ASIC has recently exercised its wind up powers to appoint liquidators to 13 abandoned companies. The move will assist employees of these companies to gain access to the Fair Entitlements Guarantee (FEG).

This brings to 19 the total number of abandoned companies to which ASIC has appointed liquidators this financial year (refer: 13-233MR).

The 13 abandoned companies owe at least 43 employees a total in excess of $800,000 in employee entitlements. These companies were domiciled in states across Australia.

The FEG is a legislative safety net scheme funded by the Australian Government. It is designed to assist employees who are owed unpaid employee entitlements because their employer company went into liquidation or the directors became bankrupt.

However, some employees who are owed entitlements have been unable to access FEG because the companies’ directors have either been unable to discharge their duties or have abandoned their insolvent companies without putting them into liquidation. The appointment of liquidators by ASIC facilitates access to FEG.

ASIC Commissioner John Price said, ‘The decision by ASIC to apply its powers to wind up companies is carefully considered against some specific criteria and is not taken lightly.

‘By appointing liquidators, we know that the affected employees will now be able to access the entitlements owed to them’.

The 13 companies wound up by ASIC are:

‘ASIC acknowledges the assistance provided by the appointed liquidators in what are often difficult circumstances. We will continue to work with the liquidators of these abandoned companies, including whether further action against the companies or their officeholders is warranted’, Mr Price said.

Background

In November 2012, ASIC released guidance on exercising its discretionary power to order the winding up of abandoned companies to assist employees of companies that are abandoned (refer: 12-268MR).

Regulatory Guide 242 ASIC’s power to wind up abandoned companies (RG 242) explains how ASIC will prioritise companies for winding up and outlines the factors it considers in exercising this discretionary power, including:

• the amount of outstanding employee entitlements claimed

• whether there is another creditor capable of winding up the company

• the amount of money available in the Assetless Administration Fund and how ASIC might best use this money, and

• whether the directors have abandoned the company.

RG 242 further outlines how to make a request to ASIC to wind up an abandoned company, how ASIC will assess a request and what happens if ASIC does decide to wind up a company. It also discusses what other options employees can pursue if ASIC decides not to wind up a company.

ASIC appointed 34 registered liquidators to its internal liquidator panel in February 2013. The panel members are from a variety of firms, both large and small, and are capable of servicing appointments in all states and territories in Australia.

ASIC may appoint a registered liquidator when winding up an abandoned company and will remunerate the liquidator from the Assetless Administration Fund.

FEG replaced the General Employee Entitlements Redundancy Scheme (GEERS) in December 2012.