Deciphering insolvency lingo
When it comes to the use of acronyms, initialisms, and abbreviations, the insolvency industry is no different to any other industry—we love them! As insolvency practitioners, we use these constantly, and sometimes don't consider how we converse and therefore how it's interpreted.
Let's take the dialogue between a Worrells Partner and an accountant as an example:
True to our Plain Talk ethos, we decipher the most common acronyms and initialisms that you may hear in the insolvency industry as follows.
AFSA – Australian Financial Security Authority
Formerly known as Insolvency & Trustee Service Australia (ITSA), this is the Commonwealth Government Department that administers and regulates the Australian personal insolvency system.
ARITA – Australian Restructuring Insolvency & Turnaround Association
Formerly known as the Insolvency Practitioners Association of Australia (IPAA), this is the leading organisation that represents insolvency practitioners and other associated professionals who specialise in the fields of restructuring, insolvency and turnaround.
DIRRI – Declaration of Independence, Relevant Relationships & Indemnities
A DIRRI is a declaration completed by a liquidator, administrator or bankruptcy trustee that requires them to disclose their independence in taking an appointment, any relationships with company directors and creditors that may impact their independence, and to disclose any indemnities provided to the insolvency practitioners in respect of their appointment.
DOCA – Deed of Company Arrangement
A binding agreement between a company and its creditors governing how the company's affairs will be dealt with to maximise the chances of the company, or as much as possible of its business to continue, or to provide a better return to creditors than an immediate winding-up of the company, or both.
DIN – Director Identity Number
The Productivity Commission has proposed implementing Director Identity Numbers as a requirement for all company directors to assist in enforcement activities, including those designed to detect and prevent illegal phoenix activity.
DPN – Director Penalty Notice
A notice issued by the Australian Taxation Office to a company director for unpaid company PAYG withholding tax or superannuation.
FEG – Fair Entitlements Guarantee
A legislative safety net scheme of last resort for eligible employees affected by their employer's insolvency providing financial assistance to cover certain unpaid employment entitlements.
POD – Proof of Debt
Not to be confused with a coffee pod from Nespresso, it's a form that a creditor completes in a liquidation or bankruptcy to detail and 'prove' the amounts owed to them to be formally recorded in the administration.
RATA – Report as to Affairs
A document (ASIC Form 507) that company directors must complete in liquidation detailing a company's assets and liabilities.
So, when a liquidator says that they are an ARITA member and have prepared a DIRRI, the director has not lodged a RATA, employees can lodge a FEG claim and creditors should lodge a POD, you will know what they are talking about!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
