We acknowledged there are a few directors and insolvency practitioners that use sharp corporate practices to shift the cost of employee entitlements to the Fair Entitlements Guarantee (FEG). 
However, we did not support piecemeal changes to legislation to address this misuse as the regulators of corporate insolvency already have sufficient enforcement powers.

We referenced one of the broad examples in the discussion paper, that controllers may breach their duty to pay employee entitlements out of proceeds from circulating assets. As a controller must be a registered liquidator with ASIC, when such a breach is identified, ASIC should take action to penalise that controller.

As the registered liquidator is known to all parties of an external administration including ASIC, when malfeasance is identified, ASIC should call on its many enforcement tools to penalise that particular registered liquidator. The propose piecemeal legislative changes would add more complexity to an already complex regime and impact all parties, registered liquidators, creditors and employees, to external administrations.

Until a comprehensive and independent review of Australia’s insolvency law encompassing both corporate and personal insolvency is undertaken, we do not support piecemeal amendments to legislation. Stronger and immediate use of existing powers by government regulators will send a clear message to directors and insolvency practitioners that employee entitlements must be given the correct priority under current legislation during external administration.

We thank our members of the Insolvency Management Committee for their contributions to this submission.