Today the Government announced several measures to crack down on illegal phoenixing activity and to hold proponents accountable. These measures are largely constructive and will help to restore the balance in favour of Directors "Who Do The Right Thing".
However Entrepreneurs also need to be encouraged to have a "Can Do" approach to take responsible and balanced risks without the fear of personal liability. There need to be therefore both Opportunities to Firstly solve a business problem quickly and Secondly where a Director acts within a reasonable time period to NOT make the Director automatically personally liable for all company debts.
The forthcoming "Safe Harbour" rules are a good step to help with the First Opportunity. Furthermore the new guidelines about "Ipso Facto"clauses should also help businesses to have a greater chance of being Rescued. These are both good steps to show that there is a better way than "Phoenixing".
However the proposed personal liability for overdue & unpaid GST is perhaps a deterrent to Entrepreneurs taking risks. The Government will consult about this measure. The effect of this change will be to give unpaid GST a "leg up" to obtain payment over trade creditors, suppliers and tradies, who will continue to largely have no easy redress for their debts unless they can e.g. obtain security. Will this create an unfair "playing field"? There are already personal liability measures in place for unpaid employee related amounts for both superannuation and for taxable amounts withheld from gross wages.
Care needs to be taken that the creeping tendency to "over-regulation" does not harm the growth of our economy and limit job creation.
There are other ways to discourage Phoenixing. It is currently very difficult to save a distressed business to preserve value and jobs both outside and inside of a formal insolvency. This also places pressure on the Government to fund the Fair Entitlements Guarantee. The Government is currently reviewing the FEG as well.
The Government should be encouraged to foster a "Can-Do" mindset as part of its Innovation Agenda for Australia