[Type text] Insolvency Policy. AH/KM/CR/8933 Page 1 of 9

Transcription

1 [Type text] Insolvency Policy AH/KM/CR/8933 Page 1 of 9

2 Policy 1. AAT policy on insolvency AAT expects its members to manage their financial affairs correctly and efficiently at all times. Being insolvent indicates serious failure and can call into question a member s competence in the handling of client financial affairs. AAT is concerned to ensure that members maintain high standards for the benefit of those to whom they provide services and so that there is ongoing public confidence in the profession. AAT therefore views the situation very seriously, and a member may be found guilty of misconduct, where he becomes bankrupt or enters into an arrangement with creditors. For these reasons, an applicant who is insolvent, may not be suitable for admission (or readmission) to membership. Likewise a member is obliged to inform AAT when he becomes insolvent, so AAT can consider whether this has any bearing on his continued membership. This is explained more fully in the guidance to accompany this policy. Similar considerations may also apply where a member or an applicant has been a partner or director of an entity which became insolvent, or where in certain circumstances he has failed to satisfy a judgment debt. In this policy and associated guidance, he is deemed to include she. 2. Definitions For the purposes of this policy and associated guidance: 1. Applicant means: a) A person who has either: i. Applied to be a full member; or ii. Applied to be a student member. 2. Bankruptcy means bankruptcy under the Insolvency Act 1986 and includes Debt Relief Orders. 3. Formal arrangement means: a) Individual Voluntary Arrangements (IVAs) under the Insolvency Act b) Deeds of Arrangement under the Deeds of Arrangement Act c) Protected Trust Deed (Scotland). d) County Court Administration Orders. 4. Informal arrangement means other types of arrangements which are outside of a formal insolvency process as defined by the Insolvency Act

3 5. Insolvency means an inability to pay one s debts when they fall due and/or liabilities exceed assets. 6. Insolvent liquidation/administration/receivership/company voluntary arrangement means: a) The member, applicant, student or affiliate has been a partner or director in an entity which i. had a winding-up order made against it on grounds of insolvency; or ii. made a proposal to enter into a voluntary arrangement on grounds of insolvency, or has entered into such a voluntary arrangement; or iii. had an administration order made against it on grounds of insolvency; or iv. had a receiver appointed by a creditor or by a court on the application of a creditor; 7. Judgment debt means a) The member, applicant, student or affiliate has been subject to a County Court Judgement (CCJ) or a High Court Judgement (HCJ); and b) that judgment relates to a financial claim (for example, for a debt) brought by a creditor ; and c) the member, applicant, student or affiliate has not discharged that debt within one calendar month of the date of judgement resulting in the entry remaining on the Register of Judgements. 8. Member means a person admitted to membership of the Association in accordance with the provisions of the Articles of Association and including a fellow member and an honorary member but not including a student or affiliate. a) Misconduct is given the same definition as that contained in paragraphs 11 and 12 of the Disciplinary Regulations 9. Student or Affiliate means: a) A person registered with AAT for the purposes of sitting AAT examinations and/or b) A person registered with AAT as an affiliate. 3

4 Policy guidance This policy guidance explains factors that AAT may consider when assessing applications for admission (or readmission) to membership where the applicant is or has been insolvent; or where such is brought to the attention of AAT with regard to a member during the course of their membership either by way of declaration by the member, or notification by a third party how AAT will consider such matters as potential misconduct. Members, applicants, students or affiliates are not required to notify AAT of loan agreements they enter into for any reason (for example Student loans, mortgages, car finance agreements etc.), even if the purpose of the loan is to help pay off other debts (for example a re-mortgage or a debt consolidation loan). In the case of disciplinary action where appropriate, all relevant considerations should be taken into account when determining the appropriate penalty for misconduct. The circumstances of a particular case may justify a lesser (or sometimes a more serious) level of sanction. AAT s Indicative Sanctions Guidance should be used by members of the Disciplinary Tribunal and Investigations Team in determining an appropriate level of sanction. 1. Bankruptcy and Debt Relief Orders 1.1 In the case of applications for student and full membership, in the absence of a disciplinary finding the following shall apply in respect of the granting of applications as a general rule: a) Where an applicant is subject to discharged bankruptcy, or the moratorium period in respect of a Debt Relief Order has expired, he may be permitted to become a member, whether student or full. b) Where an applicant is subject to bankruptcy that has not been discharged, or a Debt Relief Order where the moratorium period has not expired, then he shall not be permitted to become a member, whether student or full in the absence of exceptional mitigating circumstances as determined by AAT. c) In the case of b) above, the applicant is not precluded from reapplying for membership when his bankruptcy has been discharged, or in the case of a Debt Relief Order, the moratorium period has expired. d) In the case of a) above, where a member, whether student or full, has not disclosed the matter to AAT, then future applications shall be considered in the context of their failure to disclose material information to AAT. 1.2 In the case of disciplinary cases or where exceptional mitigating circumstances exist in the case of applications for student membership, AAT may consider relevant factors which may warrant it appropriate to deviate from the general rule determined in 1.1(b) above, such as: a) The extent of the indebtedness that resulted in the bankruptcy or arrangement. b) The reasons for the indebtedness, the circumstances of the bankruptcy or arrangement and the extent to which the member, applicant, student or affiliate was personally at fault. i. The more the member, applicant, student or affiliate was personally at fault, the more appropriate to tend towards severity in the sanction, particularly if he had been reckless or dishonest. ii. On the other hand, if there were factors beyond the control of the member, applicant, student or affiliate (for example as a result of ill health), this may be considered a mitigating factor. 4

