ASIC has assisted employees gain access to the Fair Entitlements Guarantee scheme (FEG) by exercising its wind-up powers and appointing liquidators to five abandoned companies.

From 1 January 2019 to 31 March 2019, ASIC appointed liquidators to five abandoned companies owing at least 39 employees more than $410,000 in employee entitlements. The companies are:

Abandoned companies are those where directors are unable to discharge their duties or have abandoned their insolvent companies without first putting them into liquidation.

ASIC’s appointment of liquidators facilitates access to FEG for employees who would otherwise be ineligible to apply for assistance. The appointment of liquidators also allows a full and proper investigation into the reasons why the companies failed and may assist the recovery of any voidable or unreasonable director-related transactions. In addition, abandoned companies may be an indicator that the director has engaged in illegal phoenix activity.

Employees of abandoned companies who are owed employee entitlements can apply to ASIC to wind up the company by lodging a report of misconduct.

More information about the process is available in Regulatory Guide 242: ASIC’s power to wind up abandoned companies (RG 242).

Background

The FEG is a legislative safety net funded by the Australian Government. It is designed to assist employees recover owed unpaid employee entitlements because of their employer company’s liquidation or bankruptcy. In addition, the Department of Jobs and Small Business operates the 'FEG Recovery Programme'; a programme designed to strengthen recovery activity of amounts advanced under the FEG. More information about it is available here.

ASIC first used its powers in 2013 (refer: 13-233MR) and to date, has wound up 115 companies owing approximately 305 employees more than $6 million in employee entitlements.

Employees of abandoned companies who are owed employee entitlements can lodge a request with ASIC to wind up the company. The process is outlined in RG 242 and includes information on how to lodge a request, what supporting documentation must be provided and how ASIC assesses requests.

Examples of supporting documentation and information include:

• confirmation that an employee is an Australian citizen or permanent resident, or a citizen of New Zealand;
• the employment agreement/contract with the company;
• documents which may show employee entitlements such as payslips, separation certificate, group certificates and bank statements (to show missed wages);
• an estimate of the number of people employed by the company; and
• why an employee believes that the company has been abandoned.

ASIC will generally not wind up an abandoned company where the total amount of outstanding employee entitlements is less than $15,000. Therefore, an employee should encourage other employees to lodge separate requests with ASIC.