Financial Professional Services Trading Advice Transparency Bill

Financial Professional Services Trading Advice Transparency Bill

Member’s Bill

88—1

Explanatory note

General policy statement

The position of this Bill is that professional advisers that recommend receivership, liquidation, or administration of a business, or any other status requiring a third party to manage the ongoing trading or management of the business, or disposal of its assets (such as being appointed a receiver), may not, having provided the initial advice, undertake any of those subsequent roles in respect of the entity in question.

An inherent conflict of interest exists in a case whereby provision of the initial advice for which the professional services firm is appointed could result in subsequent fee-earning business in respect of the entity in question, depending on the particular advice given. This bill removes that conflict.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 provides that the Bill comes into force on the day after the date on which it receives the Royal assent.

Part 1Amendments to Companies Act 1993

Clause 3 provides that Part 1 amends the Companies Act 1993.

Clause 4 amends section 239F of the Companies Act 1993 to prevent a person from being appointed as administrator of a company if the person recommended the administration or is associated with the person who recommended the administration.

Clause 5 amends section 280 of the Companies Act 1993 to prevent a person from being appointed or acting as liquidator of a company if the person recommended the liquidation or is associated with the person who recommended the liquidation.

Part 2Amendments to Receiverships Act 1993

Clause 6 provides that Part 2 amends the Receiverships Act 1993.

Clause 7 amends section 5 of the Receiverships Act 1993 to prevent a person from being appointed or acting as a receiver if the person recommended the receivership or is associated with the person who recommended the receivership.

1 Title

This Act is the Financial Professional Services Trading Advice Transparency Act 2021.

2 Commencement

This Act comes into force on the day after the date on which it receives the Royal assent.

Part 1 Amendments to Companies Act 1993

3 Principal Act

This Part amends the Companies Act 1993.

4 Section 239F amended (Who may be appointed administrator)

(1)

In section 239F(1), after “subsection (2)”, insert “or subsection (3).

(2)

After section 239F(2), insert:

(3)

A person is disqualified from appointment as an administrator if that person—

(a)

is a professional adviser who recommended the administration of the company; or

(b)

is employed or otherwise engaged by—

(i)

the person described in paragraph (a); or

(ii)

the business for which the person described in paragraph (a) was employed or otherwise engaged when recommending the administration of the company.

(4)

In this section, professional adviser means a person whose employment or business activities includes providing advice on the financial management of companies.

5 Section 280 amended (Qualifications of liquidators)

(1)

After section 280(2), insert:

(2A)

A person must not be appointed or act as a liquidator if the person—

(a)

is a professional adviser who recommended the liquidation of the company; or

(b)

is employed or otherwise engaged by—

(i)

the person described in paragraph (a); or

(ii)

the business for which the person described in paragraph (a) was employed or otherwise engaged when recommending the liquidation of the company.

(2)

In section 280(3), replace “subsection (1) or subsection (2)” with “subsection (1), (2), or (2A).

(3)

After section 280(4), insert:

(5)

In this section, professional adviser means a person whose employment or business activities includes providing advice on the financial management of companies.

Part 2 Amendments to Receiverships Act 1993

6 Principal Act

This Part amends the Receiverships Act 1993.

7 Section 5 amended (Qualifications of receivers)

(1)

After section 5(2), insert:

(2A)

A person must not be appointed or act as a receiver if the person—

(a)

is a professional adviser who recommended the receivership of the grantor; or

(b)

is employed or otherwise engaged by—

(i)

the person described in paragraph (a); or

(ii)

the business for which the person described in paragraph (a) was employed or otherwise engaged when recommending the receivership of the grantor.

(2)

In section 5(3), replace “subsection (1) or subsection (2)” with “subsection (1), (2), or (2A).

(3)

After section 5(3), insert:

(4)

In this section, professional adviser means a person whose employment or business activities includes providing advice on the financial management of incorporated or unincorporated bodies.