Reforms to address corporate misuse of the Fair Entitlements Guarantee Scheme

The Fair Entitlements Guarantee Scheme provides cover for certain employees who have lost their jobs due to the insolvency of their employer. It is intended to be a scheme of last resort to support redundant workers.
 
The Federal Government in its recently released consultation paper, Reforms to address corporate misuse of the Fair Entitlements Guarantee Scheme, expresses concern that the FEG Scheme is increasingly being used as a de-facto source of government subsidy for business restructuring.
 
The paper identifies that FEG payments between 2012-13 and 2015-16 total more than $1 billion. It makes the case that a major cause for this exponential rise in FEG payments is the use of “sharp corporate practices” calculated to offload a business’ financial liabilities onto the taxpayer when the business may in fact be in a position to meet employee entitlements.
 
The paper proposes reforms to address corporate misuse of the FEG Scheme, including boosting recovery provisions and introducing the use of contribution orders or solvent pooling orders to seek financial contribution from related entities in a corporate group.
 
The paper also proposes to clarify a key source of confusion and contention - the priority of costs and expenses of a liquidator or receiver of realising assets the subject of a circulating security interest over the claims of employees.

For more information about the Federal Government's proposed reforms and our thoughts Read-more-here.jpg

This Insight was authored by Noel McCoy and Agnes Kang

Scott Atkins

I'm unapologetically determined and fearless. I pursue excellence. Always.

Scott Atkins Partner

Scott is the Chair of our Board and an internationally renowned insolvency and restructuring lawyer. He is an inaugural Fellow and a member of the Board of INSOL International. Scott is also Vice President of the Australian Restructuring Insolvency and Turnaround Association (ARITA).

Scott is a trusted adviser to Australia's leading banks and insolvency and restructuring practitioners and has acted on some of the industry's most complex and sensitive banking and insolvency advisory and dispute resolution matters.

Prior to joining HDY, Scott practiced for 7 years as in-house counsel with Commonwealth Bank Group. He is now our Client Relationship Partner for the CBA Group. He is also the co-leader of our cross-border insolvency practice and our regulatory enforcement practice. Scott is recognised by his peers for his leading expertise in cross-border insolvency, acting on both inbound engagements in Australia and advising Australian clients on outbound engagements in the USA, UK, Cayman Islands, Hong Kong and The Netherlands, among other jurisdictions.

Scott was the Australian delegate on the Advisory Committee on Comparative Law established by the American Bankruptcy Institute as part of its Commission to Study the Reform of Chapter 11 of the US Bankruptcy Code. This resulted in a landmark report for the reform of Chapter 11.

He is a published author on insolvency and cross-border insolvency. Most recently, Scott was one of the Australian contributors to the 2015 publication 'International Contributions to the reform of Chapter 11 U.S. bankruptcy code' which is volume 2 of the European and International Insolvency Law Studies series. He also authored the Australian chapter of Avoidance of Antecedent Transactions and Cross-Border Insolvency (INSOL International). Among other publications, he is the co-author, together with Professor Rosalind Mason, of the Australian chapter of Look Chan Ho's leading text: Cross-Border Insolvency: Cases and Materials (Kluwer International).

Scott is a visiting lecturer on cross-border insolvency at the University of Sydney in its undergraduate and postgraduate law programs lead by Professor John Stumbles.

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Mark Hilton

I walk with honour in dark places. Take my hand. We've got this.

Mark Hilton Partner

Mark specialises in banking recovery, including all forms of consumer and corporate recovery and insolvency. He has acted for banks and other financial institutions, receivers, liquidators and administrators for over 28 years.

Mark is a leading insolvency lawyer who has been involved in some of Australia's largest and most complex insolvency matters over the past decade.

He is known for his solid relationships with Australia's Big 4 Banks, as well as his expertise in recovery and enforcement, and litigation and dispute resolution.

Clients call upon Mark for his industry knowledge, achieved from being exposed to businesses across a spectrum of industries such as aged care, banking and financial services, retail, property development, manufacturing, pharmaceutical and infrastructure.

