Sep 282017
 

SOURCE:  The Australian, 28 September 2017, by Dana McCauley, Media Writer, Sydney. Picture: Renee Nowytarger.

Channel 10 emblem

Creditors of Ten and its shareholders and staff will have to wait until at least November to discover the network’s fate.

An application for Ten Network Holdings’ proposed takeover by American broadcaster CBS has been “tentatively” listed for a three-day hearing on October 31, when the Supreme Court of NSW will hear any final shareholder opposition to the deal.

Bruce Gordon, who is yet to signal whether he will oppose the application by Ten’s administrator KordaMentha to transfer the company’s shares to CBS, did not appear at a directions hearing yesterday, when Justice Ashley Black set a provisional timetable for the matter.

Mr Gordon is understood to be mulling the next step in his ­attempt to stop CBS taking over Ten after its creditors voted this month in favour of the deal.

In setting the hearing date, Justice Black noted that interested parties may need time to ­respond to an expert report due to be filed with the Australian ­Securities & Investments Commission by KordaMentha on October 10, giving any other interested parties three days to file notices of appearance. Continue reading »

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Sep 112017
 

Logo with border

With the commencement on 1 September 2017 of the delayed parts of the Insolvency Law Reform Act 2016 (the ILRA), the Australian Securities and Investments Commission (ASIC) has updated some of the Information Sheets which it makes available on its website to the general public.

ASIC says  that “Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.”

Over time ASIC has issued about 36 insolvency information sheets and flow charts (click here for my list).  Below is a list of 15 which have recently been reissued.

In the past, nearly all ASIC’s information sheets have been available to download as printable sheets in PDF file format.  However, this facility has not (yet) been provided with the updated/reissued sheets, which are only available as text on ASIC web pages. The links below are to the relevant website pages.

ASIC INSOLVENCY INFORMATION SHEETS – REISSUED 1 SEPTEMBER 2017
Form Number
Title of Sheet
Date Updated
Link to ASIC site
INFO 39 Insolvency information for directors, employees, creditors and shareholders

1/9/2017

INFO 39
INFO 41 Insolvency: A glossary of terms 1/9/2017 INFO 41
INFO 42 Insolvency: a guide for directors 1/9/2017 INFO 42
INFO 43 Insolvency: a guide for shareholders 1/9/2017 INFO 43
INFO 45 Liquidation: a guide for creditors 1/9/2017 INFO 45
INFO 46 Liquidation: a guide for employees 1/9/2017 INFO 46
INFO 53 Providing assistance to external administrators – Books, records and RATA 1/9/2017 INFO 53
INFO 54 Receivership: a guide for creditors 1/9/2017 INFO 54
INFO 55 Receivership: a guide for employees 1/9/2017 INFO 55
INFO 74 Voluntary administration: a guide for creditors 1/9/2017 INFO 74
INFO 75 Voluntary administration: a guide for employees 1/9/2017 INFO 75
INFO 84 Independence of external administrators: a guide for creditors 1/9/2017 INFO 84
INFO 85 Approving fees: a guide for creditors 1/9/2017 INFO 85
INFO 152 Public comment on ASIC’s regulatory activities 1/9/2017 INFO 152
INFO 212 Illegal phoenix activity 1/9/2017 INFO 212
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Those regulated by ASIC are to pay ASIC for the privilege

 ASIC, Corporate Insolvency, External administration, Insolvency Law, Regulation  Comments Off on Those regulated by ASIC are to pay ASIC for the privilege
May 102017
 

An idea put forward by the Australian Government about a year ago has almost become a reality with the introduction into Parliament on 30 March 2017 of the ASIC Supervisory Cost Recovery Levy Act 2017 to establish an industry funding model for the Australian Securities and Investments Commission (ASIC) and with the release on 4 May 2017 of draft regulations for consultation.

