Submission: Draft Bill reforms to address corporate misuse of FEG

17/07/2018

Further to our article about the consultation on the draft legislation to address corporate misuse of the Fair Entitlement Guarantee (FEG) scheme, ARITA has made a detailed submission.

ARITA made the following points:

General

• Assessed against the intention of the new safe harbour and ipso facto reforms to create a stronger restructuring and turnaround culture in Australia, we are concerned that there is a risk that the proposed provisions could, in certain instances, capture a genuine attempt at business restructure which has not been successful and careful consideration needs to be given to ensure that this is avoided.

Part 5.8A amendments

• There is a need for the amendments to be clear in their operation to capture the activities of pre-insolvency advisors.

Contribution orders

• The changes to provide for contribution orders from members of corporate groups are supported in principle but there is a need for clarification around the approach to quantification of such orders.

Director disqualification

• To ensure that these provisions act as a deterrent to the “sharp corporate practices” the target of the amendments consideration should be given to making the ASIC disqualification automatic in operation (subject to some tightening of the trigger requirements).