This Act makes amendments to the Corporations Act 2001 (Cth) ('Corporations Act') and Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) ('CATSI Act') relating to protecting employee entitlements. Parts of the Corporations Act apply to Aboriginal and Torres Strait Islander corporations where the CATSI Act specifies they should apply, or where they are captured under the broad definition of ‘corporation’ in s 57A of the Corporations Act. The Amendment Act received assent on April 6th 2019.
The Act responds to calls for legislative reforms to address corporate misuse of the Fair Entitlements Guarantee (FEG) scheme.
The purpose of the Amendment is to deter behaviours by companies and directors aimed at preventing, avoiding or significantly reducing the recovery of employment related entitlements during a corporate insolvency. Secondly, it aims to enable the recovery of unpaid employee entitlements of an insolvent company in certain circumstances. Thirdly, it strengthens ASIC’s power to disqualify company directors or other officers relating to corporate contraventions and unrecovered payments under the employee entitlements scheme.
Legislative Framework
The key amendments relate to introducing stronger penalties for companies and directors, stronger options to recover entitlements and stronger powers to deal with directors and companies deliberating evading their obligations.
This Act makes amendments to Part 1 of Schedule 1 of the Corporations Act relating to employee entitlements. Some of the key amendments include:
Extending protections for employee entitlements (s 596AA(2A));
Applying offence provisions relating to entering into agreements that avoid employee entitlements (ss 596AB(1) and (2)) and provisions relating to civil contraventions (s 596AC);
Including provisions relating to persons liable to compensate for loss (s 596ACA);
Amending procedural provisions (s 596AF-AI), relating to compensation (s 596AF), events preventing proceedings (s 596AG) and joining parties to proceedings (s 596AH).
This Act makes amendments to Part 2 of Schedule 1 of the Corporations Act relating to Contribution orders. Some of the key amendments include:
Adding provisions relating to the making of entitlement contribution orders (s 588ZA);
Adding eligibility criteria for employee entitlements contribution orders (588ZB).
The Act makes amendments to Part 3 of Schedule 1 the Corporations Act relating to Disqualification from managing corporations. Some of the key amendments include:
Inserting provisions relating to when a corporation contravenes the Act or CATSI Act (inserting s 206EAB to Division 1);
Inserting provisions to strengthen ASIC’s power to disqualify company directors or other officers relating to unrecovered payments (s 206GAA).
The Act also makes amendments to the Corporations Act in Part 4 of Schedule 1 relating to Transitional provisions.