The idea –  to enable the recovery of the regulatory costs of ASIC by imposing a levy on persons regulated by ASIC – was described in Parliament by the Assistant Minister to the Treasurer (Mr Sukkar) as follows:

Industry funding of ASIC will mean that … those entities that create the need for that regulation will be the ones who pay for it—as opposed to Australian taxpayers—who too often bear the cost of financial sector misconduct.  Further, because each regulated subsector will only ever pay an amount equal to its costs of supervision, industry funding will promote equity between different regulated entities. This is because certain industry subsectors will no longer cross-subsidise the costs of the regulation of other sectors.

The laws are due to take effect on 1 July 2017.  General news article: “Companies face levy in ASIC funding overhaul”.

ASIC Supervisory Cost Recovery Levy Regulations 2017

The closing date for submissions regarding the proposed Regulations is 26 May 2017.

In releasing its consultation paper for the Regulations the Treasury department said:

The Government is seeking stakeholder views on the draft regulations necessary to support the industry funding model, which will recover (the Australian Securities and Investments Commission’s)  regulatory costs though annual levies and fees-for-service. The proposed regulations are to establish the mechanisms that will be used to calculate the levies payable by each class of regulated entity, each financial year.

There are 6 industry sectors covered by the Regulations. Each sector has several industry subsectors.  In all there are 48 industry subsectors. Each subsector  describes the “leviable entity” that is included in the industry subsector.

Registered liquidators levy

Registered liquidators are in the industry sector named Corporate, and are leviable entities in a subsector named, not surprisingly, registered liquidators.

The levy to be imposed on each registered liquidator in a financial year is the sum of:

(a)  the minimum levy component (which is proposed to be $2,500); and

(b)  the graduated levy component.  The graduated levy component is a variable amount depending on each entity’s share of the total number of notifiable events for the subsector.  The Regulations define what constitutes a notifiable event (see below).  ASIC will prescribe its regulatory costs and the total number of these notifiable events for the subsector as part of its annual legislative instrument. Continue reading »

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May 082017
 

Before it is due to come into effect on 1 September 2017, section 60-20 of the Insolvency Practice Schedule (Corporations) (Australia) is to be amended.

Under the heading “Refining the Insolvency Law Reform Act 2016”, the Minister for Revenue and Financial Services has released draft legislation of amendments to the Corporations Act 2001 and Bankruptcy Act 1966.

The professional association representing insolvency practitioners has welcomed the amendments. The Australian Restructuring Insolvency & Turnaround Association (ARITA) says (on its website 5/5/2017):

The section would (have) require(d) external administrators and trustees to obtain consent from creditors prior to related entities obtaining any profit or advantage from any administration or estate – effectively requiring Insolvency Practitioners to seek creditor approval for their own firms to work on an appointment. We are delighted that Treasury have announced draft legislation specifically to resolve this issue. It is now clear that once remuneration is approved, further approval to share that remuneration with related parties (e.g. an Insolvency Practitioner’s firm or partners) is not required …. ARITA has been working very hard behind the scenes on this under strict confidentiality. The draft legislation is on The Treasury’s website for consultation. This is a significant win for the profession, achieved by ARITA.


Illustration of Change to Corporate Insolvency Law

I have set out below an illustration of the changes that are being made to section 60-20 of the Insolvency Practice Schedule (Corporations). Although “interested parties” have been invited to make a submission regarding the draft legislation by 17 May 2017, it is doubtful whether there will be any change to the draft. Continue reading »

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New ASIC guide on how to become, and behave as, a registered liquidator

 ASIC, Corporate Insolvency, External administration, Insolvency practices, Regulation  Comments Off on New ASIC guide on how to become, and behave as, a registered liquidator
Mar 022017
 

Registered Liquidators: Registration, disciplinary actions and insurance requirements.

ASIC Regulatory Guide RG258, Issued: 1 March 2017

Australian Securities and Investments Commission:

This guide is for individuals who are or wish to become registered liquidators under … the Corporations Act 2001 …. This guide explains how to apply for registration as a liquidator, including the requirements that must be met to become a registered liquidator. This guide also explains the renewal of registration process, the disciplinary and other actions a registered liquidator may be subject to and our policy on adequate and appropriate insurance.

