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Proposed Changes to Corporations Act (Phoenix Activity) and Taxation Act (Director Penalty)22 Jun 2012 PHOENIX ACTIVITY The Federal Government considers “fraudulent phoenix activity” to be situations where a director intentionally transfers assets of a company (“transferor”), at a reduced or nominal value, to a new company controlled by that director (or his/her nominees) which effectively denies creditors access to those assets to pay the debts of the transferor company. The Government’s interpretation of “Phoenix Activity” exists whether or not an insolvency practitioner has been appointed to the transferor. There is no specific provision in the Corporations Act, 2001 (“the Act”) which makes phoenix activity “illegal”. However, directors should be warned that involvement in “fraudulent phoenix activity” can have serious consequences if it is found that the directors breached Sections 180 to 183 inclusive of the Act. Federal Government Proposed Action Similar Names Legislation To further deter “fraudulent phoenix activity”, the Federal Government has introduced the “Corporation Amendments (Similar Names) Bill 2012”. This proposed legislation has yet to be introduced to Parliament. In summary, the proposed legislation incorporates the following:
The above is a timely reminder to directors and their advisers to be prudent in their dealings when a company may be insolvent (or at risk of insolvency) particularly if they are considering the transfer of the business/assets of their company in such a manner that may be prejudicial to any creditors of the “failed” company. If you require further details on the proposed legislation, please contact our office. Phoenixing and Other Measures Legislation The ASIC have also pushed ahead further changes to deter phoenix activity, which are contained in the “Corporations Amendment (Phoenixing and Other Measures) Bill, 2012”, which was passed by Parliament on 9 May 2012 and is awaiting Royal assent. A summary of the key features of the new legislation is as follows:
The publication of insolvency notices on the new ASIC website is aimed at reducing costs as well as provide a central reference site for interested parties to obtain information on corporate insolvency matters without charge. Insolvency related Company notices will no longer be required to appear in the newspaper.
In our September 2011 Newsletter, we outlined the proposed changes to the Director Penalty Provisions contained within the Taxation Administration Act, 1953 (“TAA53”). Our September 2011 Newsletter, indicated that the changes to the law may be in effect by November 2011. Following pressure from various interest groups, the Government withdrew the proposed legislation from Parliament in November 2011 to enable further consultation. In April 2012, the Government re-released the proposed changes to the TAA53 for public consultation. In summary, the proposed changes cover the following areas:
We will further report on the proposed legislation once it becomes law. |
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