Why Insolvency Practitioners Hire Private Investigators

Why Insolvency Practitioners Hire Private Investigators

Insolvency practitioners (IPs)—such as liquidators, administrators, receivers, or bankruptcy trustees in Australia—are registered professionals (with ASIC for corporate or AFSA for personal insolvency) responsible for managing distressed entities, recovering assets, investigating company affairs, and maximizing returns for creditors. Under laws like the Corporations Act 2001 or Bankruptcy Act 1966, IPs have statutory duties to investigate the causes of insolvency, director conduct, and potential misconduct (e.g., reporting offences to ASIC). When internal resources are limited or specialized external expertise is needed, IPs hire private investigators (PIs)—licensed under state laws (e.g., NSW Security Industry Act)—for discreet, efficient, and admissible evidence gathering.

Here are the most common reasons insolvency practitioners hire PIs:

• Locating and Recovering Hidden or Concealed Assets Debtors or directors may hide assets (e.g., offshore accounts, transferred property, undeclared investments) to avoid recovery. PIs conduct thorough asset searches using databases, financial trails, and enquiries to uncover and trace these for creditor benefit.
• Investigating Potential Fraud or Director Misconduct IPs must probe wrongful/fraudulent trading, preferences (favouring certain creditors), or transactions at undervalue. PIs gather evidence of misconduct, such as embezzlement or phoenix activity (illegal asset stripping to restart under a new entity).
• Locating Evasive Directors, Debtors, or Witnesses Directors or key individuals may avoid contact or "disappear." PIs use skip tracing to find them for interviews, document service, or court attendance.
• Conducting Background Checks On directors, related parties, or claimants to reveal prior insolvencies, conflicts, or credibility issues supporting reports to ASIC.
• Surveillance and Lifestyle Investigations To verify claims of insolvency (e.g., monitoring spending inconsistent with declared poverty) or document ongoing trading in breach of restrictions.
• Supporting Public Examinations or Litigation PIs collect evidence for clawback actions (e.g., voiding unfair preferences) or pursuing claims against third parties.
• Assisting in Complex or High-Value Matters For cross-border elements, large asset pools, or when IPs need independent forensic support beyond their team's capacity.
• Verifying Creditor or Debtor Claims In personal bankruptcy or corporate cases, PIs investigate exaggerated debts, false claims, or undeclared income.

Hiring PIs enhances recovery rates and fulfills investigative duties efficiently, especially in contentious cases. Costs are typically covered from estate assets and justified by potential returns. Firms like Complete Corporate Services specialize in insolvency investigations for IPs and lawyers, focusing on asset tracing and factual inquiries. Ethical, licensed PIs ensure evidence withstands scrutiny in reports or court. IPs must maintain independence, so external PIs provide impartial support.