With recent changes to the law around insolvency with the enactment of the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 there has been another nail knocked into the coffin of the dreaded phoenix corporation. For organisations seeking debt management solutions, this change could have dramatic implications on closing potential loopholes that debtors could exploit. In order to help you recognise why this is important for businesses to understand, we thought we would speak to our friend Samantha Wooding – solicitor at STG Legal – to discuss it in detail and how it could affect your debt management.
“This legislation was enacted to prevent directors from backdating their resignations from a sinking company to remain eligible to act as a director in the future for a younger, hotter bird (otherwise known as a ‘Phoenix’, or a new company with old tricks). Under the new provisions, the last director of a company will not be able to resign unless they have either died, never provided a consent to act as a director, or an administrator has already been appointed to the company.
“Significantly, the process in which ASIC is notified of a director’s cessation has been revitalised with a strict 28-day notice period post-resignation. If a director fails to notify ASIC of their resignation within that timeframe, then the date of their resignation will be the date that the Form 484 Change of Company Details form is lodged with ASIC, not the date they claim to have resigned. This move towards a pseudo ‘Cessation by Registration’ model from a “Registration of Cessation’ model, will prevent directors from backdating their resignations, absconding from debts incurred by the company, and illegal phoenixing.
“Whilst a director may apply to ASIC or the Court to have the date changed, this will incur an application fee in addition to late fees on the filing of the Form 484 (and most likely legal costs). Considering the intention of the legislation however, it will be interesting to see on what basis ASIC or the Court would agree to back date a director’s resignation if they have failed to comply with the change.
“Of course, no resignation will be registered where there is a last director left standing (with the exceptions noted above). Hopefully, these amendments will curb the cavalier business practices that we have seen in the past – where the threat of liquidation is surpassed by the ability to resign as director and start over again with a new bird.”
The enactment of this new law will hopefully prevent directors from committing illegal acts and avoiding debt acquired from their previous corporations. For organisations who need help with their debt management, Optimum Recoveries is always here to help. Give one of our friendly team members a call on 1300 556 937.