ASIC warns small businesses about phoenix companies

ASIC recently issued advice on illegal phoenix activity which could interest newsagents and newsagent suppliers:

Illegal phoenix activity involves the intentional transfer of assets from an indebted company to a new company to avoid paying creditors, tax or employee entitlements.

The directors leave the debts with the old company, often placing that company into administration or liquidation, leaving no assets to pay creditors.

Meanwhile, a new company, often operated by the same directors and in the same industry as the old company, continues the business under a new structure. By engaging in this illegal practice, the directors avoid paying debts that are owed to creditors, employees and statutory bodies (e.g. the ATO).

Illegal phoenix activity is a serious crime and may result in company officers (directors and secretaries) being imprisoned.

While not all company collapses reflect phoenix activity, enough do for ASIC to publish this advice. It can be time-consuming and expensive to pursue those you may suspect have engaged in phoenix activity. A call to ASIC or your solicitor could guide you on a path that could help you resolve your claim to satisfaction.

I could write about situations specific to our channel but I won’t. The best thing we can do in situations like this is to report them to the various authorities like the ATO, ASIC, the liquidator and known creditors.