10. INSOLVENCY CASE ADMINISTRATION

The success of formal and informal insolvency processes is very much dependant on the availability of both public (government) and private professional insolvency case administrators or advisors. The liquidation process cannot function without the presence of a government agency staffed by experienced officials. Both the formal and informal reorganisation processes need either private professional case managers or advisors.
The development of government institutions and a private sector base of trained and educated administrators varies among the five economies.

10.1 Indonesia
In Indonesia the Bankruptcy Law provides for alternative methods for the appointment of receivers in the administration of formal insolvency cases. These are the 'custodians' of the public service and qualified persons from the private sector. In regard to the latter, some good progress has been made for the private administration of insolvency cases by private professionals. An association of Indonesian Receivers and Administrators has been formed and now has some 80 members from both the legal and accounting professions. The association was established in response to suggestions by both the IMF and the Ministry of Justice to provide qualifications for private receivers and custodians under the Indonesian insolvency law.
It is now a prerequisite that a private professional must be a member of the association before that person may be registered as a custodian with the Ministry of Justice. The association provides an initial training session to qualify persons for membership. They may then seek to be registered with the Ministry of Justice.
A number of appointments have been made of these private professionals to insolvency administrations. Enquiry is made regarding possible conflicts of interest before an appointment is made. The availability and level of fees is sometimes an issue.
The association considers that it does not compete with public sector custodians and that it is important that the public sector should remain and be strengthened because there will be many cases in which fees will not be available because of limited assets of a company that is being liquidated.
The formation and structure of the association is an important step in providing a professional organisation of private professional insolvency administrators. The Indonesian country consultant comments that there has been a quite discernible improvement in the administration of corporate liquidations since the appointment of independent receivers commenced. Most of the liquidations are conducted by independent receivers.
The further development of the association and its members may be encouraged through assistance with training and education. The association considers that this training should be also extended to the public sector administrators or custodians.
10.2 Thailand
Although it might have been expected, no similar association has as yet been established in Thailand but the reasons for this are not clear.
10.3 Korea
In Korea the chief concern is that there are not sufficient specialists available to handle the volume and complexity of cases. There is a need for an increase in the number of government officials and experts in the private sector. The pool of bankruptcy trustees and receivers must be expanded.
10.4 Malaysia
In Malaysia both public and private administration of insolvency cases appears adequately provided. Administration of most cases of liquidation is through the government Official Receiver's department. It does not become involved in reorganisation cases. Both Danaharta and CDRC are either staffed or have access to experienced professionals. Private professional administration of formal scheme of arrangement and some liquidation cases is provided through licensed insolvency practitioners.
10.5 Philippines
In the Philippines there is a perception that the appointment of private professionals to act as receivers or members of rehabilitation committees in reorganisation cases is difficult because of lack of knowledge and experience or because of inadequate remuneration. There is no system of accreditation or registration for such persons so that the identification of suitable persons becomes difficult. Consequently a practice has developed where the SEC has appointed business persons to the management committee of a company that is seeking reorganisation.
There would appear to be a need for education and training in the Philippines, particularly of professionals who wish to practice in the area of insolvency reorganisation and for officers and employees of the SEC if it is to continue to administer the formal insolvency processes.
10.6 Conclusions and proposals
- A high priority should be accorded for intensive and ongoing education and training of both public and private insolvency case administrators in many of the economies.
- The development of a private sector association of insolvency case administrators should be encouraged. Such an association should be accorded recognition under the insolvency law and, ideally, should be the body able to determine the suitability and fitness of persons to be registered or licensed as insolvency practitioners. Compulsory on-going education and training should be required of licensed practitioners.