The Government is cracking down on illegal phoenix activity by legislating a package of reforms to the corporations and tax laws that will have a significant impact on directors, pre-insolvency advisors and businesses.
Illegal phoenix activity occurs where the directors/ shareholders (or controllers) of a company strip its assets by transferring them to another company in order to avoid paying creditors.
This activity is estimated to cost creditors between $3 billion and $5 billion per year in bad debt and taxes.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2018 is one of the proposed reforms that will:
The proposed legislation is aimed at those who are engaging in illegal activity and is not intended to hinder legitimate transactions.
However, we recommend you always remain cautious and aware of your obligations to creditors when engaging in any restructuring activities in your business. It is also essential that if you are a professional advisor that you are vigilant when advising others about restructuring as you may be personally liable for breaches.
If you have any further questions about the proposed legislation or would like advice on restructuring your business, please do not hesitate to contact Rolf Koops, Taxation Partner on (02) 8022 1222.