Abandoned companies to be put into liquidation
Liquidating abandoned companies will make it harder for directors to restart the same company, but without debts - known as phoenixing - and give employees access to a government-funded scheme for unpaid entitlements such as leave and redundancy.
The Australian Securities and Investments Commission is putting together a panel of liquidators willing to take on jobs for $8800, plus GST.
This could increase the amount of money paid out by the General Employee Entitlements and Redundancy Scheme.
Employees cannot access GEERS unless directors liquidate the company. Under the new scheme, employees who feel they are entitled to GEERS money can ask ASIC to wind up an abandoned company.
Liquidator Glenn Franklin, from Lawler Draper Dillon in Melbourne, said this would be enough to do a basic assessment of an abandoned company.
The work will be funded by the Assetless Administration Fund and the size of the panel will depend on how many liquidators applied to an open tender, which closed this week.
GEERS will generally pay the cost to process any outstanding claims by employees. It is also more money than liquidators often get when they are appointed by a court.
This work was often done without being paid, Mr Franklin said. Some employees of abandoned companies had used their own money to pay for liquidation so they could access GEERS payments, he said.
ASIC might appoint a liquidator if the company did not responded to any queries, did not lodge financial records for 18 months, or if its review fee was more than a year overdue, or if ASIC believed a director had abandoned the company or if it believed the company was not carrying on a business.
The government has paid out more than $1 billion through GEERS since it started in 2001, but has only recovered $150 million.
An extra 50 to 100 failed companies were expected to be wound up every year under the scheme, ASIC commissioner John Price told BusinessDay earlier this year.
Frequently Asked Questions about this Article…
Under the new plan ASIC will automatically place companies that appear to be abandoned into liquidation using a panel of appointed liquidators. The move is designed to tidy up abandoned businesses, stop directors restarting the same company without its debts (phoenixing), and give employees a route to claim unpaid entitlements through the government scheme GEERS.
Liquidation makes it much harder for directors to simply restart the same business without its debts because a formal insolvency process is put in place. By appointing liquidators and enabling employees to access GEERS, the scheme reduces the incentive and opportunity to abandon a company and re‑establish it without liabilities.
GEERS is a government‑funded scheme that pays unpaid employee entitlements such as leave and redundancy. Employees can only access GEERS after a company has been liquidated, and under the new rules employees who believe they are owed money can ask ASIC to wind up an abandoned company so they can make GEERS claims.
Employees who think they’re entitled to GEERS payments can ask ASIC to wind up an abandoned company. ASIC may appoint a liquidator if the company fails to respond to queries, hasn’t lodged financial records for 18 months, has a review fee more than a year overdue, appears to have an abandoned director, or isn’t carrying on a business.
ASIC is assembling a panel of liquidators willing to take on abandoned‑company liquidations. The panel appointments will be paid $8,800 plus GST for these jobs, and the work will be funded from the Assetless Administration Fund. The final size of the panel depends on how many liquidators apply.
GEERS will generally pay the cost to process outstanding employee claims, and funding via the Assetless Administration Fund means these liquidations are more likely to be properly resourced. The article notes GEERS payments are often more than liquidators receive when appointed by a court, which should improve outcomes for employees.
Since GEERS began in 2001 the government has paid out more than $1 billion but recovered only about $150 million. ASIC expects the new approach to result in an extra 50 to 100 failed companies being wound up each year, which could increase the amount paid out to employees under GEERS.
Yes. Liquidators often carried out work on abandoned companies without being paid, and some employees even used their own money to pay for liquidation so they could access GEERS. The new funded panel aims to remove that financial barrier and make it easier for employees to claim unpaid entitlements.
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