The Good News is that there are Better and Safer Solutions!
The Draft Legislation for tougher laws including recovery actions and offences for illegal Phoenix Activity was released on 16 August 2018.
Further information on these proposed reforms and offences are available via the treasury media release (link).
What is Phoenixing?
Illegal Phoenix activity occurs when company assets are transferred to a new entity for little or no consideration in return while leaving the liabilities behind preventing creditors from accessing funds that would otherwise be available.
Phoenix operators therefore gain an unfair advantage to the detriment of honest businesses. A new phoenix business typically has the same director(s), operates in the same industry and has a similar name to its predecessor.
Unsuspecting Directors of companies in financial trouble may also unwittingly engage in illegal phoenix activity at the advice of disreputable advisors.
The new proposed legislation aims to impose tougher offences on directors and other parties found abetting such activity.
This includes possibly making directors liable for unpaid GST.
A Better Way Forward
It is therefore important for directors of insolvent companies to engage qualified and regulated insolvency practitioners to be advised on available solutions which may provide a workable and safer outcome outside or within Formal Insolvency.
A qualified advisor can often help find a way through that a director cannot otherwise achieve.
Qualified and regulated advisors tend to hold all of the following credentials:
To avoid risks of director’s personal liability for phoenixing, an insolvent company must either be rescued or terminated in a proper manner.
If you believe that your company is facing insolvency and wish to explore possible options, please contact Bruce Mulvaney & Co to arrange a meeting.