FREQUENTLY ASKED QUESTIONS

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5 FREQUENTLY ASKED QUESTIONS EMPLOYEES Who are the Receivers and why have they been appointed? Brendan Richards and George Georges were appointed joint and several Receivers and Managers over the Group on 25 January The Receivers appointment follows the appointment of Rachel Burdett-Baker and Luke Targett of BDO as Administrators by Group s directors. The Receivers are: In control of the business on behalf of the lenders. Liaising with interested parties for a possible sale of business as a going concern immediately. Appointment of Administrators The Board has appointed Administrators to Group and relevant associated companies. The role of Administrators is to deal with the claims of employees and unsecured creditors, including suppliers and subcontractors. The Administrators will also hold meetings of creditors of the Company in due course. The Administrators do NOT have any day to day responsibility or control over the Group. FAQ - Employees trade on

6 Page 2 What do I tell customers if they ask what is going on? Do not attempt to explain the situation to customers, in detail. Rather, if a customer does ask what is going on, provide them with a copy of the customer pamphlet provided. If you run out of pamphlets please contact Susanne Jing of this office on (03) for more pamphlets. What will change in running of the business? The Receivers will continue trading the business while they urgently assess its financial position and speak with interested parties. However, a number of changes will be made due to the financial circumstances of the Group. Some of these changes are as follows: Customers claiming stock ownership Customers are not permitted to re-enter depots to recover stock without the Receiver s express permission. Banking Continue to bank any receipts your daily into the existing bank accounts. Media Employees should not speak to the media. All requests to speak with the media are to be directed to Michael Cave of Ferrier Hodgson. Michael s contact details are: Michael Cave Ferrier Hodgson Ph: (03) michael.cave@fh.com.au Social Media Post are not to be made on the official Facebook and Twitter sites without the approval of the Receivers. Rosters Rosters will continue as per usual unless otherwise advised. If you are unable to complete any scheduled shift please contact your line manager as soon as possible. FAQ - Employees trade on

7 Page 3 Wages Wages will continue to be paid via electronic deposit on a weekly basis. The only change to this will be the payment is now coming from the Receivers. Current wages have been paid up to 23 January 2013 and you will be paid any wages owed for 24 January Annual Leave Your annual leave may be taken as normal if it has already been booked. If you are proposing to take annual leave in the future, please complete your annual leave request form as you currently do and forward the form to the Group Human Resource Manager for approval. The Human Resource Manager will then obtain approval from the Receivers and Managers to grant your annual leave. How does the appointment of Receivers and Managers affect my employment? The business will continue to trade during the Receivership period and your employment with the Group will continue and you will be paid by the Receivers, on time and in the ordinary course. Your entitlements accrued prior to the appointment of Receivers (e.g. Annual Leave; Long Service Leave) are frozen at the date of appointment and are a priority unsecured debt of the Group. Will my outstanding entitlements be paid? The Receivers are immediately seeking a sale of the business as a going concern. In the event that funds are available for distribution to creditors, employees of the Group have a statutory priority of payment with respect to outstanding entitlements such as wages, superannuation contributions, holiday pay and long service leave. Directors and other related persons also have a statutory priority of payment with respect to these entitlements; however their priority is subject to a cap of $2,000 with respect to wages and superannuation contributions and $1,500 for holiday pay and long services leave entitlements. In the event that a sale of the business as a going concern is not possible and the Group is placed into liquidation a Federal Government Scheme exists, known as the Fair Entitlements Guarantee (FEG), FEG provides a safety net arrangement for eligible employees. The FEG provides eligible applicants with compensation for employee entitlements including unpaid wages, outstanding annual leave, long service leave, pay in lieu of FAQ - Employees trade on

8 Page 4 notice and redundancy to a maximum limit in accordance with the scheme. The FEG does not provide funds in respect of superannuation. Please note that the eligibility of each claim is determined by the Department of Employment and Workplace Relations. At this stage we would expect the vast majority of employees to be eligible for FEG funding of their entitlements. The Voluntary Administrator is responsible for managing FEG funding application process and queries in relation to this should be directed to BDO (details below). Please go to FEG website at for more information. Please note FEG assistance is not available while the Group is in Voluntary Administration or subject to Deed of Company Arrangement. All queries regarding your pre-appointment employee entitlements should be directed to: Gyan Tse BDO (03) What happens if I find another job, will my entitlements be paid? If you resign after the Group is placed into liquidation you may still be eligible to make a claim to FEG. If you resign from your position during the receivership period: a) You may miss this opportunity for future employment with a purchaser of the business in the event a sale of the business occurs. b) You will not be entitled to redundancy payments (e.g. severance and notice) based on your employment contract or award. You will however be entitled to normal annual leave and long service leave payments should they apply to you. These amounts may be included in your employee claim. FAQ - Employees trade on

