New Phoenix Offences – commenced on 18 February 2020
Company Directors need to ensure that they are aware of and compliant with the new Illegal Phoenixing Laws that were introduced this week.
The new phoenix offences will prohibit creditor-defeating dispositions of company property and penalise those who engage in or facilitate such dispositions and allow Liquidators and ASIC to recover such property.
A creditor-defeating disposition relates to the transfer of a company’s asset/s for less than market value or otherwise the best price attainable at the time of disposition.
A transaction may be voidable if it is a creditor-defeating disposition and is made when the company is insolvent, or, because of the disposition becomes insolvent or enters external administration within the following 12 months.
Key changes and dates that Company Directors need to know:
Improving the Accountability of Resigning Directors – commenced 18 February 2020
The new legislation ensures directors are held accountable for misconduct by preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors.
In the event a director reports to ASIC more than 28 days after the purported resignation, the resignation takes effect from the day it is reported to ASIC.
A company or a director may apply to ASIC or the Court to give effect to the resignation if they believe they have sufficient evidence to prove the resignation actually occurred in the earlier timeframe.
A director may not be removed from a company, if doing so would leave the company without a director (unless the company is being wound up).
Making Company Directors Personally Liable for the Company’s GST Liabilities – will commence on 1 April 2020
The ATO is able to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances; similar to the current director penalty regime that exists for PAYG and superannuation currently.
Allowing the ATO to Retain Tax Funds in Certain Circumstances – will commence on 1 April 2020
The ATO is able to retain tax refunds where a taxpayer has failed to lodge a return or provide other information that may affect the amount of the ATO refunds.
New ASIC Powers
The Bill gives ASIC a suite of new powers. According to the Explanatory Memorandum to the Bill:
The amendments ensure ASIC has power to take effective action against illegal phoenix activity and protect the interests of legitimate creditors. This will:
- Overcome difficulties faced by liquidators where the company has insufficient funds to cover the cost of court action; and
- Allow ASIC to intervene where a liquidator is not fulfilling its obligations to recover company property, for example because the liquidator is complicit in the illegal phoenix of a company director.
New definition of who is an Officer of a Corporation
- The new definition provides that a person who has the capacity to affect significantly the corporation’s financial standing is now deemed an officer of the company. This definition is wide enough to potentially, not only, encapsulate shadow directors but it will also potentially encapsulate pre-insolvency advisors.
- The new legislation makes it a criminal offence for an officer of the company to engage in conduct that results in the company making a creditor-defeating disposition of property of the company, if:
- The company is insolvent;
- The company becomes insolvent because of the disposition or a number of dispositions made at the times of the disposition; or
- The company enters external administration, or ceases to carry on business altogether, less than 12 months after the disposition as a direct or indirect result of the disposition.
For further information in relation to these new laws and for expert advice regarding compliance and how to legally restructure your business, contact our Restructuring & Insolvency specialists by clicking here or by emailing: firstname.lastname@example.org or calling our offices on: +61 2 8022 1222
The content of this article is intended to provide a general guide to the subject material that is discussed here and does not constitute legal advice.