The Australian Institute of Company Directors (AICD) supports effective action to combat “phoenix activity”.
Phoenix companies “rise from the ashes” with a new corporate structure that derives its assets and directors from an old entity, but leaves behind its debts, giving the new entity a clean slate. Of course, the vast majority of Australian directors govern their companies with integrity. Anti-phoenixing measures must be structured so as to avoid limiting legitimate business restructures or increasing compliance complexity across the board.
Options for combatting “phoenix activity” are canvassed in a recent report (the third in a series) issued by the Melbourne Law School and Monash Business School. The report proposes improving identification of disqualified directors and changes to enforcement priority, options worth promoting. Other proposals, like allowing more regulators to bring disqualification orders against directors, are harder to justify.
One proposal – also in the Productivity Commission’s 2015 review – is to introduce “Director Identification Numbers” (DINs), to make it easier to trace those engaged in phoenix activity. The AICD supports this reform. However, we believe that the personal address and date of birth details (currently on ASIC registers) should be removed from public access when DINs are introduced.
This would protect against the risk of identity theft and threats to personal safety, and bring Australia in line with international best practice on treatment of directors’ personal information. Access to personal information could continue for those with approved public interest reasons, such as lawyers and journalists.
The AICD will be discussing options for reform with government and stakeholders.
To read the Phoenix Activity Report, visit: law.unimelb.edu.au.
Chair’s Mentoring Program
In March, the AICD hosted the inaugural Chair’s Mentoring Program Alumni Dinner in Melbourne, celebrating the achievements of the more than 250 mentees that have participated in the four national mentoring programs the AICD has run since 2010.
The AICD’s Chair’s Mentoring Program connects highly experienced and qualified female directors with senior ASX200 Chairs and NEDs as mentors, supporting their directorship development as part of our commitment to boosting female representation on boards. The 2017 program will open for applications in May for commencement in August. Potential candidates can register their expression of interest in participating at firstname.lastname@example.org.
Beneficial ownership register
The Australian Government has released a consultation paper examining options to introduce a beneficial ownership register for companies.
The policy aim is to improve transparency on who ultimately owns and controls companies, to assist in combating tax evasion, money laundering, bribery, corruption and terrorism financing. The proposals follow similar initiatives introduced in the UK.
While the AICD supports the policy intent, we are concerned that any new laws should not unnecessarily increase the already high compliance burdens on companies. The AICD also opposes any introduction of “deemed liability” offences for directors of companies who may breach new rules. Members can contact Matt McGirr, policy adviser, with any questions on email@example.com.
Social impact investing
The AICD has provided a submission to an Australian Government discussion paper on social impact investing. We argue that government can support growth by:
- Reducing the regulatory burden on NFPs (which is costly and reduces the potential of social impact investments to achieve market returns).
- Providing guidance on the operation of an Australian social impact investing market, including on how such investments relate to NFP status and tax.
- Supporting the development of social impact measurement.
The consultation paper questions whether a legal impediment exists that prevents directors of social enterprises from making decisions in accordance with the constitutional mission of the enterprise, rather than maximising financial returns. The AICD has noted that the law already provides flexibility for directors to consider and balance the interests of a range of factors in their decision-making, including constitutional purpose and stakeholder impacts. To find out more contact Lucas Ryan, senior policy adviser, on firstname.lastname@example.org.