The purpose of the Professional Practice Standards (PPSs) is to ensure Members of the Association for Business Restructuring & Turnaround (ABRT), and all those who work for, represent and act on their behalf maintain the highest professional standards at all times. Each PPS should be read in conjunction with the wider fundamental principles embodied in the ABRT Code of Ethics (Ethics Code) and should be applied in accordance with the spirit of the Code.

The PPSs set out practice guidelines ensuring that all those leading an engagement in the restructuring and turnaround of a business, as well as the resolution of financial distress of a business or its stakeholders, do so in a ‘best practice’ way, harmonised with all prevailing statute, and ethical and other relevant guidelines at all times. PPSs set out required practice but are not statutory or legislative statements.

A literal interpretation and use of a PPS may not be appropriate where it contradicts the fundamental principles of the Ethics Code, the regulatory or legal framework or any other applicable ethical codes to which the Member may be required to adhere to. Members should apply their own professional discretion, logical reasoning and rationalisation such that the PPS may also be applied to the full range of business structures.

1.     Initial Client Meetings

1.1.  Initial client meetings are those that are either conducted face-to-face with the approved representatives of a business, or via a video conferencing tool (such as Microsoft Teams, Zoom, Google Meet, Cisco Webex Teams, or any other such equivalent software providers).

1.2.  The point at which a consultation fee is charged, or confidential information is provided to the ABRT Member (‘Member’) by any prospective client, is the point at which the Member should deem the meeting as being an official meeting (as opposed to an enquiry) for which this Professional Practice Statement (PPS) should be adhered to. In this instance, a record must be kept as part of the Client Advisory Record (refer to PPS 3) and include details of the:

1.2.1.     date and time of the meeting,

1.2.2.     the location of the meeting, and 

1.2.3.     attendees, including their relationship with the main parties or business matters discussed (for example, partner of the advising firm/business, director or officer of the company seeking advice, etc.).

1.3.  The Member should quickly assess whether the complex nature of the matters to be discussed and the advice to be given warrant a face-to-face meeting with those seeking assistance. If a face-to-face meeting in person is considered to be the best option, this should be explained to the other party giving reasoning.

1.4.  Should either the Member or the prospective client seeking advice decide not to proceed with the matter and advise the Member of this in writing, all records, documents and accounts provided by the client for the initial meeting must be returned, deleted and/or destroyed within 10 business days.

1.5.  At the initial client meeting the Member must assess the identity of the party to be advised (the company, the directors etc). If this party is to be ‘the company’ it will be represented by a person qualified to do so on its behalf. In this situation the Member must ensure that the company representative has appropriate legal authority, with access to sufficient information, to be able to answer the questions of the Member at the meeting, and/or have ready access to such relevant information or any professional advisors to the company. 

2.     Charging for the Initial Meeting

2.1.  The ABRT Member must consider whether to make a charge for the initial meeting, and, if so, at what rate. A Member’s considerations would include:

2.1.1.     On what basis did the company seeking advice invite assistance from the ABRT Member? Is the company an existing client? A fixed charge or charge at an hourly rate should be agreed prior to the meeting.

2.1.2.     Was the company referred from another party (for example, from an accountant, lawyer, industry expert or other such professional advisor)? This may be deemed to be a ‘qualified referral’ and the ABRT Member should consider whether or not a charge is appropriate under the circumstances.

2.1.3.     Is the matter upon which advice is sought one which is complex, involving multiple sites/locations, international assets, complex logistics and distribution, a number of lenders/investors and valuable property? Is the amount of time required to consider and explore the options for the company onerous?

2.1.4.     Will the ABRT Member have to invite the assistance of additional expert consultants to make an initial assessment of the company, its challenges and threats? Such out of pocket charges and expenses, or estimations thereof, should then be considered given the time and resources of additional respective professionals’ involvement.

3.     Advice Not Provided (until Written Engagement Agreed)

3.1.  The Member must make it clear at the outset of initial meetings with prospective clients that discussions do not form advice, are not an instruction for the company, or its representatives, to act or perform in a certain way. They are acting in the capacity as a potential ‘adviser’ undertaking preliminary review of the circumstances and are not giving any instructions upon which, the directors or other representatives of the other party should take action or rely upon.   

3.2.  During preliminary discussions, the Member should recommend that the party should seek their own independent legal or other expert counsel. This may be for the purposes of further understanding their personal exposure and/or risk, any concerns about their duties as a director or officer, any interaction with excluded associated businesses affairs and/or in relation to complex taxation matters. 

3.3.  Both of the statements in sub-paragraphs 3.1 and 3.2 above should be noted and:

3.3.1.     repeated in writing via email or letter immediately following the meeting, and

3.3.2.     formally noted and kept as part of the Client Advisory Record (PPS 3).

3.4.  The ABRT Member should devise and deliver a formal engagement document to the party being advised establishing a business relationship between the two parties. It should be specifically stipulated in a written document (including an electronic document, such as an email) that there will be no formal engagement between the parties until:

3.4.1.     the terms and conditions of engagement have been agreed and evidenced by the signing by the party receiving advice;

3.4.2.     the accompanying invoice for payment of advice has been delivered to the party who will be receiving it; and

3.4.3.     the amount due on the invoice has either been paid in full or suitable payment terms agreed and the agreed sum of funds have cleared in the Member’s account. The Member may cease acting for the client where outstanding fees have not been paid within a reasonable timeframe (and where there have been multiple attempts to contact the Client or prospective client without an adequate response or payment). This should be noted on the Client Advisory Record (PPS 3).

