Anti-phoenixing laws rise
Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (the Act) was passed on 5 February 2020 and is expected to come into effect soon. The Act targets illegal phoenix activity, which involves the deliberate liquidation and transfer of a company’s assets to a new company that essentially operates the same business in order to avoid tax and other liabilities.
The Act aims to deter companies and directors from participating in illegal phoenix activity through the introduction of new offences that have severe penalty provisions. Both criminal and civil penalties apply, with the potential of 10 years imprisonment for individuals and fines up to $9,450,000 or 10% of a company’s annual turnover.
The Act also:
1. prohibits the backdating of director resignations or resigning as a director of a company if doing so would leave the company without a director; and
2. grants ASIC the power to recover company property which was disposed of for less than market value to avoid creditors - liquidators may also apply to ASIC or the Court to recover these assets.
This Act was passed by Parliament with no substantial amendments, meaning the analysis in our previous article on the Bill continues to be relevant.
Directors and their advisors should ensure they understand the implications of these new laws and monitor how ASIC enforces, and the Courts interpret, the Act to determine whether any proposed restructuring efforts will be captured by the Act.
Further information: If you would like further information about the effect of the Act on you or your business, please contact Tom Morgan or Mark Faraday from Henry William Lawyers. This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.