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 (CP 180) 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 (CP 180) 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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