How should the public interest test be applied?
The Australian Securities and Investments Commission (ASIC) has released a consultation paper outlining how it intends to implement its new power to wind up companies.
Recent amendments to the Corporations Act have given ASIC the power to order the wind up a company in specific circumstances and appoint a liquidator. The Corporations Amendment (Phoenixing and Other Measures) Act 2012 amends the Corporations Act to add a new part to Chapter 5 – External Administrations. The new part (Part 5.4C) – which comprises new sections 489EA, 489EB and 489EC – gives ASIC the power to wind up companies in FOUR scenarios:
SCENARIO 1:
ASIC may order a winding up if:
| (a) | the response to a return of particulars given to the company is at least 6 months late; and |
| (b) | the company has not lodged any other documents under this Act in the last 18 months; and |
| (c) | ASIC has reason to believe that the company is not carrying on business; and |
| (d) | ASIC has reason to believe that making the order is in the public interest. |
SCENARIO 2:
ASIC may order a winding up if the company’s review fee in respect of a review date has not been paid in full at least 12 months after the due date for payment.
SCENARIO 3:
ASIC may order a winding up if
| (a) | ASIC has reinstated the registration of the company under subsection 601AH(1) in the last 6 months; and |
| (b) | ASIC has reason to believe that making the order is in the public interest. |
SCENARIO 4:
ASIC may order a winding up if
| (a) | ASIC has reason to believe that the company is not carrying on business; and | |
| (b) | at least 20 business days before making the order, ASIC gives to: | |
| (i) | the company; and | |
| (ii) | each director of the company; | |
| a notice: | ||
| (iii) | stating ASIC’s intention to make the order; and | |
| (iv) | informing the company or the director, as the case may be, that the company or the director may, within 10 business days after the receipt of the notice, give ASIC a written objection to the making of the order; and | |
| (c) | neither the company, nor any of its directors, has given ASIC such an objection within the time limit specified in the notice. | |
Comments on Consultation Paper 180 are due by Friday 10 August, 2012.
Click here to download Consultation Paper 180. (PDF format.)
The following is ASIC’s media release of 12 July 2012:
ASIC today released a consultation paper outlining how it intends to implement its new power to wind up abandoned companies under the Corporations Act 2001 (Corporations Act) to facilitate greater access to the General Employee Entitlements Redundancy Scheme (GEERS).
Consultation Paper 180 ASIC’s power to wind up abandoned companies outlines how ASIC intends to exercise this new power, and how it will prioritise matters for winding up
‘When using this power, our first consideration will be if an order to wind up the company would facilitate employee access to GEERS’, Commissioner John Price said.
GEERS is a scheme funded by the Australian Government to assist employees of companies that have gone into liquidation and who are owed certain employee entitlements. However, companies are sometimes abandoned by their directors without being put into liquidation. This has previously resulted in employees of the company who are owed employee entitlements being unable to access GEERS.
Consistent with the new law, ASIC is proposing to apply a public interest test when deciding whether to wind up a company. This public interest test will consider factors like the cost of winding up, the amount of outstanding employee entitlements and how many employees are affected.
‘ASIC needs to consider the broader public interest when deciding which abandoned companies with outstanding employee entitlements will be wound up’, Mr Price said.
ASIC is proposing not to reinstate companies that have already been deregistered in order to wind them up later. Among other reasons, there are already court processes in place to facilitate the reinstatement of a company where that is needed.
ASIC intends to commence using this new power to wind up abandoned companies in the final quarter of 2012.
Comments on Consultation Paper 180 ASIC’s power to wind up abandoned companies are due by Friday 10 August, 2012.
Background
One of the measures of the Australian Government’s Protecting Workers’ Entitlements Package (announced July 2010) is to assist employees of abandoned companies to access the General Employee Entitlements and Redundancy Scheme when they are owed certain employee entitlements.
When the employer is a corporation, it must be in liquidation before GEERS can assist an employee.
Amendments to the Corporations Act have given ASIC the power to wind up an abandoned company in specific circumstances.
ASIC may appoint a registered liquidator over a company when exercising its power to wind up an abandoned company.
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