9 Page 5 If I have questions regarding my employment who should I call? All queries regarding the Receivership (other than queries relating to your preappointment employee entitlements) should be forwarded to Kristy Goulden of this office on (03) or at Kristy.Goulden@fh.com.au. Monthly updates on the progress of the Receivership will be posted on our website FAQ - Employees trade on

10 INFORMATION SHEET 55 Receivership: a guide for employees If a company is in financial difficulty, a secured creditor or the court may put the company into receivership. This information sheet provides general information for employees of companies in receivership. Employees should also read ASIC s information sheet INFO 54 Receivership: a guide for creditors. Who is an employee? You are likely to be classified as an employee if you are: engaged by a company under an award, Certified Agreement, Australian Workplace Agreement, or a contract of employment, and paid a salary, wages or commission. Contractors are not employees. They are ordinary unsecured creditors of the company. If you are an employee who is owed money for unpaid wages, superannuation, annual leave, sick leave, long service leave, retrenchment pay or other benefits, you are a creditor of the company. You may be entitled to some or all of what you are owed in priority to the company s other creditors. The purpose of receivership A company goes into receivership when an independent and suitably qualified person (the receiver) is appointed by a secured creditor, or in special circumstances by the court, to take control of some or all of the company s assets. (Court receiverships are beyond the scope of this information sheet.) A secured creditor is someone who has a charge, such as a mortgage, over some or all of the company s assets, to secure a debt owed by the company. Lenders usually require a charge over company assets when they provide a loan. The charge, or security, held may comprise: a fixed charge over particular assets of the company (e.g. land, plant and equipment), and/or a floating charge over assets that are used and disposed of in the course of normal trading operations (e.g. debtors, cash and stock). The powers of the receiver are set out in the charge document and the Corporations Act 2001 (Corporations Act). If a receiver has, under the terms of their appointment, the power to manage the company s affairs, they are known as a receiver and manager. Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances. You will need a qualified professional adviser to take into account your particular circumstances and to tell you how the law applies to you. Australian Securities & Investments Commission Page 1 of 4

11 RECEIVERSHIP: A GUIDE FOR EMPLOYEES It is possible for a company in receivership to also be in provisional liquidation, liquidation, voluntary administration or subject to a deed of company arrangement: see ASIC information sheets INFO 46 Liquidation: a guide for employees and INFO 75 Voluntary administration: a guide for employees. The receiver s role The receiver s role is to: collect and sell enough of the charged assets to repay the debt owed to the secured creditor (this may include selling assets or the company s business) pay out the money collected in the order required by law, and report to ASIC any possible offences or other irregular matters they come across. The receiver s primary duty is to the company s secured creditor. The main duty owed to unsecured creditors is an obligation to take reasonable care to sell charged property for not less than its market value or, if there is no market value, the best price reasonably obtainable. A receiver also has the same general duties as a company director. The receiver has no obligation to report to unsecured creditors, including employees, about the receivership. Employee entitlements If the receiver continues to trade the business, they must pay out of the company assets available to them, ongoing employee wages for services provided and other employee entitlements that arise after the date of appointment. These payments are treated as an expense of the receivership. The appointment of a receiver and manager does not automatically terminate the employment of the company s employees. As a result, unless the receiver adopts the employment contracts or enters into new contracts of employment with employees, they are not personally liable for any employee entitlements that arise during the receivership. If the company s business is sold by the receiver as a going concern, it may be that most, if not all, of the company s employees will keep their jobs. In this case, it is usual for the new owner to take over the company s liability for outstanding employee entitlements. You should seek advice about how the terms of the proposed sale of the business affect the payment of your entitlements. If there are insufficient funds to pay all creditors in full, the money from the realisation of assets must be distributed as follows: money from the sale of fixed charge assets is paid to the secured creditor after the costs and fees of the receiver in collecting this money have been paid, and money from the sale of floating charge assets is paid out as follows: 1. the receiver s costs and fees in collecting this money; 2. certain priority claims, including employee entitlements (if the liability for these hasn t been transferred to a new owner); and 3. repayment of the secured creditor s debt. In both cases, any funds left over are paid to the company or its external administrator, if one has been appointed. If the receiver is appointed under a security comprising both fixed and floating charges, which is common, there will be costs and fees of the receivership that cannot be directly allocated to realising the fixed or floating charge assets. These costs are allocated in proportion to the fixed and floating realisation amounts. If employee entitlements are to be paid by the receiver under a floating charge, the payments must be made in the following order: Australian Securities & Investments Commission, 13 December 2010 Visit our website: Page 2 of 4