5 c) The extent to which the member, applicant, student or affiliate had reasonably sought to resolve matters with his creditors. i. If, for example, the member, applicant, student or affiliate had unreasonably resisted steps that his creditors were forced to take against him, this may be an aggravating factor. ii. If, on the other hand, he sought properly and proactively to resolve matter to the satisfaction of his creditors, this may be a mitigating factor. d) The extent to which the member, applicant, student or affiliate cooperated with the trustee in bankruptcy or with the Supervisor of the Voluntary Arrangement e) Whether there is a history of serious indebtedness or a previous bankruptcy (or arrangement) i. If there is such a history, it may be appropriate to tend towards severity in the sanction f) With particular reference to Members, whether the bankruptcy (or arrangement) arose through an identifiable incompetence on the part of the Member that could be remedied within a period of time. g) Whether the Member, Applicant, Student or Affiliate has co-operated with the Association h) With particular reference to Members or Students, whether he had complied with his duty to inform the Association within 30 days that he had been made bankrupt or had entered into an arrangement i) With particular reference to Applicants, the Applicant s attitude towards financial management and whether he appears now to be able to manage his own financial affairs correctly and efficiently at all times. i. If it appears that the Applicant is able to identify mistakes he made, has learned from them and is now able to manage his own financial affairs competently, this may tend towards allowing admission. If this is the case, the Membership Assessor in the case of applications for membership or the Director in relation to applications for student membership may also consider whether it is appropriate in the circumstances to impose any conditions on Membership. 2. Arrangements (formal and informal) 2.1. In the case of applications for membership, the following shall apply in respect of the granting of applications as a general rule: Formal arrangements a) In the case of a formal arrangement with creditors where the applicant can demonstrate 12 consecutive months of payments (where relevant) immediately preceding their application for membership and confirmation of their supervisor that they have fully complied with the terms of their arrangement. 5

6 Informal arrangements b) In the case of an informal arrangement with creditors, an applicant may be permitted to become a member if he can demonstrate 12 consecutive months of payments immediately preceding their application for student membership to the satisfaction of each individual creditor with whom they have an arrangement, or a debt management organisation as appropriate. In the absence of availability of this information AAT may use its discretion and any information before it to make such a determination. 3. Insolvent liquidation/administration/receivership/company voluntary arrangement 3.1. When an applicant or member has been a partner or a director with an entity which has been subject to insolvent liquidation, or administration, or receivership, or a company voluntary arrangement, they may be admitted to membership depending on the circumstances of the case, and in particular, weight will be given to the representations of the Insolvency Practitioner as to the nature and extent of the applicant s responsibility in the demise of the company s finances to the extent of insolvency Where a member, as a result of insolvency proceedings been subject to disqualification as a company director under the Company Directors Disqualification Act paragraph 6 and that disqualification remains in force, the applicant may be admitted to student membership provided that there is no suggestion of dishonesty or fraud on the part of the applicant. Where there is any suggestion of dishonesty or fraud, then the member may only be admitted to membership at the discretion of the Membership Assessor. 4. Non-payment of judgment debt 4.1. In the case of non-payment of judgment debt (CCJs and HCJs), the following apply: a) Where an applicant has paid off their judgment debt in full and had the entry removed from the register of judgments either by way of request for removal or expiry of the time period), they may be permitted to become a student member. b) Where an applicant has not paid off the judgment debt, and the judgment remains on the register, they may be permitted to become a student member, subject to the provisions of paragraph 2 above in respect of the on-going arrangement with creditors. c) Where the judgment no longer appears on the register, but the debt to which it relates has not been discharged, the applicant may be permitted to become a student member subject to paragraph 2 above. 5. Guidance on admission to membership 5.1. Admission (or readmission) to membership is at the discretion of AAT currently the Membership Assessor in the case of applications for membership, although decision-making may be delegated as considered appropriate in accordance with the scheme of delegation Membership assessors may rely on the decision taken when a member was admitted to student membership in the absence of further insolvency occurring since that decision was taken In relation to an application for membership, the guideline starting point is: 6

