ASIC has exercised its wind up powers to appoint liquidators to a further 10 abandoned companies to assist employees of these companies to gain access to the Fair Entitlements Guarantee (FEG). The appointment of liquidators will also facilitate a full and proper investigation into the reasons why the companies failed and allow recovery of any voidable or unreasonable director-related transactions.

Since November 2012, ASIC has used its wind up powers to appoint liquidators to 29 companies who have owed, in total, 127 employees more than $1.8 million in entitlements (refer: 14-097MR and 13-233MR).

The 10 abandoned companies owe at least 26 employees a total in excess of $350,000 in employee entitlements.

The FEG is a legislative safety net scheme funded by the Australian Government. It is designed to assist employees owed unpaid employee entitlements because of their employer company's liquidation or the company directors' bankruptcy.

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

ASIC also administers the Assetless Administration Fund that liquidators of these companies can draw upon in circumstances where there are little or no funds available to conduct a proper investigation into the affairs of the companies.

ASIC Commissioner John Price said, ‘ASIC's decision 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 scheme to claim entitlements owed to them. It also enables a proper investigation into the affairs of the companies by the appointed liquidators’.

The 10 companies wound up by ASIC are:

'ASIC acknowledges the assistance provided by the appointed liquidators in what can be difficult circumstances. We will continue to work with the liquidators of these abandoned companies, including consideration of 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.