ASIC warns liquidators and company directors on illegal phoenix activity
03 September 2019
ASIC has put company directors and the insolvency industry on notice that it intends to take full advantage of proposed new laws dealing with illegal phoenix activity.
Illegal phoenix activity is where a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes, creditors and employee entitlements. A Government report estimated that the costs the economy between $2.85 billion to $5.13 billion each year.
Andrew Fielding, National Leader for BDO's business restructuring team, said liquidators often see potential illegal phoenix activity but don't have the funding to chase it up.
"There are a lot of pre-insolvency advisors around, not necessarily licensed liquidators, and they advise directors and often the directors themselves don't know phoenixing can be an illegal transaction," he said.
"Pursuing the insolvency advisors is probably the best way to deal with phoenixing.
“Tougher legislation would have limited impact without funding for liquidators for investigation.
"It still comes down to someone having to investigate and prove the phoenix," he said. "Who is going to fund the liquidator to come up with the proof? The frustration here is being a liquidator and not being able to do the investigation."
*As reported in www.smh.com.au/business/small-business/asic-puts-liquidators-on-notice-over-illegal-phoenixing-20190902-p52n1r.html?cspt=1567483481|ac02ec1087b2617d9c977e5ddbd1c0d3