12 RECEIVERSHIP: A GUIDE FOR EMPLOYEES 1. outstanding wages and superannuation 2. outstanding leave of absence (including annual leave and sick leave, where applicable, and long service leave), and 3. retrenchment pay. Each class of entitlement is paid in full before the next class is paid. If there are insufficient funds to pay a class in full, the available funds are paid on a pro rata basis (and the next class or classes will be paid nothing). The priority claims of directors and their spouses or relatives for the period they are a director, spouse or relative of a director are limited to a maximum of $2000 for outstanding wages and superannuation, and $1500 for outstanding leave entitlements. Directors and their spouses or relatives are not entitled to any priority retrenchment pay for the period they are a director, spouse or relative of a director. The General Employee Entitlements and Redundancy Scheme (GEERS) GEERS is a basic payment scheme designed to assist employees whose employment has been terminated due to the liquidation or bankruptcy of their employer and who are owed certain employee entitlements. GEERS is administered by the Department of Education, Employment and Workplace Relations. If you are employed by a company that is in receivership you are not eligible for GEERS until and unless the company enters liquidation. For more on liquidation, refer to our related information sheets. For more on GEERS, visit or contact the GEERS Hotline on or GEERS@deewr.gov.au. Establishing your claim If a receiver must pay outstanding priority employee entitlements, they may advise you beforehand how much they believe you are owed. Promptly contact the receiver if you disagree with their calculation. You may be required to complete an employee entitlement claim form. In this case, you should contact the receiver s office to agree and settle the amount. You may need to provide evidence to justify your claim. It is important that you keep your pay records or other records of the terms of your employment. You may also need these records to help you complete your income tax return and establish any entitlement to GEERS if the company enters liquidation. When submitting a claim, ask the receiver to acknowledge receipt of your claim and advise if any further information is needed. If the receiver rejects your claim after you have taken the above steps, seek legal advice. If you have a query about the timing of the payment, discuss this with the receiver. Payment Summaries and Separation Certificates Most employees require a PAYG Payment Summary (group certificate) to complete and lodge their income tax return. A Separation Certificate may also be required before an employee who loses their job can apply for social security. If a receiver pays you any employee entitlements, they must provide you with a PAYG Payment Summary recording the entitlements paid and any income tax deducted. Contact the receiver to find out if they are going to prepare your PAYG Payment Summary for entitlements paid by the company prior to their appointment and, if so, what period it will cover. The receiver is not obliged to prepare this. If you can t obtain a PAYG Payment Summary for any period, contact the Australian Taxation Office on to find out how to meet your obligations. Australian Securities & Investments Commission, 13 December 2010 Visit our website: Page 3 of 4

13 RECEIVERSHIP: A GUIDE FOR EMPLOYEES A receiver must prepare a Separation Certificate for any employee whose employment is terminated during the receivership. They are not obliged to prepare one for terminations that occurred prior to the receivership. Contact Centrelink on to find out what you should do if you can t obtain a Separation Certificate. Queries and complaints You should first raise any queries or complaints with the receiver. If this fails to resolve your concerns, including any concerns about the receiver s conduct, you can lodge a complaint with ASIC at or write to: ASIC Complaints PO Box 9149 TRARALGON VIC 3844 ASIC will usually not become involved in matters of commercial judgement by a receiver. Complaints against companies and their officers can also be made to ASIC. For other enquiries, contact ASIC's infoline on or make an enquiry at To find out more For an explanation of terms used in this information sheet, see ASIC s information sheet INFO 41 Insolvency: a glossary of terms. For more on external administration, see ASIC s related information sheets at INFO 74 Voluntary administration: a guide for creditors INFO 75 Voluntary administration: a guide for employees INFO 45 Liquidation: a guide for creditors INFO 46 Liquidation: a guide for employees INFO 54 Receivership: a guide for creditors INFO 43 Insolvency: a guide for shareholders INFO 42 Insolvency: a guide for directors INFO 84 Independence of external administrators: a guide for creditors INFO 85 Approving fees: a guide for creditors These are also available from the Insolvency Practitioners Association (IPA) website at The IPA website also contains the IPA s Code of Professional Practice for Insolvency Professionals, which applies to IPA members. Australian Securities & Investments Commission, 13 December 2010 Visit our website: Page 4 of 4