His background in commercial litigation has provided a basis for a substantial practice involving the recovery of loss associated with negligent valuations in connection with securitised loans.

Mark's willingness to embrace innovation is, among other things, evidenced by his coordination of the establishment of recovery extranets to assist financial institutions to monitor the status of recovery and enforcement action on secured and unsecured lending transactions.

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Laura Johns Partner

Laura has extensive experience in insolvency and banking dispute resolution. She advises Australia's leading banks and other financial clients on complex corporate insolvency processes, litigation and recovery matters.

Laura acts for banks, insolvency practitioners, companies and creditors on issues connected with companies in financial distress and has assisted clients on a variety of insolvency and restructuring assignments. She regularly advises on security enforcement, receiverships, voluntary administrations and liquidations.

Laura has significant experience with professional negligence claims on behalf of banking clients, in particular, against valuers. She is also regularly involved in dealing with security enforcement litigation, matters involving Financial Ombudsman Service complaints, fraud related matters and general banking and insolvency related litigation in the Supreme Court and Federal Court.

Laura has recently completed a 6 month secondment in house at an Australian bank. 
She regularly presents and writes on insolvency, litigation and recovery matters.

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John Martin Partner

John is a leading lawyer in both financial sector dispute resolution (complex and regulatory) and corporate insolvency and restructuring, with a particular specialty in cross-border insolvencies. He is recognised by his clients, peers and legal directories as a leader in his field.
 

Domestically, John advises on large and complex insolvencies and assists in finding solutions for financial institutions with regulatory and other complex issues. His clients include several of Australia's major banks, as well as insolvency practitioners appointed to insolvent entities.

Internationally, John has advised in connection with insolvencies in England, Fiji, Bermuda, Cambodia, Cayman Islands, Brunei, and Norfolk Island. His cross-border experience includes acting for the liquidators of an insolvent bank, and various liquidators of insurance and reinsurance companies.

John is a recognised authority on insolvency issues, with articles published in media outlets such as The Australian Financial Review and the Insolvency Law Journal. He has presented at numerous domestic conferences as well as internationally in the US, England, South Africa, Singapore, Canada, New Zealand, and the Netherlands.

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Alex Mufford Partner

Alex is the Group Leader of Henry Davis York's Banking, Turnaround and Insolvency Group, which includes the legal teams for Banking & Finance and Restructuring & Insolvency.

Alex specialises in structured capital markets, restructuring and receivables finance. He often uses his structured finance expertise to assist our insolvency and restructuring clients. Alex is recognised by his clients, peers and legal directories as a leader in his field.

Alex has also advised on various aspects of the cross-border insolvency of Lehman Brothers, including advising Perpetual Limited in its proceedings in the English High Court and the Court of Appeal against Lehman Brothers to enforce priority and subordination arrangements in the Lehman $US10billion 'Dante' credit linked note program.

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Claudine Salameh Partner

Claudine has over 15 years' experience dealing with legal issues in the financial services sector.

She is a banking and insolvency litigator and regulatory expert. She acts for the major Australian financial institutions in matters involving customer disputes and litigation, fraud, regulatory and compliance issues, regulatory investigations, inquiries and enforcement matters, security enforcement and insolvency litigation. She also acts for insolvency practitioners in formal receiverships, voluntary administrations and liquidations.

Claudine is well known for her ability to manage risks posed by litigation and regulatory inquiries and investigations. She is particularly attuned to reputational and business risks. She is highly strategic and creative and is recognised by her clients for being able to achieve the perfect balance between legal arguments and commercial and practical outcomes.

Claudine has been instrumental in working with clients to provide insights into the field of behavioural economics, which over the past few years, has been of interest to policy makers and regulators as a tool to engage in 'choice architecture'. On a practical level, Claudine has worked closely with clients to design approaches to customer engagement that make use of behavioural insights.   

Claudine is an expert in the conduct of review and remediation programs and provided assistance to the regulator, by way of submissions and her involvement in an industry working group, on ASIC's regulatory guide on review and remediation programs.

