New source of litigation funding for liquidators

On 1 July 2015, the Commonwealth Government launched its Fair Entitlements Guarantee Recovery Programme, which aims to bolster recovery action by liquidators for amounts advanced under the Fair Entitlements Guarantee Scheme to pay employee entitlements.

What is it?

Under the Program, liquidators of companies to whom advances have been made under the FEG Scheme can apply for litigation funding to pursue recovery and other proceedings in order to increase the pool of assets available for distribution to creditors.

The Programme is intended to fund liquidators for claims they could not otherwise bring for lack of funds, and its key objective is to improve the Commonwealth’s recovery of advances made under the FEG Scheme.

After the Commonwealth has been repaid for its advances made under the FEG Scheme, other creditors of the company may benefit from the assets recovered by the liquidator.

A total amount of $11.5M will be made available under the Programme over a two-year period starting from 1 July 2015.

How do you apply?

  • Liquidators can apply for funding where:
  • employment entitlements have been paid under the FEG Scheme;
  • there are claims that could be brought on behalf of the company against one of more persons, including for voidable transactions and insolvent trading;
  • those claims have reasonable prospects of success;
  • if successfully prosecuted, the claims will result in the company recovering property that will improve the return for employment entitlements; and
  • the requisite application form has been completed.

What does the Commonwealth consider?

In deciding whether to fund a liquidator, the Commonwealth by its Department of Employment will have regard to the merits and complexity of the case, its prospects of success, the estimated costs of the proposed litigation as compared to the Department’s proof of debt, and the assets of the defendant(s) to meet any judgment ordered against them

If a liquidator’s application is successful, they will be required to enter into a funding agreement with the Commonwealth governing (among other things) what will be paid and how monies recovered will be applied.

For more information contact:

Greg Brackenreg — Partner — Dispute Resolution Team
(02) 6279 4409
greg.brackenreg@mvlawyers.com.au

Bernice Ellis — Senior Associate — Dispute Resolution Team
(02) 6279 4385
bernice.ellis@mvlawyers.com.au