NO.062

CORPORATIONS AMENDMENT (REPAYMENT OF DIRECTORS’ BONUSES) BILL 2002

Today I introduced the Corporations Amendment (Repayment of Directors’ Bonuses)

Bill 2002 into the House of Representatives.

The Bill amends the Corporations Act 2001 to permit liquidators to reclaim

unreasonable payments made to the directors of companies that are wound up.

This will assist in the restoration of funds, assets and other property to companies

in liquidation for the benefit of employees and other creditors.

To be caught, the transaction must have been unreasonable, and entered into

during the four years leading up to a company’s liquidation, regardless of its

solvency at the time the transaction occurred.

The reasonableness of a transaction will be determined with regard to a number

of factors, including the respective costs and benefits of the transaction to

the company.

Under the Bill, the reasonableness of a benefit to a director is determined

as at the time the benefit is conferred on the director. This enables liquidators

to recover payments where the true magnitude of the unreasonableness involved

only becomes apparent when the company actually makes the payment, even if it

appeared reasonable at the time the company agreed to make the payment.

The Bill is drafted so as to include transfers made to a close associate of

a director, or transfers made to a third party for the benefit of a director

or close associate.

To avoid constitutional doubt, the amendment will apply with prospective effect,

from the commencement of the Bill.

The Bill was introduced with the approval of the Ministerial Council for Corporations,

which comprises the Commonwealth, States and Territories.

The Bill gives a strong statutory expression of the Government’s intention

that directors should not receive unreasonable remuneration, particularly when

employees, creditors and shareholders are at risk.

CANBERRA

16 October 2002

Contact: David Alexander

02 6277 7340