What does a Controlling Trustee do?
By Administrator 12 August, 2013
What is a Controlling Trustee?
A Controlling Trustee is usually an insolvency accountant (i.e. an accountant who is registered with AFSA as a Trustee in Bankruptcy) but a solicitor can also act as a Controlling Trustee. If you appoint a solicitor, they need to be a member of the Insolvency Practitioners Association of Australia. One advantage of appointing a Registered Trustee in Bankruptcy is that they can act as your Controlling Trustee and then act as the Trustee of your Personal Insolvency Agreement (if your proposal gets accepted by your creditors). A solicitor cannot act as the Trustee of your PIA.
Most people wouldn’t realise that the process to set up a Personal Insolvency Agreement is split into 2 parts. The first part is the Controlling Trustee period (which usually lasts for 25 business days) and the second part (if the agreement gets accepted) is to administer the Personal Insolvency Agreement.
How do I appoint a Controlling Trustee?
A Controlling Trustee is appointed once you execute a document known as a 188 Authority. Once executed, the authority cannot be revoked (i.e. cancelled or withdrawn) and the Controlling Trustee will act for a minimum period of 25 working days (unless it is extended which we will explain below).
If you are a married couple and you have joint assets and or debts you have the option of submitting a joint proposal. Submitting a joint proposal will bring many advantages including:
- A streamlined administration process;
- Reduced costs;
- Your debts will be pooled and settled by the one proposal.
What does a Controlling Trustee do?
Once appointed, your assets will be under the control of your Trustee so you won’t be able to sell them or deal with them in anyway without your Trustee’s permission. Your trustee will immediately commence investigations, prepare a report to your creditors and then call a meeting of creditors.
Below is a step by step guide as to what a Controlling Trustee will do.
Complete an investigation
The Controlling Trustee will investigate what assets you own or have disposed of in recent years. If you have disposed of assets in recent years, the Controlling Trustee must form a preliminary view if those assets could be “clawed back” in bankruptcy.
Prepare a report
The Controlling Trustee will prepare a report to your creditors, which will include:
- Your financial details (including your income & expenses, your secured and unsecured debts & any assets owned outright);
- The results of the investigation (as discussed above);
- Your proposed Personal Insolvency Agreement; and
- A recommendation from your Controlling Trustee as to whether the creditor’s interests would be better met by accepting your proposal or whether their interests would be better met by you being made bankrupt.
Hold a Meeting of your Creditors
The Controlling Trustee must hold a meeting of your creditors within 25 business days of being appointed which you will need to attend by phone or in person. This meeting may be adjourned if additional investigations need to be completed by the Controlling Trustee. If an outcome isn’t decided by creditors within 4 months of the 188 authority being signed, the authority will lapse. You cannot sign another 188 authority within 6 months of signing the first authority.
In most cases an outcome is usually decided at the first meeting. For the proposal to be accepted, creditors present and voting at the meeting must represent a clear majority and hold 75% of the debt (calculated in value).
What happens after the Meeting of Creditors?
If creditors accept the proposal the Controlling Trustee will end and a Trustee to administer the Personal Insolvency Agreement will be appointed.
If the creditors reject the proposal, they will usually pass a resolution for you to file a debtors’ petition and become bankrupt.
If you are thinking about appointing a Controlling Trustee so you can propose a Personal Insolvency Agreement then give us a call. We have a Trustee on staff who will be happy to help. Call us now on our toll free line 1800 676 598.