With illegal phoenix company activity costing the Australian economy more than $3 billion annually, the time has come to well and truly crackdown on this scourge. The concept of a phoenix company is quite simple, an insolvent business transfers assets below fair market price to a related company. Whereby, intentionally denying unsecured creditors access to the company’s assets. This then leaves a corporate shell in liquidation, unable to pay its debts to creditors. More worryingly it creates a phoenix company reborn from the ashes with same directors in the same industry, with the ability to do the same thing.
This illegal practice comes at a substantial cost to everyone involved. It leaves employees unpaid, businesses out of pocket for goods or services never received and places a significant burden on the government to compensate for the strain of these improper insolvency practices.
Crackdowns in late 2016 from the ATO and ASIC, were able to target pre insolvency advisors facilitating these practices. According to ASIC Commissioner, John Price, the first port of call in avoiding this should be contacting relevant insolvency practitioners to ensure appropriate guidance through insolvency. Similarly, numerous laws exist to protect creditors and employees who have been wronged in dealing with these corporations.
With the rise of unregulated pre-insolvency advice leaving businesses in the ashes of Phoenix Companies, it is important that proper advice is sought from professional corporate liquidation services. For more information regarding phoenix companies and to receive trusted advice from an insolvency service in Brisbane, please contact us today.