How designated services apply to insolvency practitioners

You should read this guidance alongside our professional designated services guidance, which explains each table 6 designated service in more detail.

Who this guidance is for

This guidance is for any of the following:

• insolvency practitioners
• advisers who provide insolvency‑related or restructuring services
• firms that support insolvency appointments.

It applies across corporate and personal insolvency, and to formal appointments and advisory engagements.

Insolvency practitioners may provide designated services as part of their appointments or while providing advisory services. This may include where you control, restructure or dispose of assets, or assist a person with transactions, as part of administering, restructuring, or liquidating a body corporate or legal arrangement.

Whether you provide a professional designated service depends on what you do, not your appointment title. You may be providing a table 6 designated service if your actions directly assist a person to do any of the following:

• carry out a transaction (such as a sale, transfer or financing)
• create or restructure a body corporate or legal arrangement (for example, implementing a restructuring arrangement or formal insolvency process).

If you only provide general or high-level advice and don’t take steps that assist a person to carry out a transaction, or otherwise assist with creating or restructuring a body corporate or legal arrangement, you may not be providing a designated service as part of that engagement.

Why insolvency practitioners are subject to AML/CTF regulation

Insolvency practitioners are appointed after a business or individual experiences financial distress. As part of their role, they take control of the business or estate and investigate its affairs.

This can include identifying assets and liabilities, reviewing financial records, and understanding who has been involved in the business, such as directors, shareholders, creditors and other connected parties.

This places insolvency practitioners in a unique position to understand how a company or estate operated before their appointment. In some cases, this may reveal indicators of criminal activity or misuse of corporate structures that occurred prior to their involvement.

For example, during an appointment you may identify:

• unusual or complex company structures that make it difficult to understand ownership or control
• evidence that a business has been transferred between entities, including where a similar business is being carried on through a new company (for example, phoenixing activity)
• the use of shelf or inactive companies, or directors who appear to be acting on behalf of others with little knowledge of the company’s activities
• cash-intensive operations or unexplained flows of funds through the business
• inflated or fictitious creditor claims
• assets or funds that may have originated from unlawful activity.

These risks don’t arise because of the role of the insolvency practitioner. Instead, they reflect how insolvency processes and corporate structures may be misused before an appointment occurs.

In carrying out an appointment, you may also need to deal with assets, funds or transactions connected to these earlier activities. For example, you may realise company property, manage funds, or participate in a restructuring or sale. This means you may need to handle assets or transactions that present money laundering, terrorism financing or proliferation financing risks.

Insolvency practitioners are well placed to detect, manage and report on these risks because they review and reconstruct the affairs of an entity after the fact, where information may not have previously been scrutinised in the same way.

In some cases, these activities will be designated services under table 6. As part of providing these designated services, insolvency practitioners are well placed to identify, manage and report suspicious activity where it arises.

Whether you’re a reporting entity

You’re a reporting entity if you provide a designated service.

In insolvency work, this means the reporting entity is the person who provides the designated service. This will usually be:

• the individual appointed to a role (such as a liquidator, administrator or trustee)
• a company appointed to a role (such as a company appointed as a debt agreement administrator).

An accounting or legal firm that supports an insolvency practitioner (for example, by providing staff, systems or administrative support) doesn’t provide a designated service just because it supports that practitioner. The firm is only a reporting entity if it provides a designated service in its own capacity.

A firm supporting an insolvency practitioner may also be a reporting entity if it is the lead entity of a reporting group.

Table 6 designated services apply only where services are provided while carrying on a business. In the Act, a business includes a venture or concern in trade or commerce, even if it isn’t regular, repetitive or continuous.

Where you provide insolvency services in a commercial context, including when acting as an appointed insolvency practitioner, your activities will generally be undertaken while carrying on a business.

Who is the client

In this guidance, we use ‘client’ to describe the person who is receiving the designated service for AML/CTF purposes. In the Act, this person is the ‘customer’.

