The Insolvency Practitioner’s Role Under FEG

When an insolvency occurs, the Insolvency Practitioner (IP) is usually the first point of contact for employees seeking their outstanding employment entitlements.  As an initial step, IPs should refer relevant employees to FEG Online Services to lodge a claim for an advance with the Department of Education, Employment and Workplace Relations.

Beyond this initial advice to employees, what role does the IP play in the FEG claims process?

In general, the Department asks IPs to:

  1. Provide timely and accurate information to the Department from company books and records;
  2. Verify the information about employment entitlements; and
  3. Distribute FEG advances to relevant employees after successful claims are processed.

There are 4 key stages to the Department’s claims process, all of which may involve a request for assistance from the IP.

Firstly, an “effective claim” under section 14 of the FEG Act will be allocated to a case manager. The case manager will then contact the IP with a request for information about the company and its former employees.

Second, the case manager will request that the IP confirm or verify the outstanding entitlements and seek the IP’s agreement to distribute advances to employees.  The case manager will generally provide a spreadsheet to the IP, together with a verification statement and distribution agreement for the IP to sign and return.  The Department requests that these documents are completed and returned within 4 weeks.

Third, the case manager will check the verified information for discrepancies with the relevant governing instrument of the employment (such as an industrial award, collective agreement or employment contract).  The case manager will usually discuss any discrepancy with the IP.

Fourth, after a decision is made that an employee is eligible for an advance, the case manager will forward the advance to the IP for distribution to the relevant employee.  The IP must deduct relevant tax and distribute the advance to the employee within 14 days of receipt from the Department.

During the claims process, the IP must:

  • Advise the Department as soon as possible if all or part of the business transfers to another employer
  • Provide the Department with relevant documents as they become available (such as circulars, reports, agreements, trusts entered into in the last 12 months, notices of creditors meetings, creditors reports).

By way of finalising the process, the IP must also do the following:

  • Return to the Department an Aquittal and Overpayment spreadsheet and Statement of Aquittal within one month of receiving the FEG advance
  • Return to the Department within 6 months any advances not able to be distributed to employees
  • Advise the Department of the likelihood of a dividend as soon as this information becomes available.

It should also be remembered that, as a condition of making a FEG advance, the Department has the same right of priority payment as former employees.  When a FEG advance is made, the Department will complete a formal proof of debt.

The Department states on its website that it will support the role of the insolvency practitioner throughout the assessment of claims.  In particular, where there are insufficient funds or assets available to fund the work of assisting the Department with FEG-related matters, and that work would otherwise not be done as part of the administration, the case manager will invite a quote for services.  There is a schedule of fees for the work of verification and distribution of FEG payments.

If you require advice or assistance concerning any FEG-related issue or request, please contact us for a no obligation, fee free discussion.