CLICK HERE to read or download a copy of ASIC’s Regulatory Guide RG 258.

——————————————————

Contents of RG 258

Continue reading »

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Nov 122015
 

Transcripts have now been published for all of the public hearings of the Senate inquiry into insolvencies in construction industry. Phoenixing of companies is the main topic discussed. Several insolvency practitioners have given evidence, and at the hearing in Sydney on 28th September the insolvency profession was criticised by the leading participant, Senator Doug Cameron. At the public hearing in Melbourne on 29th September the Walton Constructions case was discussed in detail by the insolvency practitioners initially appointed as external administrators.

A list of the public hearings and those who appeared as witnesses is provided below. Continue reading »

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ASIC winds up more abandoned companies to help employees

 ASIC, Corporate Insolvency, External administration, Insolvency Statistics  Comments Off on ASIC winds up more abandoned companies to help employees
Oct 262015
 

Some directors of insolvent companies abandon their companies rather than adopt the proper course, which is to put the company through formal liquidation under the Corporations Act.

The Australian Securities and Investments Commission (ASIC) recently (21 October 2015) published a list of the latest abandoned companies that it has placed in liquidation under the special powers provided in section 489EA of the Corporations Act 2001. This brings to 60 the total of such company liquidations.

Were it not for special powers given to ASIC, abandonment of a company would cause employees who had not been paid their wages, leave and other entitlements to miss out on the compensation administered through the Australian Government’s Fair Entitlements Guarantee scheme (FEG), because such financial assistance is only available to employees of businesses that have gone into liquidation (or bankruptcy in the case of non-corporate employers). So putting an abandoned company into liquidation gives unpaid employees access to the FEG compensation. Unpaid employees of an abandoned companies can submit a request to ASIC to wind up the company.

The latest group of 10 abandoned companies owed at least 15 employees a total in excess of $429,000 in employee entitlements. They are:

LATEST LIST OF ABANDONED COMPANIES
Source: ASIC Media Release 15-305MR, 21-10-2015

Company Name

State

Adelaide Commercial Furniture Pty Ltd SA
JBKM Ventures Pty Ltd QLD
New Energy Technologies Pty Ltd NSW
Rifam Pty Ltd VIC
Let it Rain Pty Ltd NSW
Focus on Training Pty Ltd VIC
YQ Trading Pty Ltd NSW
Parklane Building Corporation Pty Ltd NSW
Sureline Training Services Pty Ltd WA
Australian Veterinary Hospitals (South Australia) Pty Ltd NSW

Apart from the names of the liquidators appointed, this is the only information supplied by ASIC. (The “corporate veil”, or something like it, seems to require that the identity of the company directors be kept confidential.)

As to the costs per company, ASIC said in January 2013:

“The cost of taking winding-up action is generally estimated to be about $15,000. This figure comprises ASIC’s costs and the liquidator’s remuneration.” (Reg Guide 242)

One can only hope that the liquidators are recovering company assets to pay the liquidation costs, or that the directors are penalised in some way for making taxpayers foot the bill.

The 60 abandoned companies wound up by ASIC since 2013 owed a total of 213 employees more than $2.9 million in entitlements.

END OF POST

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Government contemplates imposing a regulation levy on external administrators

 ASIC, Corporate Insolvency, External administration, External administrators, Regulation  Comments Off on Government contemplates imposing a regulation levy on external administrators
Aug 312015
 

UPDATE TO THIS POST: In November 2016 the Treasury issued a revised proposal for consultation. See my blog titled “Levy on registered liquidators and other industries to help fund ASIC”.

A Government levy on registered liquidators is included in a draft proposal to adopt an “industry funding” model, or user-pays system, for the Australian Investments and Securities Commission (the ASIC). The levy is intended to recover costs incurred by the ASIC in regulating registered liquidators.

The Consultation Paper, issued on 28 August 2015, estimates that a flat levy on registered liquidators:

“… would equate to around $12,700 per year and some liquidators would potentially pay a high proportional fee relative to their costs of regulation.”