In the insolvency context, you may not have a traditional adviser-client relationship with this person. You’re appointed to perform statutory functions and owe duties to a range of stakeholders.

However, AML/CTF obligations still apply where you’re engaging in activities which involve providing a designated service within the Act. You need to identify who you’re assisting, or acting on behalf of, as part of that activity.

Who the client is for AML/CTF purposes

The client depends on the designated service you’re providing and the circumstances of the appointment. 

For services covered by items 1–4 and 6 of table 6, the relevant client is generally either of the following:

• the person you’re assisting through the activity
• the person on whose behalf you’re carrying it out.

A designated service can also be provided jointly to more than one person. In these cases, identify the client by identifying each person you’re assisting through the relevant activity, or on whose behalf you’re acting.

A person includes any of the following: 

• an individual (including a sole trader)
• a company (such as a private company, public company or foreign company)
• a trust (such as a discretionary or unit trust)
• a partnership (incorporated or unincorporated)
• an unincorporated association
• a corporation sole
• a body politic.

In many insolvency appointments, you will provide designated services to the company or entity you’ve been appointed to. Although you may act as an agent, you’re considered a separate entity for AML/CTF purposes. This means you may be providing a designated service to the company or entity over which you’re appointed.

Bankruptcy and similar appointments

In some cases, you may be acting in relation to an estate rather than assisting, or acting for or on behalf of, a specific person (for example, a trustee in bankruptcy). In these cases, items 1-4 and 6 will not apply. 

Item 5 may still apply in limited circumstances, such as where a shelf company is sold or transferred.

In some personal insolvency matters, the client may be the debtor. In some controller or receivership appointments, it may be the company, the appointing secured creditor, or both, depending on the method and terms of appointment. For item 5, the client will generally be the buyer or transferee of the shelf company.

Example: trustee in bankruptcy selling vested property

A trustee in bankruptcy is appointed to administer the estate of an individual who has been declared bankrupt. Upon bankruptcy, the bankrupt’s property vests in the trustee, who is responsible for realising that property and distributing the proceeds in accordance with the law.

As part of the administration, the trustee sells real property that previously belonged to the bankrupt.

In this scenario, the trustee is acting in relation to the estate of the bankrupt, rather than assisting or acting on behalf of a specific person in a transaction.

Because items 1–4 and 6 of table 6 apply only where a service is provided to a person, the trustee is not providing a designated service under these items. The fact that ownership of the property has vested in the trustee, or that the trustee sells that property, doesn’t, on its own, result in a designated service.

Creditors and stakeholders

The fact that your actions may benefit creditors, shareholders or other stakeholders doesn’t, on its own, make those persons your client for AML/CTF purposes.

For example, where you realise company assets and later distribute funds to creditors, you may still be assisting or acting on behalf of the company, rather than providing a designated service to each creditor.

Beneficial owners

If your client is not an individual, you need to consider any beneficial owners of that client as part of initial customer due diligence.

For example, if the client is a company, partnership, unincorporated association or trust, the Act and Rules require you to establish information about the customer’s ownership and control structure as part of your customer due diligence obligations.

Learn more about: 

• initial customer due diligence  
• determining ownership and control structures.

How table 6 designated services apply to insolvency practitioners

Items 1 to 6 of table 6 are the services most likely to arise as part of insolvency and restructuring work. Items 7 to 9 only apply in limited circumstances.

The following sections explain how these items may apply to common insolvency activities.

Whether you provide a designated service will depend on the activity you undertake and the terms of your appointment or engagement. High level or general advice, on its own, won’t usually be enough to constitute a designated service.

A designated service is more likely to arise where you take steps to assist a person to carry out a transaction, or carry it out on their behalf, or perform another activity described in table 6.

When a designated service starts

In insolvency work, AML/CTF obligations are triggered by providing a designated service, not by the appointment itself.

Being appointed, on its own, doesn’t mean you’re already providing a designated service. After appointment, you should identify the designated services you’re likely to provide and complete initial customer due diligence before you start providing those services. 

