ASIC forced to wind up 31 abandoned companies in the past year
Friday, July 3, 2015/
Australia’s corporate watchdog used its wind-up powers to appoint liquidators to 31 abandoned companies in the 2014-15 financial year, in a bid to help almost 100 employees access almost $1 million in unpaid entitlements.
The Australian Securities and Investments Commission revealed on June 30 it had recently appointed liquidators to 12 abandoned companies that owe at least 42 employees more than $335,000 in entitlements.
Liquidators have been appointed to Composite Building Systems and Board Nominees in South Australia; R&L Printing, Ausclubcard, Stableford Nominees and MDK Services in Victoria; NSP Salary Packaging Services and Gazal Telecom Australia in New South Wales; and Arareil, Spraytime, Javelin Transport National and New Year Investments in Queensland.
ASIC had already used its wind-up powers to appoint liquidators to 19 other companies since July 2014. Combined, the 31 companies owed 98 employees more than $995,000 in entitlements.
Company directors usually call in administrators or liquidators of their own accord but the Australian Securities and Investments Commission has the power to appoint liquidators when a company’s directors are unable to discharge their duties or have abandoned their insolvent companies without putting them into liquidation.
Once the companies are formally in liquidation, employees can access the federal government’s safety net Fair Entitlements Guarantee Scheme (FEG). Liquidators can also investigate why the company failed and potentially recover any voidable or unreasonable director-related transactions.
ASIC first used its wind-up powers in August 2013, with ASIC commissioner John Price saying at the time ASIC will take “great care in exercising” the power.
The latest actions by ASIC coincide with an uptick in the number of wind-up applications being made against small and medium size businesses by the Australian Tax Office.
The ATO applied to wind-up 556 businesses in May, which was more than double the number of applications that the ATO lodged in July 2014 and 77% of the total number of wind-up applications received by ASIC in May.
While a wind-up application from the ATO does not force a business to close, wind-up applications can be a leading indicator for insolvencies.
Jamieson Louttit, whose insolvency practice Jamieson Louttit & Associates compiled the figures, told SmartCompany in June the steady rise in government-initiated wind-up applications since 12 months ago shows the ATO “has had enough of late payers and is demanding money from SMEs”.