David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

asked the Minister representing the Minister for Financial Services and Superannuation, upon notice, on 28 September 2010:

If employee entitlements were to be given a higher priority in respect of any fixed and floating charge security a bank holds, would this not make a bank more proactive in monitoring loans it has and in ensuring a situation is not allowed to deteriorate to a position where only a secured creditor recovers their funds.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

The Parliamentary Secretary to the Treasurer has provided the following answer to the honourable senator's question:

Employees would only benefit from their entitlements receiving a higher priority in the distribution to creditors to the extent that any of their entitlements are not already covered by the General Employee Entitlements Redundnacy Scheme (GEERS). To the extent that that employee entitlements are covered by GEERS, employees would receive no additional advantage by receiving a higher priority in the distribution. Almost all employee entitlements are covered by GEERS.

If payments of employees entitlements were made dependent on the realisation of assets, it is likely that payments to employees of their entitlements would be delayed further, than under GEERS.

A proposal by the former government to place claims for outstanding employee's entitlements before the interests of all secured creditors was considered by the Parliamentary Joint Committee on Corporations and Financial Services in its June 2004 report, Corporate Insolvency Laws: A Stocktake. The PJC recommended against its adoption.

Employees currently receive a special priority in the distribution to creditors under the Corporations Act. If employees ranking was increased to an even higher ranking, it would be expected to increase the costs of secured credit as margins were increased to reflect lower than expected asset recoveries.