Identifying that a client presents high ML/TF risk as part of customer due diligence doesn’t, on its own, prevent you from providing a designated service. Instead, it means you must apply appropriate measures to manage and mitigate that risk, such as enhanced customer due diligence and increased monitoring.

For example, a designated service may start when you do any of the following:

• begin managing or carrying out a sale of assets
• participate in, or act for a person in, a financing or restructuring transaction
• take control of and manage funds as part of a transaction (such as receiving, holding and controlling sale proceeds)
• trade on a business and make payments or handle funds as part of that activity.

Court or tribunal orders and insolvency appointments

Some table 6 items include an exception where a designated service isn’t provided if the relevant activity is carried out pursuant to, or results from, an order of a court or tribunal.

This exception doesn’t apply simply because you were appointed by a court or tribunal. It only applies where the order itself specifically requires or gives effect to the activity that would otherwise be a designated service.

For example, where a court appoints an insolvency practitioner but doesn’t order a specific sale, and the practitioner realises or sells assets using their general powers, the sale doesn’t directly arise from the court order. In that case, the exception won’t apply and the activity may be a designated service. 

Whether the exception applies depends on what the court or tribunal order requires you to do, not how the appointment was made.

Learn more about how this exception applies to professional designated services.

Item 1: assisting to plan or execute a transaction to buy, sell or transfer real estate

You may provide an item 1 designated service where you take steps that assist a person to carry out a real estate transaction, or carry it out on their behalf. This can include managing a sale process or negotiating and executing contracts for sale as part of an insolvency engagement.

In insolvency work, the client is the person you’re assisting through that activity. In corporate appointments, this is usually the company you’ve been appointed to. In some controller or receivership appointments, the client may be the company, the appointing secured creditor, or both.

Item 1 doesn’t apply where the real estate transfer is carried out pursuant to, or results from, an order of a court or tribunal. This exception only applies where the order itself requires or gives effect to the real estate transaction. It doesn’t apply where the order simply confers general powers and you use those powers to carry out the transaction.

Example: liquidator arranging the sale of company-owned real estate

A liquidator is appointed by a court to wind up a company. After reviewing the company’s assets and liabilities, the liquidator discovers that the company owns an unencumbered commercial property. During the appointment, the liquidator sells the property.

A mere court appointment or general power to sell doesn’t mean the court order exemption applies. However, if the court order specifically required the sale of that property, item 1 may not apply.

The liquidator begins acting on behalf of the company in relation to the transaction, including by taking steps to carry out the sale of the property, such as appointing an agent, negotiating terms of sale or instructing solicitors to prepare sale documents.

In this example, the liquidator is acting on behalf of the company in relation to the sale of its property. Although the liquidator is appointed by the court and performs independent statutory functions, they are a separate legal person to the company who is carrying out the transaction in relation to the company’s assets.

For AML/CTF purposes, this means the liquidator is providing an item 1 designated service to the company. The fact that the sale proceeds may later be used to pay creditors doesn’t, on its own, make the creditors the client for AML/CTF purposes.

Item 2: selling, buying or transferring a legal arrangement or body corporate

You may provide an item 2 designated service where you take steps that assist a person to transfer ownership or control of a company or other legal arrangement, or carry it out on their behalf. This can include completing a share sale or similar arrangement.

In insolvency work, the client is the person you’re assisting through that activity, or the client on whose behalf you’re acting. In most appointments, this will be the company you have been appointed to, as you are typically acting on its behalf in carrying out the transaction.

Item 2 doesn’t apply where the transfer is carried out pursuant to, or results from, an order of a court or tribunal. This exception only applies where the order itself requires or gives effect to the transfer. It doesn’t apply where the order simply confers general powers and you later use those powers to carry out the transaction. 

Example: receiver implementing the sale of shares in a subsidiary

A receiver is appointed over a company that holds a controlling shareholding in a subsidiary. The receiver determines that selling that shareholding is necessary to realise value under the appointment and begins negotiations with an identified buyer.

