Corporate restructuring rorts under scrutiny in government blitz

Directors and companies may soon face a stricter penalty regime for employing 'sharp corporate practices' in an attempt to prevent, avoid or reduce obligations to pay creditors and employee entitlements upon a company's insolvency.

The Australian Government's consultation paper released in early May 2017 calls for submissions to crack down on phoenix activity and corporate restructures after a reported blowout in the Fair Entitlements Guarantee (FEG) scheme saw the government (and ultimately taxpayers) shoulder $1 billion in entitlement payments for employees of insolvent companies over the past four years.

Under the existing FEG scheme, the government provides financial assistance for certain unpaid employee entitlements to eligible employees who have lost their jobs due to the insolvency of their employer. The scheme has been criticised as presenting a 'moral hazard', as it enables certain employers to use smart corporate practices to prevent, avoid or minimise