The Gillard Government is proposing tough new measures to crack down on 'phoenix' company activity under draft laws released today, said Parliamentary Secretary to the Treasurer, David Bradbury.
The draft Corporations Amendment (Similar Names Bill) 2012 (the Similar Names Bill) and the Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (the Phoenixing Bill),which will implement key components of the Gillard Government's Protecting Workers' Entitlements 2010 election commitment, have been released for public consultation.
The Similar Names Bill imposes personal liability upon directors for the debts of 'phoenix' companies that are set up using a similar name to a failed company that has left unpaid creditors behind.
"The Gillard Government is delivering on its election commitment to strengthen our corporate laws and make sure that workers' entitlements are protected," said Mr Bradbury.
"These amendments will crack down on 'phoenixing', where directors try and avoid having to pay workers' entitlements and other unsecured creditors by restarting their failed business using a similar company name, sometimes located in the same premises with the same staff and clients.
"Under these proposals, directors of a failed company can be held liable for the debts of a company that has a similar name to a pre-liquidation name of the failed company - otherwise known as a phoenix company.
"This will stop directors from exploiting the limited liability protections in the corporations law to avoid having to pay any debts, including workers' entitlements, that they incur in a 'phoenix' company.
"This will ensure that directors cannot keep racking up debts through multiple 'phoenix' companies and escape their obligations to pay workers' entitlements and other creditors.
The draft Phoenixing Bill, which has also been released by the Gillard Government for consultation today includes amendments to the Corporations Act to provide the Australian Securities and Investments Commission (ASIC) with an administrative power to wind up abandoned companies and to facilitate the online publication of notices and gazettals relating to external administrations.
"The Government will also be giving ASIC, the corporate watchdog, the power to wind up a company that appears to no longer be carrying on its business.
"This reform will ensure employees will be able to swiftly access the Government's General Employee Entitlements and Redundancy Scheme (GEERS), which is only triggered once a company is wound up.
"Other measures contained in the draft Phoenixing Bill include a new requirement that liquidators 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.
"These amendments will deliver on our election commitments and will ensure that workers do not lose their entitlements because of bad corporate behaviour."
The draft Similar Names Bill and the draft Phoenixing Bill can be found on the Treasury website.
Submissions on the Phoenixing Bill close on 24 January 2012.
Submissions on the Similar Names Bill close on 29 February 2012.
20 December 2011