Submission: Reforms to address corporate misuse of the fair entitlements guarantee scheme

Treasury issued a discussion paper consulting on options for targeted law reform to address corporate misuse of the FEG scheme and to improve the recovery of FEG payments.

ARITA's submission made the following points:

  • Consideration should be given to restricting the extent of financial assistance provided by the FEG Scheme, so that the generosity of the scheme dovetails with the National Employment Standards, particularly in respect of redundancy entitlements. This would be more in keeping with the notion of a ‘safety net’ scheme,
  • Wilful sharp corporate practices are unacceptable, however the complexity in applying the law may lead to inadvertent misallocation of proceeds of circulating assets,
  • ARITA supports reform to Part 5.8A of the Corporations Act to make the provisions more effective as a deterrent to avoiding or preventing the recovery of employee entitlements, whilst not unduly restricting business restructures which may serve the interests of a company’s creditors as a whole,
  • ARITA supports reforms to improve the accountability of corporate groups for shortfalls in employee entitlements,
  • ARITA supports increased action against miscreant company directors and the introduction of a Director Identification Number (‘DIN’) which will assist such action,
  • ARITA supports holistic reform to ensure the ordinary application of Chapter 5 of the Corporations Act to the external administration of corporate trustees. We do not support limited amendments that only focus on the issue of the priority of employee entitlements,
  • We reject that there is any uncertainty in the right of receivers to recoup as a priority specific costs, and general costs apportioned on a pro-rata basis, from circulating security asset realisations,
  • ARITA supports amendments to s 561 which provide clarity on the recovery of remuneration and costs of liquidators, and
  • ARITA supports amendments to ss 433, 560 and 561 which reduce the complexity of the interaction and application of these two provisions and allow for the timely resolution of employee entitlement claims by receivers.
A copy of ARITA's submission can be accessed here.