Not infrequently, directors abandon insolvent companies in circumstances where that company may owe a significant amount to its employees by way of wages and other entitlements.

Ordinarily, where any insolvent company is placed into liquidation (either by the directors or perhaps on the application of a creditor) the employees become entitled to access the Fair Entitlements Guarantee scheme (FEG), a Federal Government initiative which, via the Department of Employment, pays employees certain of their entitlements that the insolvent company is simply unable to pay.

Where a company has effectively been abandoned by its director/s however, unless and until it is placed into liquidation, employees remain in a state of limbo, never to receive any payments from  their insolvent employer and yet unable to access FEG.

Enter ASIC!  In a recent press release, ASIC has revealed that between April and July 2016, it has used its powers arising pursuant to Pt 5.4C of the Corporations Act 2001 to wind up 13 abandoned companies owing more than $556,000 in unpaid employee entitlements.  To date in fact, ASIC has used its powers to wind up some 84 abandoned companies owing around $4.4 million in unpaid employee entitlements. Thanks to ASIC’s work, the employees of those companies can now access the FEG scheme and receive the entitlements they deserve.

If you would like more information on how and why ASIC uses its powers to wind up abandoned companies, please contact ERA Legal.