New liquidation trigger for abandoned companies
COMPANIES abandoned by directors will automatically be placed into liquidation by the corporate watchdog when a new panel of liquidators is assembled early next year.
Liquidating abandoned companies will make it harder for directors to restart the same company but without debts - a practice 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 may 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 can ask ASIC to wind up an abandoned company.
Liquidator Glenn Franklin from Lawler Draper Dillon in Melbourne said the fee offered would be enough to do a basic assessment of a 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 of processing any outstanding employee claims. The fee is also more money than liquidators often get when they are appointed by a court. Such work was often done for no payment, Mr Franklin said. Employees of abandoned companies had been known to use their own money to pay for liquidation so they could access GEERS payments, he added.
ASIC may appoint a liquidator if the company does not respond to queries, does not lodge financial records for 18 months, if its review fee is more than a year overdue, if ASIC believes a director has abandoned the company or if it believes the company is not carrying on a business.
The government has paid out more than $1 billion to 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, an ASIC commissioner, John Price, told Fairfax earlier this year.
The Assetless Administration Fund was set up in 2005 to investigate failed companies where ASIC suspected directors had breached duties. It has about $3.5 million for 2012-13.