs of applying for an extension of time from the administration. sut-~ject to any order from the ( \mt1. An insoh·ency practitioner may not claim remuneration and costs for applying for an extension of time if the reason for the failure to meet the deadline was attri butablc to the poor conduct of the insolvency practitioner such as (a) failure to meet deadlines; or (b) lack of knowledge of the time limits; or (c) poor processes; or (d) inadequately trained or supervised staff (J) Insolvency prnctitioners must ensure that stakeholders arc clearly advised of time limits that impact on them and the consequences of not meeting those time limits, 71 2018