Reforms to combat illegal phoenix activity – draft legislation

In the submission, the AICD indicated its strong support for the government’s aim of deterring and disrupting illegal phoenix activity. In terms of specific measures proposed by the government, the AICD:

• Indicated it considered it unnecessary to introduction a new legislative mechanism to recover property in circumstances where a company has sought to avoid creditors as unnecessary, as the existing provisions already available to liquidators and ASIC achieve the objects of the provision.
• Recommended that the government require ASIC to apply to a Court for an administrative order seeking the return of property which has been transferred as part of a voidable creditor-seeking disposition.
• Did not see the need for the introduction of a specific phoenix criminal offence targeting officers and advisers as necessary, given that illegal phoenix behaviour is generally a civil or criminal breach of director’s duties.
• Did not support the introduction of a civil penalty provision, which risks capturing honest directors who, despite their best intentions or honest belief, approve a transaction that results in a reduction in returns to creditors.
• Supported the government’s proposed changes to the Corporations Act regarding director resignation;
• Did not support the government’s proposed changes preventing the abandonment of companies, and considers the enforcement of existing laws, and particularly directors’ duties provisions in the Corporations Act, will likely be more effective in addressing this serious issue.
• Did not support enabling the enabling the Australian Tax Office (ATO) Commissioner to make directors personally liable for any outstanding GST liabilities through the director penalty regime.