The paper discusses, as another option, the merits of the levy being based on “assets realised”. It states that one point in favour would be that:

“Levying liquidators on the basis of ‘assets realised’ would promote greater harmonisation between bankruptcy and corporate insolvency laws. It would be similar to the asset realisations charge administered by the Australian Financial Security Authority.”

In bankruptcies the liability to pay the asset realisations charge is that of the practitioner, but the amount of charge paid is borne by the estate or administration. This aspect is not discussed in the Consultation Paper. But presumably if the ASIC levy follows the bankruptcy scheme, the levy will be paid from funds held or realised by the company under external administration. Continue reading »

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Jul 312015
 

During the June 2015 hearing in Canberra of the Senate Economics References Committee’s inquiry into “Insolvency in the Australian construction industry”, Mr Dave Noonan, a national secretary in the Construction, Forestry, Mining and Energy Union (CFMEU), listed what he thought were the main causes of business failure in the construction industry. In doing so he was drawing largely on figures published by the Australian Securities and Investments Commission (ASIC), which gathers that information from liquidators and other external administrators.

It’s the latest example of these ASIC statistics being quoted as if they were accurate and credible. In the CFMEU’s case, Mr Noonan took delight in agreeing with a Dorothy Dixer from a friend in the Senate (Senator Doug Cameron) that “the CFMEU was not named as one of the major reasons for corporate failure in the construction industry”. The inference was, of course, that the statistics proved that the CFMEU was not a problem for the industry.

What some of those who quote these ASIC statistics may not know is that the categories of causes from which external administrators must choose are predetermined. In other words, in nominating causes of failure external administrators must select from a list of categories created by the ASIC. Also, one of those categories – one which gets a large number of ticks – is labelled merely “Other”.

Furthermore, and curiously, the information given to the ASIC by external administrators appears, on the face of it, to be at odds with the widespread belief amongst the insolvency community, unions and regulators that many business failures, especially in the construction industry, are the result of fraudulent phoenix activity. Which raises the question of whether the number of permitted categories of causes need to be increased, and/or whether the categories need to be modernised, broadened and clarified.

circle-of-confusion

Permitted categories of causes

The ASIC compiles its statistics on the causes of failure from information supplied by external administrators when they fill out their statutory reports online (Form EX01, Schedule B of ASIC Regulatory Guide 16). In filling out these reports – i.e., in nominating the causes of a particular corporate insolvency – external administrators must select from 13 categories of causes, which are shown below in the order established by the ASIC and using its exact words. This list of categories has existed for at least thirteen years. The only change since 2002 has been to alter the name of cause number 13, from  “None of the above” to “Other, please specify”.

Select from these causes of failure

1.  Under capitalisation
2.  Poor financial control, including lack of records
3.  Poor management of accounts receivable
4.  Poor strategic management of business
5.  Inadequate cash flow or high cash use
6.  Poor economic conditions
7.  Natural disaster
8.  Fraud
9.  DOCA (Deed of Company Arrangement) failed
10. Dispute among directors
11. Trading losses
12. Industry restructuring
13. Other, please specify

For those with business savvy, a rough definition of most of these ASIC categories can be deduced from their titles. (Which is just as well, because there is no official explanation.) But some categories – particularly “Fraud” (ASIC cause 8) – are vague and broad, and would benefit from the ASIC stating exactly what they mean.

