Tidbits from the Transcripts - construction inquiry to receive list of suspect liquidators

Senator Doug Cameron will soon have a list of liquidators
connected to repeated construction sector failures.

A list of liquidators of interest is to be delivered to the Senate References Committee's inquiry into insolvency in the construction industry.

At the inquiry's final public hearing in Canberra, senior officials from the Department of Employment told chief inquisitor Senator Doug Cameron how as part of administering the Fair Entitlements Guarantee scheme (FEG), they gathered intelligence about individuals who preside over entities which repeatedly collapse with insufficient assets to pay employee entitlements.

Included in that intelligence are the names of those liquidators who consistently appear as the suspect directors' preferred appointees.

"Every six months FEG provides a list of data to ASIC that includes the case names, the amounts paid, the directors' names and the liquidator's names," FEG branch manager Sue Saunders told the inquiry.

"Every six months we provide data to the ATO that is more specific to the phoenixing agenda in the sense that it provides the names of every case and every director where the same director has been listed for more than one case under FEG.

"The information we gather about the cases that become insolvent and leave unpaid employee entitlements to be met under GEERS or FEG is useful intelligence to feed into the other range of information the ATO and ASIC are collecting that builds their risk profile around certain operators in the industry," Saunders said.

FEG Scheme to target banks on Section 433

WHILE it's good news that the Department of Employment will fund liquidators' recovery actions against directors and companies where an insolvency has left employee entitlements unpaid, more interesting still is the revelation that banks and receivers are also to be the subject of a renewed focus.

On July 1 the Federal Department of Employment, which administers FEG, or the Fair Entitlements Guarantee Scheme, resurrected the Active Creditor Pilot (ACP) program, phoenix like, after it was shut down without explanation in 2009. The new bird is called the Fair Entitlements Guarantee Recovery Program.

It's architect, Henry Carr is eager to again put money into the pockets of liquidators with strong cases for recovering FEG funds from directors who left companies with unpaid employee obligations. But he's not stopping there.

"One of the issues that is within the scope of the FEG Recovery programme is ensuring that receivers and controllers have fulfilled their statutory duty to pay employee entitlements out of floating charge assets, before paying proceeds of the secured property to their appointer," Carr told SiN.

"In circumstances of a breach of their statutory duties, the receiver/controller may be personally liable to pay damages; or the bank that had knowledge that certain preferential creditors remained unpaid, may be found to hold the proceeds of the charged assets on constructive trust for the Commonwealth," he said.

"Obviously a lot of the insolvency profession look the other way when I bring up this topic but I'm very interested in looking at whether all of the banks have lived up to their obligations in respect of their floating charge assets."

At its core, Carr said the issue is whether a bank can have a fixed charge over highly liquid assets like debtors and cash at bank.

Phoenix fund's future going Dodo

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.