Claudine is very familiar with ASIC's powers to obtain documents and information from financial institutions and is called upon by financial institutions to provide assistance in these matters. She has a style that is conducive to having a fruitful dialogue with both the regulator and the various stakeholders within a financial institution.

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Mark Schneider

Achieving our clients' business goals drives our strategy and advice. It's what we do.

Mark Schneider Partner

Mark is the partner responsible for managing our Brisbane office. He has broad experience in corporate restructuring, insolvency and banking and general commercial litigation. Mark specialises in resolving disputes, advising both banks and insolvency practitioners in relation to all aspects of the enforcement of securities and the realisation of distressed assets in Australia and internationally.

Mark has advised insolvency practitioners, secured and unsecured creditors including financial institutions and directors in relation to debt recovery, security enforcement, restructuring, formal insolvency procedures and dispute resolution throughout Australia and in Europe.

He takes pride in helping banks, financiers and their appointees implement practical strategies for resolving disputes, enforcing securities and realising distressed assets in Australia and internationally.

Mark regularly advises on secured creditors' rights, including undertaking complex security reviews and the intensive management of complex and sensitive debt positions.

Mark is sought out by clients involved in potential disputes who are concerned about protecting their reputation. He is experienced with alternative dispute resolution as well as appearing and instructing in the State and Federal Courts, including at Appellate level.

Mark has experience in many industry sectors including commercial, rural and residential property, hotels and leisure, retail, energy and resources (including mining services).

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Noel McCoy

I want you to win and will leave no stone unturned until you do.

Noel McCoy Partner

Noel is a specialist in complex turnaround, restructuring and insolvency matters with over 14 years' experience in advising and representing cross-border, financial services and government clients.

He has helped lead some of Australia's most significant cross-border insolvency engagements, including in conducting the first appellate decision in Australia under the UNCITRAL Model Law on Cross Border insolvency (Saad Investments). Noel acts for the foreign liquidators of Centaur Litigation in conducting Australian investigations and litigation and has advised on the Caledonian Bank restructure. Noel also has extensive experience in international judgment enforcement & offshore asset recovery.

Noel currently advises a variety of NSW and Commonwealth government agencies on their financial commitments and exposures. He helps lead HDY's engagement with the Commonwealth Department of Employment in connection with the Fair Entitlements Guarantee Program.

Noel has advised major Australian financial institutions and not-for-profit organisations about lending and restructuring taking into account the unique challenges and profiles of not-for-profit organisations. Noel had primary carriage of HDY's receivership engagement giving rise to the landmark decision of Re Anglican Development Fund Diocese of Bathurst (2015) 336 ALR 372.

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Helen Taylor

I am absolutely committed to achieving the best outcome for our clients.

Helen Taylor Special Counsel

Helen has more than 13 years' experience advising clients on a broad range of banking, insolvency and regulatory matters.

She has developed market-leading expertise in regulatory risk and strategy and has extensive experience supporting the financial services sector with the design and implementation of large-scale, complex remediation programs. Most recently, Helen played a pivotal role in the execution and strategic direction of a financial planning remediation program mandated by ASIC, with primary responsibility for overseeing compliance with the regulatory framework.

Helen has acted for financial institutions and government bodies in matters involving customers disputes, regulatory investigations and compliance, inquires and responses to compulsory information requests.

She has also acted on a diverse range of matters in the corporate restructuring, insolvency litigation and security enforcement context. She regularly advises clients on their exposures to distressed companies, debt recovery, workouts, administrations and liquidations and has significant experience acting on cross-border insolvency engagements.

Helen's recent experience includes advising the liquidators of the Octaviar group of companies on all aspects of the liquidation including complex proceedings commenced against a major non-bank lender in Queensland and the USA.

Upon being admitted as an Australian legal practitioner (expected to be in November 2017), Helen Taylor will become a member of the partnership of Henry Davis York.  Helen is currently a Special Counsel admitted to practice in England and Wales.

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