The designated service starts when the receiver begins taking steps that directly advance the transfer of ownership or control of the subsidiary, such as negotiating the sale, reviewing or preparing transaction documents, or progressing the transfer with the buyer.

In this example, the receiver is acting on behalf of the company in relation to a transaction involving the transfer of ownership or control of a body corporate. Although the receiver is appointed by a secured creditor and exercises powers under that appointment, they’re a separate legal person carrying out the transaction in relation to the company’s asset, being the shares in the subsidiary.

For AML/CTF purposes, this means the receiver is providing an item 2 designated service to the company. This is because the receiver is acting on behalf of the company in carrying out the sale of its asset.

The fact that the sale proceeds may ultimately be applied for the benefit of the secured creditor doesn’t, on its own, make the secured creditor the client is for AML/CTF purposes. A person is only the client where the practitioner is assisting or acting on behalf of them in the transaction.

Item 3: receiving, holding, controlling or managing a person’s property

You may provide an item 3 designated service where you receive, hold and control, or manage, money or other property as part of assisting a person with a transaction, or carrying it out on their behalf. Handling money or property on its own isn’t enough.

In insolvency work, the client is the person whose money or property you’re receiving, holding and controlling, or managing, as part of the relevant transaction. Depending on the appointment or engagement terms, this may be the company, the debtor, or in some controller or receivership appointments, the company, the appointing secured creditor, or both.

Item 3 doesn’t apply where the money or property is to be received or paid under an order of a court or tribunal. This only applies where the order itself requires or gives effect to the receipt or payment of the money or property. It doesn’t apply where the order simply confers general powers and you later decide to deal with the funds using those powers.

Example: liquidator using a liquidation account to distribute funds to creditors

A liquidator is appointed by the members of a company to wind up the company through a creditors voluntary liquidation. The liquidator opens an administration account (liquidation account) that they control to receive sale proceeds and other funds realised from the company’s assets.

The liquidator controls that account and uses it to pay authorised expenses of the liquidation. Later, the liquidator distributes funds from the account to creditors.

Item 3 applies once the liquidator is receiving, holding and controlling the company’s money as part of acting on behalf of the company in winding up it up. The designated service doesn’t arise simply because money passes through an account. It arises where the liquidator is actively controlling those funds as part of winding up the company.

In this example, the liquidator is acting on behalf of the company in controlling and distributing the company’s funds. Although the liquidator is appointed by creditors and owes duties to stakeholders, they’re controlling money that belongs to the company and carrying out activities as part of winding up the company.

For AML/CTF purposes, this means the liquidator is providing an item 3 designated service to the company. The fact that creditors receive a distribution from the liquidation account doesn’t, on its own, make those creditors the client for AML/CTF purposes.

Item 4: equity or debt financing for a body corporate or legal arrangement

You may provide an item 4 designated service where you take steps that assist a person to organise, plan or carry out a financing transaction, or carry it out on their behalf. This can include arranging borrowing or funding to support trading, restructuring or compromise of debts.

In insolvency work, the client is the person you’re assisting or acting on behalf of through that activity. In many corporate appointments, this will be the company you have been appointed to. In some controller or receivership appointments, the client may be the company, the appointing secured creditor, or both. In some personal insolvency appointments, the client may be the debtor.

Example: administrator arranging short-term funding to continue trading

An administrator is appointed to a company that needs short-term funding to continue trading while sale options are explored. After appointment, the administrator works with financiers and advisers to negotiate a short-term loan facility for the company.

The designated service starts when the administrator begins taking steps that directly advance the financing transaction, such as negotiating terms, arranging documentation or progressing the facility with the proposed lender.

In this example, the administrator is acting on behalf of the company in relation to a transaction for debt financing. Although the administrator performs statutory functions and works with external financiers, they’re arranging funding in connection with the company’s business and activities.

