The Federal Government has this week announced a number of proposed reforms aimed at those individuals, entities and advisors who undertake or facilitate illegal phoenix activity.
Illegal phoenix activity occurs when company directors deliberately, in an attempt to avoid paying the company’s creditors including its employees and government bodies, transfer the company’s assets to a new company (usually with a similar name) before liquidating the original company.
The reforms propose to introduce new powers to both the Australian Securities Investments Commission (ASIC) and the Australian Taxation Office (ATO) including in respect of:
- ASIC, there are a number of reforms which are intended to undergo consultation with the aim of increasing ASIC’s powers in respect of companies engaging in illegal phoenix activities; and
- the ATO, the right to retain assets including income tax refunds of entities, individuals and their associates, suspected of illegal phoenix activity.
Further information regarding the proposed powers can be found in the Minister for Revenue and Financial Services media release here.
Interestingly, the media release confirms that the proposed reforms will include the introduction of Director Identification Numbers (DIN) for all company directors. Under the proposal each company director will be issued with a unique DIN. The DIN will be integrated with other government agencies and regulators to assist in the mapping of the relationships between directors, related entities and their associates.
A consultation process will commence to determine the most effective way to roll out these measures.
To discuss the proposed reforms or phoenix activity in general please contact: