The Morrison Government is taking action to deter and disrupt illegal phoenix activity to protect workers and level the playing field for businesses, introducing new rules to protect the interests of honest creditors, including trade creditors and employees.
The new Insolvency Practice Rules will 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.
The Government is determined to combat illegal phoenixing. The reforms to the Insolvency Practice Rules will ensure that illegal phoenix operators and those who collude with them are unable to stack votes to the detriment of honest creditors.
The Government will also provide an additional $8.7 million over 4 years from 2018-19 to increase funding for the Assetless Administration Fund. The Fund is administered by ASIC to finance preliminary investigations and reports by liquidators into the failure of companies with few or no assets, where this may lead to ASIC enforcement action, with a particular focus on curbing fraudulent phoenix activity.
This additional funding will increase ASIC’s ability to fund liquidators, who play a vital role in investigating and reporting illegal phoenix activity, including supporting the new liquidator avenues to recover assets lost through illegal asset stripping activity.
These actions complement and build on actions the Government has already taken to combat illegal phoenixing, crime and fraud in the economy. These include announcing and releasing draft legislation for a comprehensive package of reforms to corporations and tax laws to deter and penalise illegal phoenix activity.
Other Government actions include introducing a new Phoenix Hotline, which makes it easier to report suspected phoenix behaviour to the ATO, the introduction of legislation to address corporate misuse of the Fair Entitlements Guarantee scheme and the establishment of the Phoenix, Black Economy and Serious Financial Crime Taskforces.
The Insolvency Practice Rules can be found on the Federal Register of Legislation.