In the current economic climate, businesses across a wide range of sectors are facing devastating realities. As more and more businesses struggle to stay afloat and grapple with extreme financial distress and insolvency, it is becoming increasingly important to ensure that any measures taken are legally sound.
A concerning trend has emerged of late, with directors resorting to ‘phoenix’ activity.
What is phoenix activity?
'Phoenixing' is the now illegal practice of stripping a company of its business assets, liquidating the company, and moving those assets into a new company.
What are the consequences for directors of an illegal phoenix company?
Recent changes to the law mean company directors who intentionally engage in illegal phoenix activity in Australia can be prosecuted and if found guilty, go to jail for up to 10 years. Shine Lawyers' Michael Lalji, Commercial Disputes Practice Leader, recently spoke to A Current Affair on the subject. To view the story please click here.
Get your business back on track
If you are a director concerned about your company’s financial position, the law provides flexible options to restructure debt legally without resorting to activity such as phoenixing.
Shine Lawyers’ team of expert insolvency lawyers can provide tailored solutions to get your business back on track, and help you to navigate the legal process.
What to do if you suspect phoenix activity
If you suspect someone has engaged in illegal phoenix activity, you can report it to the relevant authorities. You can report phoenix behaviour by:
All reports and tip-offs about suspected phoenix activity are forwarded to the Phoenix Taskforce, a cross-government taskforce dedicated to stamping out illegal phoenix activity. For more information, visit the ASIC website.
Written by Shine Lawyers. Last modified: August 20, 2020.