‘Phoenix’ reforms welcomed
REFORMS designed to crack down on illegal phoenixing activities have been welcomed by local accountants.
The term illegal phoenixing refers to company directors who simply rebirth a company, hence the phoenix label, and leave behind debts, in most cases unrecoverable, while setting up a new company providing similar products and services as the old one.
Recently Hall Chadwick Gold Coast partner Richard Croaker and national professional standards manager Steven Barnett delivered a workshop on the Gold Coast to lawyers and accountants on new proposed laws designed to combat illegal phoenixing.
Mr Barnett said it was ironic that illegal phoenixing is yet to be defined in legislation – at this stage it is known as a Creditor Defeating Disposition.
“Phoenixing may not technically be illegal on its own because on the surface it can look remarkably similar to a genuine business rescue – we certainly don’t want laws that could be a deterrent to a genuine business rescue,” he said.
“Those activities involved in assisting to save a failing business may include ceasing to trade to avoid personal liability for insolvent trading, setting up a new company and selling off assets at a fair market value – all perfectly legal provided those involved act responsibly.”
Related reforms also being considered include the introduction of director identification numbers (DIN).
This is where regulators, credit providers and insolvency practitioners will be more easily able to identify and track individuals and red flag higher-risk entities.
The building industry has been the target of illegal phoenixing activity on the Gold Coast.