For AML/CTF purposes, this means the administrator is providing a designated service under item 4 to the company. The fact that a financier provides funding to the company, or that the funding may ultimately benefit creditors, doesn’t, on its own, make that person the client for AML/CTF purposes.

Item 5: selling or transferring a shelf company

You may provide an item 5 designated service where you sell or transfer a shelf company as part of an insolvency engagement.

The client will generally be the buyer or transferee of the shelf company.

Example: transferring a shelf company as part of a restructuring engagement

An insolvency adviser is engaged on a restructuring matter and, as part of the agreed transaction, arranges for a shelf company to be sold to a buyer for use in the restructured business.

The designated service starts when the adviser begins taking steps that directly advance the sale and transfer of the shelf company, such as arranging the transfer, preparing or reviewing sale documentation, or progressing the transaction with the buyer.

In this example, the adviser is arranging the sale and transfer of a shelf company to the buyer. For AML/CTF purposes, this means the adviser is providing an item 5 designated service to this buyer, who qualifies as their client.

Item 6: creating or restructuring a body corporate or legal arrangement

You may provide an item 6 designated service where you take steps that assist a person to create or restructure a body corporate or legal arrangement, or carry it out on their behalf.

In insolvency work, the client is the person you’re assisting through that activity. In many corporate appointments and restructuring engagements, this will be the company you have been appointed to. If the service involves creating a company or an express trust, other persons may also be clients, as set out in table 6.

Example: administrator transferring shares under a deed of company arrangement

An administrator is appointed to a company and later becomes the deed administrator under a Deed of Company Arrangement (DOCA). The DOCA provides that all shares in the company will be transferred to the deed proponent as part of a restructuring of the company’s affairs.

To give effect to this, the administrator takes steps to implement a share transfer under section 444GA of the Corporations Act 2001, including seeking approval from either creditors or the court and processing the transfer of shares to the deed proponent.

The designated service starts when the administrator begins taking steps that directly advance the restructuring of the company.

In this example, the administrator is acting on behalf of the company in restructuring its ownership and implementing the DOCA.

For AML/CTF purposes, this means the administrator is providing an item 6 designated service to the company, who is the client. The fact that the shares are transferred to the deed proponent, or that the deed proponent provides funds to support the restructuring, doesn’t, on its own, make the deed proponent the client for AML/CTF purposes.

Item 7: acting as, or arranging, certain roles on behalf of a nominator

You may provide an item 7 designated service where you act as, or arrange for another person to act as, a director, secretary or similar role on behalf of another person (the nominator) as part of an engagement.

The client is the person on whose behalf the role is carried out. This person is referred to as the nominator and may be described as the substantive director in some contexts. This activity is most likely to arise in advisory or restructuring engagements.

An example may include where you arrange for a person to act as a director on behalf of the nominator as part of a restructuring arrangement.

Item 7 doesn’t apply where any of the following apply:

• you act, or arrange for another person to act, in a fiduciary capacity pursuant to, or resulting from, an order of a court or tribunal
• you act as trustee of a regulated debtor’s estate.

This exception only applies where the order itself requires or gives effect to the relevant activity.

Item 8: acting as, or arranging, a nominee shareholder

You may provide an item 8 designated service where you act as, or arrange for another person to act as, a nominee shareholder on behalf of a nominator as part of an engagement.

The client is the nominator. Item 8 is unlikely to apply to most insolvency practitioners because formal insolvency appointments don’t usually involve nominee shareholding arrangements.

An example may include where you arrange for a nominee shareholder structure on behalf of the nominator as part of a restructuring advisory engagement.

Item 9: providing a registered office or principal place of business address

You may provide an item 9 designated service where you provide a registered office or principal place of business address as a commercial service in its own right.

The client is the person to whom the address service is provided.

Related pages

• Professional designated services
• Accounting program starter kit
• Legal profession program starter kit
• Check to see if you may be regulated
• New industries and services to be regulated
• Combating money laundering, terrorism financing and proliferation financing
• Your obligations