Today I introduce a Bill to amend the Corporations Act 2001.
The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 contains two key sets of measures.
Administrative winding up of abandoned companies
The first set of measures contained in this Bill strengthens the powers of the Australian Securities and Investments Commission (ASIC) to place companies into liquidation when they have been abandoned by their directors.
This Bill delivers part of the Gillard Government's Protecting Workers' Entitlements Package election commitments.
When a company fails, employees can often end up missing out on some or all of their entitlements – such as unpaid wages and certain other accrued benefits. The Government's employee assistance scheme, the General Employee Entitlements and Redundancy Scheme or 'GEERS', aims to protect workers' entitlements in these situations, so that employees of failed companies can recoup many of their unpaid entitlements as quickly as possible.
Under GEERS, employees of a failed company are only able to access the scheme where the company that has employed them fails and is placed into liquidation. However, sometimes the directors of a failed company simply abandon the company, rather than go through the appropriate processes to wind-up the company. At present where this occurs, employees are not able to access their unpaid entitlements under GEERS.
If a company has been abandoned but has not yet been deregistered, employees (or ASIC on their behalf) currently have to apply to the courts and incur legal costs in order to place the abandoned company into liquidation before they can access GEERS.
This is further complicated by the fact that where the abandoned company has been deregistered by ASIC or by its members, ASIC or the company's employees have to apply to the courts to reinstate the company and, only once the company is reinstated so that it can be placed into liquidation, could any potential employee eligibility for GEERS be triggered.
To address this impediment and safeguard the rights of employees of failed companies to access GEERS, today I introduce legislation that will provide ASIC with the following discretionary powers:
- the power to place a company into liquidation in circumstances where ASIC currently has a power to deregister the company;
- the power to reinstate any deregistered company and immediately place it into liquidation; and
- the power to place a company into liquidation where ASIC has reason to believe that the company is no longer carrying on business; where ASIC gives notice to the company and its directors of its intention to place the company into liquidation; and where neither the company nor its directors oppose the placement of the company into liquidation.
I anticipate that ASIC will issue guidance to industry on the circumstances in which this power will be used.
Publication of corporate insolvency notices
The second set of measures in the Bill will facilitate the future requirement of public notices in corporate external administrations to be published on a single publicly available website.
There are a range of notices that, in the course of external administrations, must be published in the print media or the ASIC Gazette. These public disclosure obligations are in addition to obligations for petitioning creditors and for external administrators to communicate directly with known creditors to inform them of certain events.
There are significant costs to external administrations in complying with these obligations. These costs are ultimately borne by creditors through reduced returns. There are also costs to creditors in monitoring numerous newspapers for relevant notifications – particularly as there is no set newspaper or day of the week on which notices must be published.
The Bill will amend the Corporations Act to remove the requirement for these notices to be published in newspapers or the ASIC Gazette. Instead, the Bill requires these notices to be published in a “prescribed manner” and provides a power for regulations to be made that will prescribe that manner. These amendments will facilitate the future provision of corporate external administration notices via a single website.
As part of the reform package to modernise and harmonise Australia's insolvency industry, which I released together with the Attorney-General on 14 December 2011, the Government announced that ASIC would establish a corporate external administration notices website by 1 July 2012. Online publication of notices will replace approximately 53,000 newspaper advertisements over the next four years, saving external administrations around $15 million over that same period.
The reforms will apply to both advertisement requirements and gazettal requirements.
Removing the requirement for these notices to be published in newspapers, and instead enabling them to be published in a prescribed manner, facilitates the publication of these notices on a single website. Requiring all public notices to be lodged on a single website ensures that these notices are publicly accessible at one location; and able to be searched and accessed by stakeholders quickly and easily.
In addition to the two key reforms I have outlined, the Bill also contains some miscellaneous amendments in relation to paid parental leave and the powers of the Court in relation to company reinstatements.
The Ministerial Council for Corporations has been consulted and has approved the amendments contained in this Bill.
This Bill delivers part of the Gillard Government's Protecting Workers Entitlements Package election commitments.
It strengthens ASIC's powers to place companies into liquidation when they have been abandoned by their directors. This Bill will benefit the employees of these abandoned companies, by enabling quicker access to their unpaid entitlements through the Government's employee assistance scheme.
The Bill also paves the way for a more streamlined and cost-effective process involving the publication of insolvency notices via a single, publicly available website. This will benefit creditors of companies in external administration, by reducing the costs of complying with these regulatory obligations.