1.1 The purpose of this document is to provide the industry with guidance on what it means to be a ‘fit and proper’ person in the context of gaining, and maintaining, registration as a personal insolvency practitioner in Australia.
1.2 Being a fit and proper person is integral to maintaining public confidence in the personal insolvency profession. Ideally only persons who act with honesty, integrity, diligence, judgement and good character will operate within the industry – so that vulnerable users can feel confident when engaging their services.
1.3 This statement is relevant to those who are registered trustees and registered debt agreement administrators, or those who intend to apply to become one. The references relating to the Inspector-General in this document also extend to independent committees for the purposes of making registration and disciplinary decisions under the Bankruptcy Act 1966 (‘the Act’).
1.4 This Inspector-General Practice Statement will not limit, in any way, the ability of the Inspector-General to inquire and determine whether a person is a fit and proper person.
2.1 For registration as a registered trustee, an applicant must satisfy a registration committee that they are a fit and proper person under section 20-20 of Schedule 2 of the Act.. Once registered, a trustee must remain a fit and proper person to maintain their registration, otherwise it may form a ground for the Inspector-General to issue a show-cause notice under section 40-40 of Schedule 2 of the Act.
2.2 For debt agreement administrators, the fit and proper requirement is applicable to those who are registered, or have had their registration renewed, on or after 27 June 2019. To be registered as a debt agreement administrator, an applicant must satisfy the Inspector-General that they are a fit and proper person under section 186C of the Act. For registered company administrator applicants, the company itself and each director of the company must be a fit and proper person. Once registered, they must remain a fit and proper person to maintain registration. Otherwise, it may form a ground for the Inspector-General to request a written explanation from an administrator under section 186K and 186L of the Act, asking why the administrator should continue to be registered.
3.1 There is no set standard test to determine what constitutes ‘fit and proper’ and it is not defined by the Act. This is in acknowledgment of the fact that the concept is constantly evolving to reflect the expectations of the community.
3.2 Establishing whether a person is fit and proper requires the Inspector-General to take into account a range of factors that shows a person has sufficient honesty, integrity, diligence, judgement and good character to carry out the duties and activities required of them as a personal insolvency practitioner.
3.3 A very wide discretion is necessary to take into account the context which is relevant to the duties of a personal insolvency practitioner. In the High Court case of Hughes and Vale Pty Ltd v State of NSW (No 2)[1] Dixon CJ, McTiernan and Webb JJ stated that the purpose of the fit and proper test was “to give the widest scope of judgment and indeed for rejection”.
3.4 The mere fact that a person’s conduct falls into one of the listed considerations in this statement does not automatically mean that a person is not fit and proper. The Inspector-General will assess the relevance and significance of the conduct in determining whether the person is fit and proper. An assessment may also take into account whether there has been a significant single breach or multiple breaches of conduct of lesser severity when determining whether the person is fit and proper.
4.1 The following are relevant considerations the Inspector-General may have regard to when determining a person is not fit and proper. It is not intended to be an exhaustive list, and regard may be had to other factors that, in the view of the Inspector-General, are also related to whether or not a person is or remains fit and proper.
Honesty |
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Integrity |
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Diligence |
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Judgement |
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Competence |
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Professional character and reputation |
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4.2 In assessing the conduct of a personal insolvency practitioner, the Inspector-General may consider compliance with:
- Bankruptcy Legislation – such as the Bankruptcy Act 1966, Bankruptcy Regulations 1996 and Insolvency Practice Rules (Bankruptcy) 2016
- Professional industry standards – such as APES 330 Insolvency Services
- Codes of Professional Conduct – such as the ARITA Code of Professional Practice
- Inspector-General Practice Statements and Directions
- Integrity Principles for Trustees and Debt Agreement Administrators - While the Integrity Principles are broader than the ‘fit and proper’ test, they offer a vision of good culture that may inform how a ‘fit and proper’ person should conduct themselves
5.1 Additional considerations will be taken into account which may mitigate or aggravate the significance of an incident identified by the Inspector-General. These factors are not intended to be an exhaustive list, and regard may be had to other factors that, in the view of the Inspector-General, are also related to whether or not a person is or remains fit and proper.
Repeat conduct |
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Severity |
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Consequences of actions |
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Time elapsed |
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[1] (1955) 93 CLR 127