AICD submission on corporate misuse of the Fair Entitlements Guarantee

The AICD supports the operation of the FEG as a scheme of last resort that ensures that employees are paid their entitlements in the event of the insolvency of their employer. The AICD also supports greater regulator prioritisation and resourcing of FEG misuse as a key mechanism to to reduce sharp corporate practices that are impacting the viability of the FEG.

Our key points in the submission were:

• Greater prioritisation and resourcing by the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) of the enforcement of existing legislative provisions relevant to the FEG, including phoenix activity. Regulators should be first looking to exercise their existing powers to combat this activity and send a deterrent signal to perpetrators, including directors, rather than seeking further complex law reform that will likely result in minimal benefits in reducing FEG misuse.
• We did not support any changes to the existing personal liability settings on directors. Adding new or expanded avenues for personal liability associated with reliance on FEG will do nothing to disincentivise sharp corporate practices. It would also run the real risk of further stifling Australia's overly compliance focused corporate governance environment to the detriment of productivity and economic growth - two areas where Australia faces critical challenges
• We did not support amendments to the FEG related director disqualification provisions in the Corporations Act 2001 under sections 206EAB and 206GAA.
• We recommended that significant reform of the FEG is postponed until an independent comprehensive review can be completed as was recommended by Parliamentary Joint Committee on Corporations and Financial Services in 2023.