Bill to strengthen FEG recoveries introduced into Parliament

2/10/2018
 
The Government has recently introduced into the House of Representatives its proposed legislation to strengthen recoveries for its Fair Entitlements Guarantee (FEG) scheme.

The Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 was introduced on 20 September 2018.

ARITA participated in the roundtable and submission process reviewing the Exposure Draft of the Bill and a summary of our submission was provided to members in July.

The key features of the Bill (as introduced) are:

  • Amendments to Part 5.8A of the Corporations Act 2001 (Corporations Act) to:
    • extend the scope of the criminal offence for conduct which results in the avoidance of the payment of employee entitlements to cover reckless conduct;
    • introduce new civil penalty and compensation provisions which cover entering into a transaction that is likely to avoid, prevent or significantly reduce recoverable employee entitlements; and
    • broaden the scope of bodies which can apply for orders under Part 5.8A.
  • Introduction of “Contribution Orders” which can be made, in limited circumstances, against companies within a corporate group, or entities with a closely connected economic relationship, for payment of outstanding employee entitlements of an insolvent entity.
  • Introduction of new powers of disqualification for directors, either directly by ASIC or after application to the Court, where there has been repeated instances of corporate contraventions and insolvencies inappropriately relying on FEG.

    Copies of the Bill and updated Explanatory Memorandum are available through the Parliament website.

    We have assessed the final Bill introduced into Parliament and it appears a number of matters raised through ARITA’s advocacy have been addressed in the final form of the Bill. In particular, the Bill:

  • now includes different wording to sections within Part 5.8A which seeks to clarify the application of the provisions to pre-insolvency advisors;
  • adopts proposals put forward by ARITA to exclude from the operation of ss 596AB and 596AC transactions which are made pursuant to schemes of arrangement (as well as those pursuant to deeds of company arrangement which were included in the Exposure Draft)
  • adopts ARITA’s suggestions for amendments to proposed s 596AG so as not to unduly restrict the operation of the proposed new provisions;
  • changed the timeframes contained in the new director disqualification provisions to, in part at least, reflect ARITA’s submissions concerning the need to balance the policy objectives underlying these amendments against broader objectives which are aimed at encouraging genuine business restructure.

ARITA will monitor the progress of the Bill and update members as to developments.