Director Fraud, page-2

ASIC action on illegal phoenix activity

ASIC works with other government agencies to detect, deter and disrupt directors and advisers that engage in illegal phoenix activity. Illegal phoenix activity is where a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding company debts, which can include taxes, trade creditors and employee entitlements.

How ASIC is combating illegal phoenix activityWorking with other Government agencies and law reformIllegal phoenix prosecutions and outcomes

How ASIC is combating illegal phoenix activity

ASIC uses regulatory strategies to disrupt illegal phoenix activity. These strategies aim to deter directors and facilitators from engaging in illegal phoenix activity, hold them accountable if they have breached the law and protect creditors, employees, consumers and government revenue.

ASIC’s approach involves:

Education and outreach – We engage with industry representatives to identify companies potentially at risk of engaging in phoenix activity to ensure they are aware of their legal obligations and raise awareness.Surveillance and compliance – We identify directors who have a history of failed companies and use data analytics to determine if they may engage in future illegal phoenix activity. We conduct surveillance and use compliance strategies to prevent further offences.Request Assistance for External Administration - If directors don't give books and records to the liquidators or report a failed company's affairs, ASIC assists the appointed liquidators to obtain them and prosecute the directors.Assetless Administration Fund (AA Fund) – ASIC can provide a monetary grant to liquidators to help them compile a report into the failure of a company. This is only available where there are not enough assets to fund the preparation of the report.Disqualifying directors – Directors are disqualified from managing corporations where they have been involved in two or more companies placed into liquidation in the past seven years.Enforcement action – ASIC takes action against those who facilitate, aid or abet illegal phoenix activity, including against directors who breach their duties.

As part of our education and outreach activities we prepare articles and presentations on issues around illegal phoenix including:

Illegal phoenix activity, 2016 article by ASIC Commissioner, John PriceOpening statement to the Senate Economics References Committee’s public hearing into insolvency in the Australian construction industry, 2015Stopping the Phoenix's flight, 2014 article by former ASIC Commissioner Greg TanzerCombating illegal phoenix activity, 2014 article by former ASIC Commissioner Greg Tanzer

Working with other Government agencies and law reform

ASIC works with other government agencies including the Australian Taxation Office, Fair Work Ombudsman and the Department of Employment through the Phoenix Taskforce and Serious Financial Crime Taskforce to exchange intelligence and information about illegal phoenix activity. The Phoenix Taskforce uses data matching tools to identify, manage and monitor suspected illegal phoenix activity.

ASIC also works with Government on potential law reform measures and has contributed to various reports on illegal phoenix activity prepared by Government including the Economic Impact of Potential Illegal Phoenix Activity Report commissioned by the ATO in 2018.