After giving directors the benefit of protection from liability for insolvent trading, through the ‘safe harbour reforms’, the government has not required of directors that they at least verify who they really are to start with.
The most authoritative reports on countering unlawful phoenix activity that we have are those three produced by Melbourne and Monash Universities, government funded to the tune of $403,000 and worth every cent.
In its June 2017 response to the 2015 Senate report on insolvency in the construction industry, the government refers to these three reports as evidence of its commitment to funding of good research, necessary in this complex area.
Melbourne Monash’s final report of the three, released in February 2017, made a large number of recommendations, including that all directors have the benefit of an individual identity number (DIN), to establish their correct details for all companies which they establish or of which they are directors.
Something in the nature of a frequent flyer number and card for directors.
Apart from meeting the convenience of directors, the final report said that a director identity number
“is our most important recommendation, and it is key to many of the other recommendations in this document”.
Such an idea has now been recommended by a Senate inquiry into tax avoidance, this Senate report and by the Productivity Commission, but the most significant reports are those of Melbourne Monash.
The government’s response, twice now, is that a DIN would in fact impose a “regulatory burden” on directors but that it will
“give further consideration to DINs as part of its ongoing work to combat illegal phoenix activity in Australia”.
We are all given the assurance of
“basic data quality checks … carried out on manually processed forms”
with penalties applying for false or inaccurate information.
It is odd that while the government’s black economy taskforce is looking at biometric identification, trackable bank notes and probably cryptobehavioural and DNA analysis, the government sees it as burdensome to require directors to fill in one form with their correct name and address when they set up a company; and odd that the AICD does not actively support it.
But it is consistent with the government’s further view that there would be too much change needed in IT infrastructure to alter ASIC’s manual director data matching program with AFSA, where ASIC relies upon its “person numbers” and where if a name is spelt inconsistently, “no further action will be taken”. The bankrupt director may not need to worry.
As to the government’s other responses to the Senate recommendations, they are similar – more examination of ‘options for law reforms to deter, detect and deal with illegal phoenix activities’, ‘toughening up’ the laws, ‘combating’ illegal activity, more funding for ASIC, more reporting by liquidators, and charging them to do so, changing forms, allowing the agencies communicate with each other, and having ASIC ‘look closely at its enforcement record and identify areas for improvement’.
Other issues cover ASIC statistics (all ok), the beneficial ownership of shares (no), pre-insolvency advisers (a matter for ASIC), and some remote connection between voting rights of creditors in a bankruptcy and court powers to terminate deeds of company arrangement.
The government, and no doubt the Courts, still do not like the idea of giving the Federal Circuit Court corporate insolvency jurisdiction.
An important topic in the government response is mental health and suicide prevention, the government referring to the successful model of MATES in Construction (MIC) and the OzHelp Foundation.
This is my assessment, readers can make their own.
 Defining and Profiling Phoenix Activity (2014); Quantifying Phoenix Activity: Incidence, Cost, Enforcement (2015); and Phoenix Activity: Recommendations on Detection, Disruption and Enforcement (2017), all funded through an Australian Research Council Discovery Grant.
 Phoenix Activity: Recommendations on Detection, Disruption and Enforcement (2017).