The Carnell Report – implications for turnaround and restructuring professionals

The report recommends that from 1 July 2017:

1. Borrowers should be provided with a copy of instructions given to an investigating accountant, and a full copy of the final report.
2. Banks should not appoint a practitioner as a receiver if the practitioner has previously undertaken an investigative accountant’s review.
3. Banks should select receivers through a competitive selection process.

The report suggests that there should be a requirement for receivers to provide a ‘flow of information’ to keep company directors ‘abreast of developments’ – although there was clear recognition of ‘legitimate concerns and limitations on the receiver releasing information around certain asset sale activities’ – but there was no specific recommendation addressing this point.

It appears that the intention is that these recommendations be implemented via changes to the Code of Banking Practice – which would avoid the need for legislation.

In addition, the report recommends that external dispute resolution schemes be expanded to cover investigative accountants and receivers (as well as bank valuers).  It would seem likely that an expansion of EDR schemes to cover third parties would require legislation.

The extent of input from the turnaround and restructuring professionals who undertake such assignments is not clear from the report.

The inquiry was part of the Government’s response to the Parliamentary Joint Inquiry into Impaired Loans. Similar issues, albeit on a broader scale and of a more significant nature, were raised in the UK, as discussed here.   

Update: For further developments on the EDR scheme please see Consultation on the Industry wide EDR for Business Credit disputes: AFCA