Independence? But who’s asking!

Over the years I have been very proud to be a member of a profession, essentially the accounting profession, that prided itself on focusing on taking an independent stance in respect to dealing with and for its clients.  It was something that was driven in from the day you started and as a school leaver, you were somewhat even younger and impressionable.  It was in those early days that I remember seeing a client come in with a request that was declined by the Partner simply because it would compromise his position and potentially leave him exposed.  The client marched on took his business elsewhere and no doubt got the answer he wanted; … for a fee.

Interestingly though some time later that client was to reappear on the doorstep seeking assistance.  This time, the circumstances were different.  The client was in the process of making an acquisition and it was now critical to him to have an advisor that would not waver and would call it as it was seen.  It’s all in the perspective really, but what is even more concerning is that even the staunchest of clients will often go for what is good, regrettably rather than not necessarily what is right.

The insolvency profession over the years has been at the centre of some of the ugliest stoushes relating to independence which has ultimately resulted in the great statement of Independence, the DIRRI, i.e. the Declaration of Independence, Relevant Relationships and Indemnities.

Some time ago, well before these were an issue I remember a practitioner who took on an appointment to a hospitality business with no visible connection to the organisation prior to the appointment.  Alas, the same person was a paid advisor to a significant local competitor, and as such his involvement to close down the operations of his appointee, would, to the reasonably minded have beggared the question as to whether it was the right thing for the appointee or the right thing for the competitor?

In essence ASIC’s and theoretically ARITA’s stance is that ANY involvement with a future appointment prior to that appointment is taboo.  Regardless as to whether such an involvement is advantageous to creditors or not.

Recently we have seen the issues relating to the goings on in South Australia regarding the appointments there too.  It became clear that certain funding Creditors had had one organisation involved for some time and in the event that there was to be an appointment then they were the anointed ones.  Any concept of a conflict resulting from a, potentially significant, prior involvement was not even worth considering, and interestingly has not even been commented formally on by any regulatory or professional body.

The Board then appeared to decide that they were more comfortable with a more ‘independent’ organisation.  Whilst it is noted that this team were independent of the funders they did do significant funded preparatory work prior to their appointment.  Regardless, the regulators and the professional bodies remained silent.

Notwithstanding that issue, before the Meeting to consider whether they were replaced or not was convened the issue was already in the hands of lawyers and those that could were exerting an influence that may not necessarily succeed at a meeting of Creditors.  Ultimately the prevailing wind won the day and the new alternate Team made it to the table.  Again there remained a deathly silence from the regulators and the professional bodies.

It is now a known fact within the industry that the firm at the core of this that in some way considered themselves to adopt an independent stance has paid dearly.  The regulators and the professional bodies remain silent.

Once upon a time, there were purportedly two types of practitioners; Creditor based or in the alternate Debtor based, and you were branded as such.  Maybe one day we just may well get a profession that is actually, and truly independent.

 

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