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Fair Entitlements Guarantee – powers to demand information

The Department of Employment, Skills, Small and Family Business’ Annual Report 2018-2019 provides some information about the Fair Entitlements Guarantee Recovery Program which is now administered by the Attorney-General’s Department, and about a 2019 court decision in 1st Fleet.

Fair Entitlements Guarantee Recovery Program

The annual report explains that since it began on 1 July 2015, the FEG Recovery Program has spent approximately $23.2 million of administered funding (excluding funding of the special purpose liquidator of Queensland Nickel Pty Ltd (in liq)) to recover approximately $101.49 million of FEG advances. The recovered amounts are returned to consolidated revenue. The program has also incidentally recovered $8.5 million in additional entitlements for employees.

1st Fleet

Under the heading of “enforcing creditor rights to information”, FEG reports that company creditors

“often feel powerless and uncertain, particularly as reporting to creditors is typically limited when the company is under administration …”.

It goes on to explain that, to address this, sections 70–45 and 70–55 of the Insolvency Practice Schedule (Corporations) were introduced into the Corporations Act 2001 in September 2017, giving creditors the right to request information from insolvency practitioners at any time during the external administration process.

There were equivalent rights given to creditors in a personal insolvency.

FEG says it

“uses these provisions to request information to assess the progress of insolvencies and ensure that the employees’ priority rights to repayment in the liquidation are properly recognised. However, until recently there was uncertainty about the nature of information creditors are entitled to request”.

In September 2018, FEG says it obtained a judgment in 1st Fleet Pty Ltd, [2019] NSWSC 6 – which it sought “to clarify the scope of creditors’ powers to request information under these provisions”.

According to FEG, the decision

“strongly reinforced the breadth of the powers available to creditors under the information request provisions”.

Some may dispute that

Unlike ordinary creditors, the Commonwealth can request information and documents without restriction. Ordinary creditors are constrained by certain criteria.

FEG goes on to say that this decision has

“generated significant interest from the insolvency profession, as it provides clear guidance on how insolvency practitioners should approach information requests in future. For employee creditors of an insolvent company, it provides greater confidence and clarity as to the types of information they are entitled to request and receive”.

Rather, the decision provides “guidance on how insolvency practitioners should approach information requests from the Commonwealth in the future”.

As to employee creditors, they have the same rights as ordinary creditors, and no more.

But unlike ordinary creditors, the Commonwealth is bound by its model litigant and statutory obligations.

See A new priority of the Commonwealth in an insolvency?

Comments on more annual reports follow soon.

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