Sladen Snippet - Proposed laws targeting illegal phoenix activity

The Federal Government has announced further measures to assist in curbing illegal phoenix activity as part of the release of the 2018 Budget on 8 May 2018.

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.

As part of the Budget papers the Treasurer announced additional measures intended to restrict the prevalence of illegal phoenix activity with an increased focus on those individuals partaking in such activities.

The Federal Government first announced reforms aimed at illegal phoenix activity in September 2017, focusing on the individuals and advisors involved in illegal phoenix activity. The original reforms can be found here.

The Budget papers repeat and expand on these original reforms and place greater restrictions on directors of these alleged phoenix companies regarding director resignations and the director penalty regime.

The budget reforms include:

  • introducing new phoenix offences to target those who conduct or facilitate illegal phoenixing;
  • prevent directors improperly backdating resignations to avoid liability or prosecution;
  • limiting the ability of directors to resign when this would leave the company with no directors;
  • restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator;
  • extend the Director Penalty Regime to GST, luxury car tax and wine equalisation tax, making directors personally liable for the company’s debts; and
  • expand the ATO’s power to retain refunds where there are outstanding tax lodgements.

To discuss the proposed reforms or phoenix activity in general please contact:

Meagan O’Connor
Sladen Legal
T: +61 3 9611 0106 | M: + 61 438 531 978
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia

Dean Beaumont
Sladen Legal
T: +61 3 9611 0131
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia

Ed Cameron
Senior Associate
Sladen Legal
T: +61 3 9611 0179 | M: +61 409 183 975
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia