Legal

ASIC to recover more than $400,000 from abandoned companies, prompting investigations

Matthew Elmas /

ASIC

ASIC chair James Shipton.

Corporate regulator ASIC has been appointing liquidators to abandoned companies in recent months to recover more than $400,000 in unpaid employee entitlements.

Companies including NISS Technologies, Jovawill Pty Ltd, Ruschi Pty Ltd, Steel Project Services and the Surat Basin Group are now being investigated by liquidators at ASIC’s behest, amid concern about illegal phoenixing activity.

ASIC says the wind-ups will allow “a full and proper investigation into the reasons why the companies failed and may assist the recovery of any voidable or unreasonable director-related transactions”.

“Abandoned companies may be an indicator that the director has engaged in illegal phoenix activity.”

Companies are abandoned when directors fail to put an insolvent business into liquidation, as is their legal duty.

At least 39 workers stand to recover at least $410,000 in entitlements under the taxpayer-supported Fair Entitlements Guarantee (FEG) scheme, which assists workers when their employers go bankrupt.

However, in recent years, dodgy directors have abused the FEG scheme to skip out on paying their workers, prompting new laws which have given regulators, including the Fair Work Ombudsman and Australian Taxation Office (ATO), stronger powers.

Since 2013 when it first used its wind-up powers, ASIC has recovered $6 million in employee entitlements for 305 workers, using its wind-up powers on 115 companies.

The latest spate will add to an up-tick in SME wind-ups over the last 18 months, with data from Prushka Fast Debt Recovery revealing a spike in small-business insolvency last year.

Court documents reveal between January and December last year, 3,601 businesses issued winding-up applications, up from 3,155 in 2017.

The ATO processed over half (54%) of wind-up applications last year, while other government agencies such as ASIC were responsible for just 8%.

NOW READ: ATO, Fair Work Ombudsman to be given new powers to pursue directors for abandoning workers

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Matthew Elmas

Matthew is the news editor at SmartCompany. You can contact him at [email protected].

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