3.4.4.     The Member should be wary of extending credit to a potentially insolvent business unless an agreement is made, and the Member registers their security interest on the Personal Property Securities Register (PPSR). 

3.5.  The Member and their team or representatives should, at all times, respect the confidentiality of information acquired and should not disclose any such information to third parties without the requisite authority (unless there is a legal, professional right or duty to disclose). Confidential information acquired as a result of an initial client meeting should not be used for the personal advantage of the ABRT Member or any third parties.

4.     Key Information

4.1.  Certain information should be requested from the prospective client to enable the ABRT Member to conduct a preliminary review, prior to onboarding the client through a formal engagement.

4.2.  It should be made clear to the client at the initial meeting that information, directions & decisions must be provided in, or acted upon, a timely manner so as not to delay the performance and provision of the preliminary assessment (see PPS 2 – Triage). The following information is neither exhaustive or essential and is provided to ABRT Members as a guide only:

• Any objectives that the client is seeking to achieve by virtue of the engagement.

• Full details of the prospective client to which advice is to be given (for example, ‘the company’, ‘the director(s)’ or ‘officer(s), or ‘the business’ and/or ‘owners’), including any group structure, related companies, relevant trusts, the Australian Company Number(s) (ACN), Australian Business Number(s) (ABN), date of registrations or incorporations and the registered office address (information may be obtained through an ASIC company search, an ABN registry search and through obtaining copies of relevant trust deeds).

• An organisational search of the PPSR should be conducted for all relevant entities and trusts and any communications received from suppliers, vendors or financiers regarding claiming ownership of property allegedly subject to such an arrangement(s).
  
  
• The full names and contact details of directors and other officers of all companies or the business owners.
  
  
• The last set of externally prepared ‘End of Financial Year’ Financial Statements. 
  
  

• The latest set of management accountants; including the profit and loss statement (or income statement), the balance sheet and any financial forecasts available. 

• For the sake of ease, the ABRT Member may request ‘viewing access’ only to the prospective client’s accounting software (such as Xero or MYOB etc). Otherwise, the ABRT Member may seek verbal authorisation to make contact with the prospective client’s bookkeeper or accountant in order that key financial information may be obtained quickly.

• The amounts owed to the Australian Tax Office (ATO) in relation to taxes and any unpaid superannuation (PAYG/GST, income tax etc).

• The ABRT Member should communicate the urgency of obtaining copies of all 21-day Director Penalty Notices (non-lockdown) that have not yet expired and have been received by the director(s) or picked up by the accountant. The DPN regime should be brought to their attention (see PPS2 – Triage). 

• The ATO Integrated Client Account (ICA) and details of any verbal or formal written repayment plans in place with the ATO. Has there been any defaults? Are there are any Business Activity Statements (BAS) outstanding?

• Any outstanding Superannuation Guarantee Charge Statement (SGC), letters or warnings of demands for payment, threats to make public the ATO debt by way of notifying the Credit Reporting Bureaus, warnings of any Director Penalty Notices.
  
  

• The ABRT Member should request a copy of all ATO Director Penalty Notices that have been issued to the director or picked up by the accountant with regards to outstanding taxes (for example, PAYG/GST and/or Superannuation).

• Details of all banks, financial institutions and other lenders the company has checking, savings, loan and other accounts or facilities with, including the amounts owed, in arrears or within the overdraft limit. 
  
  
• Details of all correspondence with the company’s banks and other lenders setting out alleged default in payments of principal and/or interest, breaches of clauses in any debenture, charge document, loan deed or other, or any other defaults giving rise to an action or pending action by that bank or lender. It should be established where personal guarantees have been given, or if there are caveatable/equitable interests.
  
  
• The name and contact details of all solicitors, accountants and auditors of the company, including email, other electronic and telephone details for all known key business advisory contacts.
  
  
• Details of all correspondence with solicitors, accountants and auditors setting out receipt of any pre-action letters, letters of demand, writs, originating applications, solicitors’ letters and other claims against the company.
  
  
• Details of any freehold or leasehold properties held by the company, including deeds, agreements and other documents evidencing ownership or tenancy of the relevant properties.

• Details of all premises from which the business trades, including the details of the landlord, the key terms of the lease agreement, whether there are arrears outstanding and/or action being taken and details of whether a personal guarantee has been given. 

• If possible, a summary of work in progress or stock should be obtained. Should the client’s company undertake project work, a schedule of estimated of milestones, work completed and progress payments should be provided. This should include any details of any variations, disputed works or changes to contractual arrangements. 

• Details of all full- or part-time employees working for the company (including their awards), including consultants, agents and those working under a service agreement, together with their current status; including any arrears in pay/salary, claims for damages against the company, actions or potential actions being taken by them. Details of trade unions and the status, if any, of current actions being taken against the company, negotiations and existing and pending industrial action. Details of any Enterprise Bargaining Arrangement.
  
  
• The Aged Payables Report should be obtained. Details of all utility suppliers to the company, including any payment plans, payments made in the past six months and arrears on accounts. Request copies of any communication between the company and utility providers.
  
  
• The Aged Receivables Report should be obtained. A list of all suppliers to the company, to include their current status (actively or historically supplying, etc.); including any and all amounts due to them, the significance and uniqueness of supplies from them and whether any ransom payments have ever been demanded or made to them.
  
  
• Details of all insurances taken out by the company. Including whether a Management Liability Policy is held (Directors and Officers Cover).

• Whether the Company has undertaken a ‘small business restructuring’ under Part 5.3B of the Act within the previous seven years.