A Quick Glance at Australia’s Latest Amendments to the Corporation Act

A Quick Glance at Australia’s Latest Amendments to the Corporation Act Australia empowers the Australian Securities and Investments Commission (ASIC) to wind up abandoned companies by introducing new provisions in the Corporations Act, which will assist employees who are owed entitlements to access the General Employee Entitlements Redundancy Scheme (GEERS).

ASIC expects to exercise its powers in the last quarter of 2012. In line with the new provision, ASIC may wind up abandoned business entities and can appoint a registered liquidator in the wind up process.

Amendment of Australian Corporations Act: Background Prior to the amendment, company directors used to abandon companies without liquidating the company and creditors were not given any incentive to support the wind up process. It is mandatory for the employers to liquidate the corporation to enable employees to obtain payments from GEERS. Amendment of Australian Corporations Act: Outline As per the new regulations in the Corporations Act, ASIC can wind up a company if: There is a minimum six month delay of response to a return of particulars given to the business entity; The Company fails to lodge required documents under the Corporations Act in the past 18 months; ASIC comes to a conclusion that the business entity is not conducting business; ASIC believes the move is in public interest; The Company’s outstanding review fee has been due exceeding twelve months; ASIC believes the move is in public interest; ASIC has re-established the company registration in past six months and deems that the wind up is in the public interest; or ASIC deems that the entity is not conducting business and has given a chance to the director of the company a chance to defend ASIC’s winding-up directions, twenty days prior to the order.

Public Interest Test ASIC’s main focus is to facilitate employee access to GEERS. Once it is established, ASIC will go for a public interest test considering the following factors: Capability of a creditor to initiate a wind up and if adequate time has passed to facilitate the creditor to go ahead with a wind up application; Whether liquidation cost including ASIC’s cost surpasses the outstanding employee entitlement amount, and number of employees affected in the wind up process; Existence of any operations of the entity having value; and Availability of funds in the Assetless Administration Fund (AAF) and proper utilization of available limited funds.

Appointment of a Registered Liquidator In case ASIC orders for a wind up, it may employ a registered liquidator and determine its remuneration which will be paid from the AAF. As per ASIC, funding from the AAF would uphold the Australian Government's objective of detecting and following violations of directors' duties, including illegal phoenix activity.

Amendment of Australian Corporations Act: Consequences An ASIC order for a wind up, pursuant to the relevant section of the Corporations Act, will be considered to have been approved by the company with a special declaration.

Directors of the company cannot make a declaration of solvency as per section 494 of the Corporations Act.

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