Numbers for categories of ASIC causes

The ASIC’s latest report on this subject [1.] shows that in 2013-14 the “nominated causes of failure” – for all industry types, not just the construction industry – from highest to lowest, were:

Chart 1
CAUSES OF FAILURE
NUMBER
Inadequate cash flow or high cash use
4,031
Poor strategic management of business
3,975
Trading losses
3,078
Poor financial control including lack of records
2,908
Other
2,726
Poor economic conditions
2,312
Dispute among directors
1,743
Poor management of accounts receivable
1,017
Dispute among directors
271
Industry restructuring
222
Fraud
146
Natural disaster
122
Deed of Company Arrangement failed
55
TOTAL
22,606

Top nominated causes

An external administrator may nominate as many of the prescribed causes as he or she likes. According to the ASIC, external administrators nominated an average of between two and three causes of failure per report in 2013–14. So in its summary the ASIC highlights the top three nominated causes of failure for companies and provides figures on the percentage of reports by external administrator in which these nominated causes appear:

Chart 2
CAUSES OF FAILURE
2013-14
Inadequate cash flow or high cash use (ASIC cause 5)
in 42.6% of reports
Poor strategic management of business (ASIC cause 4)
in 42.0% of reports
Trading losses (ASIC cause 11)
in 32.5% of reports

These top three nominated causes have been the same for the past four years. It appears that “Other” (ASIC cause 13) may be a close fourth.

What is fraudulent phoenix activity?

The following explanation of phoenix activity comes from “Defining and Profiling Phoenix Activity”, a paper published in December 2014 as part of a research project (still going) by Associate Professor Helen Anderson, Professor Ann O’Connell, Professor Ian Ramsay, Associate Professor Michelle Welsh and Hannah Withers of the University of Melbourne Law School and the Monash Business School:  [2.]

“The concept of phoenix activity broadly centres on the idea of a second company, often newly incorporated, arising from the ashes of its failed predecessor where the second company’s controllers and business are essentially the same. It is important to note that phoenix activity can be legal as well as illegal. Legal phoenix activity covers situations where the previous controllers start another similar business when their earlier entity fails in order to rescue its business. Illegal phoenix activity involves similar activities, but the intention is to exploit the corporate form to the detriment of unsecured creditors, including employees and tax authorities.
In a typical phoenix activity scenario, a company in financial difficulties, ‘Oldco’, is placed into liquidation or voluntary administration, or is simply left dormant (and may then be deregistered). Prior to this occurring, Oldco’s assets may be transferred either to a newly incorporated entity, ‘Newco’, or to an existing entity, such as a related company in a corporate group. “

Losses incurred

Estimates of losses incurred by the Taxation Office, employees, the Fair Entitlements Guarantee (FEG) scheme, sub-contractors, trade creditors , etc. as a result of phoenix activity vary, but are in the hundred of millions. On its website the ASIC quotes from figures in a report published by Fair Work Australia in 2012 which put the cost to the Australian economy at potentially more than $3 billion annually. The FWA report, “Phoenix activity: sizing the problem and matching solutions”, estimates that the annual cost of illegal phoenix activity is:

  • up to $655 million for employees, in the form of unpaid wages and other entitlement
  • up to $1.93 billion for businesses, as a result of phoenix companies not paying debts, and for goods and services that have been paid for but not provided, and
  • up to $610 million for government revenue, mainly as a result of unpaid tax – but also due to payments made to employees under the General Employee Entitlements and Redundancy Scheme (GEERS) now the Fair Entitlement Guarantee (FEG).  [3.]

 

Phoenix perpetrators and phoenix victims

A phoenix transaction carried out by a company normally brings about the end of the company. If the company’s former suppliers or subcontractors cannot survive without the payments they were receiving from the company, they too may have to close down. Hence, where phoenix activity is involved a failed company might be a phoenix perpetrator or a phoenix victim (or perhaps a phoenix perpetrator as a result of being a phoenix victim!).

For simplicity’s sake, this article will focus upon companies/directors that are phoenix perpetrators.

To which category of ASIC causes of failure do phoenixing events belong?

When looking at a failed company an external administrator might conclude that the company is a phoenix perpetrator (or, to describe the event more accurately, that the directors caused the company to carry out a phoenix arrangement). However, the predetermined list of causes which the ASIC has created doesn’t provide a category that is clearly made for such cases, or a category into which such cases might logically fit.

“Fraud” (ASIC cause 8) might be an appropriate category. But if the phoenix activity was “legal” [4.] it may not.

