The new legislation introduced in Parliament yesterday will make it an offence for company directors to engage in creditor‑defeating transfers of company assets that prevent, hinder or significantly delay creditors’ access to those assets.
Pre-insolvency advisers and other facilitators of illegal phoenix activities will also be liable, as there will be a separate offence for any person who procures, incites, induces or encourages a company to make creditor‑defeating transfers of company assets.
Directors will be prevented from backdating their resignations to avoid personal liability, while the director penalty provisions will be extended to make directors personally liable for their company’s GST and related liabilities.
The bill will also seek to prevent a sole director from resigning and leaving a company as an empty corporate shell with no director.
The ATO will also be able to retain refunds where there are outstanding tax lodgments.
“The legislation is targeted at those who misuse the corporate form and builds in a number of important safeguards to ensure the new laws do not affect honest businesses and genuine efforts to rescue a business in financial distress,” said assistant treasurer Stuart Robert.
“These safeguards include an extension to the government’s already legislated safe harbour for directors of companies in financial distress. The legislation also includes amendments to the safe harbour to ensure these important provisions continue to operate as intended and continue to promote a culture of business restructure and turnaround.
“In addition to this legislation, the government has also amended the Insolvency Practice Rules to restrict the voting rights of certain creditors related to the phoenix company to ensure the interests of honest creditors are not affected by those complicit in illegal phoenix activity.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.