IT'S hard to know which is more mythical. The Phoenix – feathered metaphor for perpetual renewal - or successful applications to the Assetless Administration Fund (AAF).
Launched in 2005 and administered by ASIC, the AAF has been a source of diminishing assistance in recent years.
In 2009/2010, ASIC doled out $3.17 million to insolvency practitioners with no cash and grounds for investigation. The following year they had to manage with $2.84 million. That shrank to $2.16 million in the year just past. AAF allocations prior to 2009/2010 are not made public.
Yet despite the decline in grants, imminent regulatory responses to Phoenix activity could make AAF approvals even rarer.
The proposed Part 5.4c amendment to the Corporations Act means ASIC, which controls access to the AAF, will soon be dipping into the fund itself.
So how will applicants fare once the controller of the AAF’s purse strings becomes a competitor? And how will the shrinking fund cope with a potential increase in demand?
“ASIC will monitor the impact of the winding up reforms on the AAF and keep Treasury appraised of developments,” the corporate regulator told SiN.
SiN wonders how independent such appraisals might be seen to be by a cynical insolvency profession, well aware regulatory bodies see it as part of the problem.
Then there's the question of whether an election-focused Treasury and surplus-fixated Treasurer will even care? Or whether there's time to address such concerns.
Wind-ups initiated by ASIC could begin as early as mid-November, with the regulator currently assessing submissions to its Consultation Paper 180 on the topic.
In its submission the IPAA recommended enforcing current laws.
"... there are existing laws available to the ATO and ASIC to deal with the issue, and to employees and unions. The issue is that the laws need to be enforced," the IPAA said.
Nor are existing laws the only mechanism in place to assist abandoned employees. In June this year Bill Shorten used his discretionary powers as Federal Workplace Relations Minister to give Hastie employees access to GEERS before the construction firm had been placed into liquidation.
Then there is the question of need. How many GEERS claims are being knocked back because the abandoned company has not been liquidated?
SiN asked the Department of Education, Employment and Workplace Relations (DEEWR) for figures on the number of claims to GEERS between 2009 and 2012 rejected.
A DEEWR spokesman said 448 claims from 298 businesses were assessed as ineligible during the period "because the former employer had not entered liquidation".
"There is no evidence to suggest this situation is trending up or down," the spokesman said.
No trend that is when the figures are lumped together and not broken down year-on-year.
So, it's about 1.5 employees per abandoned business. Doesn't seem like a weight of numbers sufficient to justify such a draconian amendment as Part 5.4c. But there is an out clause.
Potentially, threats to the AAF's capacity to fund insolvency practitioners might be assuaged by Part 5.4c’s “public interest test” component, which gives the corporate cop near criminal leeway in deciding when to initiate the winding-up of an abandoned company.
"Consistent with the new law, ASIC is proposing to apply a public interest test when deciding whether to wind up a company," the regulator said in CP 180.
"This public interest test will consider factors like the cost of winding up, the amount of outstanding employee entitlements and how many employees are affected."
Given the trend of declining grants and Part 5.4c's broad discretionary power, the public interest test might mean ASIC raids the AAF only when the number of employees abandoned are either too numerous to ignore or are backed by a bellicose union. But that’s a myth for another day.
Contact SiN
Launched in 2005 and administered by ASIC, the AAF has been a source of diminishing assistance in recent years.
In 2009/2010, ASIC doled out $3.17 million to insolvency practitioners with no cash and grounds for investigation. The following year they had to manage with $2.84 million. That shrank to $2.16 million in the year just past. AAF allocations prior to 2009/2010 are not made public.
Yet despite the decline in grants, imminent regulatory responses to Phoenix activity could make AAF approvals even rarer.
The proposed Part 5.4c amendment to the Corporations Act means ASIC, which controls access to the AAF, will soon be dipping into the fund itself.
So how will applicants fare once the controller of the AAF’s purse strings becomes a competitor? And how will the shrinking fund cope with a potential increase in demand?
“ASIC will monitor the impact of the winding up reforms on the AAF and keep Treasury appraised of developments,” the corporate regulator told SiN.
SiN wonders how independent such appraisals might be seen to be by a cynical insolvency profession, well aware regulatory bodies see it as part of the problem.
Then there's the question of whether an election-focused Treasury and surplus-fixated Treasurer will even care? Or whether there's time to address such concerns.
Wind-ups initiated by ASIC could begin as early as mid-November, with the regulator currently assessing submissions to its Consultation Paper 180 on the topic.
In its submission the IPAA recommended enforcing current laws.
"... there are existing laws available to the ATO and ASIC to deal with the issue, and to employees and unions. The issue is that the laws need to be enforced," the IPAA said.
Nor are existing laws the only mechanism in place to assist abandoned employees. In June this year Bill Shorten used his discretionary powers as Federal Workplace Relations Minister to give Hastie employees access to GEERS before the construction firm had been placed into liquidation.
Then there is the question of need. How many GEERS claims are being knocked back because the abandoned company has not been liquidated?
SiN asked the Department of Education, Employment and Workplace Relations (DEEWR) for figures on the number of claims to GEERS between 2009 and 2012 rejected.
A DEEWR spokesman said 448 claims from 298 businesses were assessed as ineligible during the period "because the former employer had not entered liquidation".
"There is no evidence to suggest this situation is trending up or down," the spokesman said.
No trend that is when the figures are lumped together and not broken down year-on-year.
So, it's about 1.5 employees per abandoned business. Doesn't seem like a weight of numbers sufficient to justify such a draconian amendment as Part 5.4c. But there is an out clause.
Potentially, threats to the AAF's capacity to fund insolvency practitioners might be assuaged by Part 5.4c’s “public interest test” component, which gives the corporate cop near criminal leeway in deciding when to initiate the winding-up of an abandoned company.
"Consistent with the new law, ASIC is proposing to apply a public interest test when deciding whether to wind up a company," the regulator said in CP 180.
"This public interest test will consider factors like the cost of winding up, the amount of outstanding employee entitlements and how many employees are affected."
Given the trend of declining grants and Part 5.4c's broad discretionary power, the public interest test might mean ASIC raids the AAF only when the number of employees abandoned are either too numerous to ignore or are backed by a bellicose union. But that’s a myth for another day.
Contact SiN
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