Costello's bill aims to recover excessive payouts

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Costello's bill aims to recover excessive payouts

'Unreasonable' payments made to directors of companies just before those companies went into liquidation could be recovered by administrators on behalf of workers and other creditors, under a bill introduced into Federal Parliament today by Treasurer Peter Costello.

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'Unreasonable' payments made to directors of companies just before those companies went into liquidation could be recovered by administrators on behalf of workers and other creditors, under a bill introduced into Federal Parliament today by Treasurer Peter Costello.

The Corporations Amendment (Repayment of Directors' Bonuses) Bill 2002 aims to stop a situation such as happened in the weeks leading up to the One.Tel collapse last year, when founders Jodee Rich and Brad Keeling netted payouts of $7 million each in bonuses.

It allows liquidators to recover funds, assets and other properties where unreasonable payments or transfers were made to directors or their close associates - including relatives of the director and their spouse or de facto - up to four years before the company's collapse. This applies regardless of the solvency of the company at the time.

The Bill adds a new section to the Corporations Act defining 'unreasonable' transactions as those occurring when 'it is made to a recipient in circumstances where a reasonable person in the company's circumstances would not have entered into the transaction'.

The reasonableness of the transaction is to be determined with regard to the respective costs and benefits to the company, and benefits to the recipient, of entering into the transaction.

Transactions covered would include payments; conveyances, transfers and other dispositions of property; the issue of securities (including options); and incurring an obligation to enter into these arrangements.

Costello told Parliament today the Bill gave 'strong statutory expression' to the Government's intention that directors not profit unreasonably when creditors, employees and shareholders were at risk.

'Directors are in a better position than most to know the true state of affairs of the company in the short to medium term, and should not profit from this knowledge at the expense of employees and ordinary creditors,' he said.

Debate on the Bill was adjourned.

 

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