Treasury has released for consultation the exposure draft Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2018. Background.
The proposed Bill includes a range of measures to both deter and disrupt illegal phoenixing and punish those who engage in and facilitate this illegal activity.
The term “illegal phoenixing” is not defined but broadly refers to the use of serial deliberate insolvency as a business model to avoid paying company debts.
The exposure draft legislation includes reforms to:
- introduce a new offence for company directors to engage in creditor‑defeating transfers of company assets that prevent, hinder or significantly delay creditors’ access to those assets;
- introduce a separate offence for any person (such as a pre-insolvency adviser) who procures, incites, induces or encourages a company to make creditor‑defeating transfers of company assets.
The offences will be supported by an extension of the existing liquidator asset clawback avenues to cover illegal phoenix transactions. ASIC will also receive a new regulatory tool to recover property that has been transferred under an illegal phoenix transaction.prevent directors from backdating their resignations to avoid personal liability;
- prevent directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors;
- extend the director penalty provisions to make directors personally liable for their company’s GST and related liabilities;
- expand the Australian Taxation Office’s existing power to retain refunds when there are tax lodgments outstanding;
- restrict the voting rights of related creditors of the phoenix operator at meetings regarding the appointment or removal and replacement of an external administrator.