Even if “Fraud” is the cause category into which external administrators should, and do, put fraudulent or illegal phoenix cases, then it appears that the commonly accepted extent of such activity is not being reflected in their reports to the ASIC.  As chart 1. shows, “Fraud” accounts for only 146 out of 22,606 causes.

Furthermore, anecdotal evidence suggests that “Fraud” is regarded by external administrators as referring to dishonesty by employees or outsiders – like the misappropriation of funds, or the abuse of position by employees, or wrongful or criminal deception by outsiders.

In a “legal phoenix” case the external administrator might select the cause category of “Other” (ASIC cause 13). The fact that this cause stands at an appreciable 2,726 out of 22,606 on the latest count (see chart 1.) adds weight to that possibility. But because the “please specify” descriptions that are requested and given in this category are not publicly disclosed by the ASIC (and probably not even analysed), we don’t know what is being included in this undefined, catch-all category.

In a “legal phoenix” case, and even in an “illegal phoenix” case, the external administrator might – for the purpose of reporting causes of failure – disregard the phoenix transaction, preferring the view that the company failed before implementation of the phoenix scheme as a result of other causes, such as “inadequate cash flow or high cash use”, “poor strategic management of business” and/or “poor financial control including lack of records”.

What we don’t know

There is so much we don’t know. For example:

  • We don’t know whether phoenixing is generally regarded by external administrators as a cause of failure of companies.
  • We don’t know how many phoenix cases – legal and illegal – external administrators encounter.
  • We don’t know whether illegally phoenixing is generally regarded by external administrators as either an offence or “misconduct” to be reported to the ASIC.

 

Possible misconduct

The above discussion of causes has drawn on information supplied by external administrators in a particular section of the statutory report form EX01. However, the main reason for this form’s existence is to report, as required by the Corporations Act, possible offences that the external administrator has noticed.

In Schedule B external administrators are asked to advise whether they are reporting “possible misconduct”.  It is possible, therefore, that reports of illegal phoenixing are contained in this main section of their reports.

But if this is so, the ASIC’s analysis of the statutory reports received – published in “Insolvency statistics: External administrators’ reports” – does not mention it. In fact, the word “phoenix” appears only once in the latest of those published reports, and then only in a passing manner. Perhaps this is to be expected, given that the word “phoenix” does not even appear in Schedules B and D nor in any other part of ASIC Regulatory Guide 16.

It’s possible that the word’s absence from the offences/misconduct section of the Regulatory Guide may be due to the fact that “there is no express ‘phoenix offence’”. [4.] 

However, as “Defining and Profiling Phoenix Activity” explains, acts carried out during conduct of an “illegal phoenix scheme” are likely to be offences under one or more of several sections in the Corporations Act.  Also, the acts are likely to breach provisions of the Tax Assessment Act, the Criminal Code Act and/or the Fair Work Act.  [4.] .

Winding up

At this point we arrive at the same questions presented by the earlier analysis of the causes of failure. Is the phoenix activity observed by “the front-line investigators of insolvent corporations”  [5.]  being officially reported to the ASIC? If it is, how does the ASIC know it is, and how is the ASIC putting that information on the public record and before inquiries and researchers looking into phoenix activity?

Given the high level of interest in, and regulatory action to curb, the illegal phoenixing phenomenon, it is a pity that the store of the valuable knowledge derived from first-hand observations by external administrators is not being properly mined. The ASIC should give serious consideration to amending/expanding the Form EX01, Schedule B of Regulatory Guide 16 with simple changes to:

  •  include a category for corporate failures caused by phoenix schemes; and
  • include a question in the misconduct section asking whether the company was involved in a phoenix scheme.

