Burying the phoenix company: ASIC's new regulatory guide 242
Following consultation with stakeholders about its new powers to wind up abandoned companies, on 8 November 2012 the Australian Securities and Investments Commission (ASIC) released a Regulatory Guide titled ASIC’s power to wind up abandoned companies, indicating the actions it proposes to take in relation to abandoned companies and “phoenix” companies.
In July this year, important amendments were made to the Corporations Act 2001 (Cth), which have received very little public attention. The amendments were intended primarily to address the growing problem of abandoned companies and “phoenix” companies, and the damage which the practice of “phoenixing” can do to small suppliers and employees of such companies. The amendments were made via the Corporations Amendment (Phoenixing and Other Measures) Act 2012 (Cth).
“Phoenixing” essentially refers to the process by which directors abandon a company without properly winding it up and simply transfer the assets of that company to another company, usually under a similar name to the abandoned company, in order to evade paying liabilities such as employee entitlements and money owed to smaller creditors. The new company, like the bird from Greek mythology, rises from the ashes of the old company and continues business with the same assets and customers leaving the former employees and smaller creditors without any effective means to pursue their claims…
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