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21-193MR ASIC action assists employees of abandoned companies to access almost $450,000 in employee entitlements
ASIC has assisted employees gain access to the Fair Entitlements Guarantee scheme (FEG) by exercising its wind-up powers and appointing liquidators to 19 abandoned companies.
From 1 July 2020 to 30 June 2021, ASIC appointed liquidators to 19 abandoned companies owing at least 29 employees $448,370 in employee entitlements.
By comparison, from 1 July 2019 to 30 June 2020, ASIC appointed liquidators to eight abandoned companies owing at least 20 employees more than $294,000 in employee entitlements.
Generally, the companies have been abandoned for more than six months before ASIC makes the appointment.
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).
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 Attorney General’s Department operates the 'FEG Recovery Program', a program which aims to improve the recovery of employment entitlements advanced under the FEG.
ASIC first used its powers in 2013 (refer: 13-233MR) and to date, has wound up 142 companies owing approximately 356 employees more than $6.8 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.