The Government has released an exposure draft of the Corporations Amendment (Phoenixing and Other Measures) Bill 2012 in addition to an exposure draft of the Corporations Amendment (Similar Names Bill) 2012 for consultation.
The package is part of the Government’s pledge to target phoenix company arrangements and activities where directors are able to avoid their obligations to pay workers’ entitlements and other unsecured creditors by re-establishing failed business using a similar company name.
The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (the Bill) amends the Corporations Act vesting in the Australian Security And Investments Commission (ASIC) the administrative power to order the winding up of a company, impose a notification requirement upon insolvency practitioners with respect to unpaid parental leave requirements. It will also provide for various methods of publication of events relating to the external administration of a company. Notices and gazettals alerting the public to external publications will be published online. The Phoenixing legislation aims to better protect workers’ entitlements, as they will be able to quickly access the Government’s General Employee Entitlements and Redundancy Scheme (GEERS), which is only triggered once a company has formally placed into liquidation.
The draft laws will enable liquidators to notify the Department of Families, Housing, Community Services and Indigenous Affairs (FAHCSIA), which funds employers to pay the Government’s paid parental leave payments for their employees, of the winding up of a company. This amendment will ensure that FAHCSIA can determine whether to continue making paid parental leave payments to the company or pay them directly to the employee.
Under the proposed Phoenixing legislation ASIC would be able to administratively appoint a liquidator to assume the conduct of a company’s affairs, where a company is deregistered, deregisterable or abandoned. The appointed liquidator would then be able to investigate and report on any alleged misconduct or investigate and take action in respect of uncommercial transactions entered into prior to deregistration. ASIC would be able to order the winding up of a company if the company’s response to a return of particulars sent to it by ASIC is more than six months overdue, the company has failed to lodge any other documents with ASIC and ASIC considers the company is no longer carrying on business.
ASIC will also be vested with power to order the winding up of a company which hasn’t paid its annual review fee within 12 months of the due date, but reserves the power to reinstate a company if it is satisfied that it should not have been deregistered.
The Similar Names Bill imposes personal liability upon Company Directors in relation to the debts of phoenix companies establishing by using a similar name to a failed company that has unpaid creditors.
S596AJ sets out the circumstances under which a person will be liable to discharge the liabilities of a for debts incurred by the debtor company; (a) when the debt was incurred, the person was a director of the debtor company; and (b) the person was a director of a failed company at any time during the 12-month period ending at the start of the relevant date in relation to the winding up of the failed company; and (c) when the debt was incurred, the debtor company was known by a name that: (i) is the same as a pre-liquidation name of the failed company; or (ii) is so similar to a pre-liquidation name of the failed company as to suggest an association with the failed company; and (d) the debt was incurred during the 5-year period beginning at the start of the relevant date in relation to the winding up of the failed company. The debt must have been incurred after the commencement of the legislation.