7 a) Not to admit him if he is the subject of an undischarged bankruptcy order b) In the case of a formal arrangement with creditors, not to admit him if he is unable to demonstrate 12 months of continuous repayments to each creditor immediately preceding the application to the satisfaction of the supervisor c) In the case of an informal arrangement with creditors, not to admit him if he is unable to demonstrate twelve months of continuous repayments to each creditor immediately preceding the application to the satisfaction of AAT, with a credible repayment plan in place, but d) To admit him in other circumstances In relation to an application for student membership, the guideline starting point is: a) Not to admit him if he is the subject of an undischarged bankruptcy order b) To admit him in other circumstances It will be for the applicant to satisfy the Association of his suitability for membership In reaching his decision, the Membership Assessor in the case of applications for membership or the director in the case of application for student membership should consider whether there are any relevant factors which might tend to justify a more severe, or a more lenient, approach in any case Where a student does subsequently apply for membership, his application will be considered afresh and determined in the light of his particular individual circumstances in accordance with any policy or guidelines in force relating to applicants for membership. 6. Guidance on application of the Disciplinary Regulations 6.1. Where the Association receives notification from the member or student (or if it comes to the attention of the Association by other means) that: a) He has become bankrupt b) He has entered into a formal arrangement with his creditors c) He has entered into an informal arrangement with his creditors d) One of the other insolvency events has occurred e) He meets the criteria for non-payment of judgment debt the matter will be viewed as potential misconduct and will be dealt with under the Disciplinary Regulations There is a duty on every member and student or affiliate to inform the Association within 30 days if any of the criteria outlined in 6.1 above are met. Failure to inform the Association in the circumstances outlined above shall amount to misconduct Where a matter is dealt with under the Disciplinary Regulations, (and the Conduct and Compliance team considers after initial inquiry that there is a case to be pursued), the Investigations Team will determine whether, on the basis of the evidence before it, the Member is guilty of misconduct, and make a recommendation on this basis In deciding whether or not there has been misconduct in insolvency cases, the Investigations Team (or Disciplinary Tribunal) should consider the factors outlined in sections 1 to 4 above. 7

8 6.5. There is a range of sanctions that may be recommended (by the Investigations Team) or ordered (by the Disciplinary Tribunal) where a Member is found guilty of misconduct Determination of a sanction should be undertaken in accordance with the provisions detailed within the Indicative Sanctions Guidance The IT/DT should also note: a) It is unlikely to be appropriate to fine i. a member (under regulation 40(a)(viii)); or ii. a student or affiliate (under regulation 40(b)(v)) b) With particular reference to students, it is unlikely to be appropriate to declare an assessment null and void (under regulation 40(b)(vii)). c) Where the member concerned is a member in practice and the circumstances are not deemed to justify expulsion, it may be appropriate to order/recommend that his practising licence be withdrawn (under Regulation 40(a)(iii)) and/or that he be declared ineligible for a practising licence (under Regulation 40(a)(iv)). This leaves him the option of continuing to practice as an employed member. d) Students or affiliates are not permitted in any event to advertise their connection with AAT when providing professional services to clients. The issue of withdrawing AAT s endorsement of their services does not therefore arise. e) In the case of a fellow member, if the circumstances are not deemed to justify expulsion, it may be appropriate to remove the fellow member status (under Regulation 40(a)(v)) in addition to any other sanction under Regulation 40(a)(ii) to (ix). f) In any case where the circumstances are not deemed to justify expulsion or in the case of Student withdrawal of student membership, it may be appropriate to give advice under regulation 42. 8

9 7. Guidance on readmission 7.1. IT/DT recommendation as to readmission: a) Where the DT orders/it recommends expulsion of a member or withdrawal of student membership, it should consider whether to recommend a period of time which should be required to lapse prior to readmission being considered. b) If such a recommendation is to be made, the guideline starting point is: i. For students- one year although this may be increased or decreased depending on the circumstances within a suggested range of 6 and 18 months. ii. For members- 18 months although this may be increased or decreased depending on the circumstances within a suggested range of one to three years. c) The DT/IT should also consider whether to recommend any terms on which readmission should be made conditional. d) If a student has his registration withdrawn or a student or affiliate is declared unfit to become a member, he should be advised that if he subsequently applies to be readmitted as a student or admitted as a member of the Association, his case will be considered in accordance with any policy and guidelines in force relating to Membership admission (and readmission), and any recommendation made by the DT/IT at the time of the withdrawal of the student membership will be taken into account. e) If a member is expelled, he should be advised that if he subsequently applies to be readmitted, his case will be considered in accordance with any policy and guidelines in force relating to membership readmission, and any recommendation made by the DT/IT at the time of the expulsion will be taken into account Membership Assessor recommendations as to readmission a) Where the application is for re-admission, the Membership Assessor in the case of applications for membership or the Director in the case of applications for student membership, should consider the nature and extent of the Applicant s disciplinary history with AAT. b) If the Applicant was previously expelled under the Disciplinary Regulations in respect of the matter under consideration, or had his student membership withdrawn, the Membership Assessor in the case of applications for membership or director in the case of applications for student membership, should take account of any recommendation made by the Disciplinary Tribunal (or the Investigations Team if the expulsion or withdrawal of student membership was by consent) as to any period of time which should be required to lapse before readmission be considered and/or any terms on which readmission should be made conditional. c) If no recommendation was made by the Investigations Team or Disciplinary Tribunal, the Membership Assessor or Director, should consider the guideline starting points as set out in 5.3 above. 8. Appeals An individual may appeal a decision taken by a Membership Assessor or under the Disciplinary Regulations subject to the provisions detailed within the Appeals Policy and Procedure. 9