FOOTNOTES:

  1. Insolvency statistics: External administrators’ reports 1 July 2013-30 June 2014: Report 412, 29 September 2014
  2. http://law.unimelb.edu.au/cclsr/centre-activities/research/major-research-projects/regulating-fraudulent-phoenix-activity
  3. http://asic.gov.au/for-business/your-business/small-business/compliance-for-small-business/small-business-illegal-phoenix-activity/
  4. “Defining and Profiling Phoenix Activity”, December 2014, Associate Professor Helen Anderson and others.
  5. The ASIC often refers to external administrators as “the front-line investigators of insolvent corporations”. See for example, “Regulatory Guide 16: External administrations: Reporting and lodging”, para. R16.4

Previous posts on this blog regarding this inquiry:

 

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Jul 062015
 

(6 July 2015) From 1 July 2015 the Australian Government’s Department of Employment will accept applications from liquidators for funding under its Fair Entitlements Guarantee programme.  The following is a copy of the FACT  SHEET for the Fair Entitlements Guarantee Recovery Programme.


FEG logo

A division of the Australian Government Department of Employment

Fair Entitlements Guarantee Recovery Programme

This fact sheet provides information for liquidators about the Fair Entitlements Guarantee (FEG) Recovery Programme which aims to improve the recovery of employment entitlements advanced under FEG.

The FEG Recovery Programme

FEG provides financial assistance for unpaid employment entitlements to eligible employees who have lost their jobs due to the liquidation or bankruptcy of their employers. Once entitlements are paid under FEG, the Commonwealth stands in the shoes of the employee as a subrogated creditor and is entitled to claim in the liquidation and is given priority over other unsecured creditors under the Corporations Act 2001 (Cth).

The FEG Recovery Programme is administered by the Department of Employment (‘Department’) with the purpose of funding actions that will improve recovery of amounts advanced under FEG.

Under the FEG Recovery Programme funding may be provided to liquidators to enable recovery efforts, including legal proceedings, which the liquidators would not otherwise have the financial resources to pursue.

How to apply

Actions that the Department may consider funding include, but are not limited to:

  • voidable transaction claims, such as unfair preferences and uncommercial transactions;
  • insolvent trading claims;
  • transactions entered into with the intention to avoid employment entitlements; and
  • claims against receivers and secured creditors for failure to pay employment entitlements.

Liquidators of insolvent entities where employment entitlements have been paid under FEG can apply for funding assistance where:

  •  they are aware of one or more claims that might be brought, on behalf of the company, against any person or persons; and
  • those claims have reasonable prospects of success and, if successfully prosecuted, will result in the company recovering property that will improve the return for employment entitlements.

Applications for funding assistance can be made by completing the Funding Application Form available on the FEG website and returning:

  •  by email to: FEGRecovery@employment.gov.au
  •  by post to: Fair Entitlements Guarantee Branch Department of Employment GPO Box 9880 CANBERRA ACT 2601

Considerations

When determining whether to provide funding, the Department will have regard to:

  •  the merits, prospects of success and risks of the proposed action;
  • the complexity of the proposed action and its likely duration;
  • the total costs that are likely to be incurred, compared to the admitted value of the Department’s proof of debt and the scope for improved recovery;
  • the availability of favourable evidence;
  • whether the proposed defendant or defendants have sufficient assets to satisfy an adverse judgment; and
  • whether sufficient information has been provided, as part of the initial application or in response to a request for further information, to enable the Department to make its funding decision.

If your application is accepted, you will be required to enter into a funding agreement with the Department. The funding agreement will govern what the Department will pay for and how monies recovered are to be applied.

A draft of the funding agreement will be provided to you if your application is accepted. The Department will not be liable to pay any amounts until the funding agreement has been executed and will only provide funding in accordance with the funding agreement.

Want more information?

You can contact the FEG Hotline if you would like more information about the FEG Recovery Programme:

If you speak a language other than English, call the Translating and Interpreting Service (TIS) on 13 14 50 for free help anytime.

Further information about FEG is also available on the FEG website (www.employment.gov.au/FEG).

The information contained in this fact sheet is not legal advice. Where necessary, you should seek your own independent legal advice relevant to your particular circumstances. The Commonwealth is not liable for any loss resulting from any action taken or reliance made by you on the information contained in this factsheet.     Updated: June 2015


 

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