ASIC on watch for ‘phoenix’ attempts

AN anticipated wave of business insolvencies and administration has the corporate regulator on guard, but any attempt by businesses to “phoenix” their operations will be met by stiff resistance from a team of investigators.

The new interim head of the Australian Securities and Investments Commission antiphoenix investigations unit said the regulator was mindful of the potential shake-out of insolvency protections measures introduced by the Morrison government in the early days of the pandemic.

ASIC commissioner Diana Steicke said the regulator was targeting 40 investigations in the first half of 2021 after thousands of businesses which avoided insolvency face the music.

“We don’t have any evidence to suggest that the end of safe harbour is going to impact illegal phoenix, we’ve actually had a decrease in our reports of misconduct, about 8 per cent to March to November,” she said.

“But we’re going to be watching pretty closely around what liquidators are reporting to us.”

Despite the collapse in insolvencies during 2020, ASIC has secured five convictions and disqualified 11 directors for illegal phoenix.

Ms Steicke said the regulator was expecting the coming wave of insolvencies to hit the economy in three waves.

“The companies that were insolvent when COVID-19 hit, they would have entered insolvency if not for the relief measures, they’ll fall over quickly,” she said.

“The second wave are those that continued trading in reliance on the relief measures that became available, but they’re not viable when those measures are withdrawn.

“And finally … the companies that weren’t insolvent but incurred additional debts during COVID-19, they may fail a few years down the track.”