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Michael Murray’s on-going commentary on issues in corporate and personal insolvency law and related policy and law reform, in Australia and internationally. Given the scope of insolvency, this extends to business, consumer and professional conduct, and ethics, governance and regulation, criminal, tax, environmental and administrative law, and the courts and government.

 

The cost of unlawful phoenix activity – yep ….

PWC’s June 2018 report on the cost of phoenix activity – The Economic Impacts of Potential Illegal Phoenix Activity – is interesting but it confirms much of what we know, including that since PWC’s last report, some years ago, not much impact has been made by the government and its regulators.  The government would be better to action the objective and well-argued recommendations in the three reports of the Universities of Melbourne and Monash, funded at $422,441, of over 18 months ago.

A hotline is not one of them.  

The thrust of those reports is on pre-emptive and disruptive measures, rather than delayed and reactive responses, and on transparency to counter the present opacity in which phoenix directors find it easy to operate. An obvious measure is to introduce a director identity number (DIN), recommended back in 2012 , initially resisted as ‘red tape’ but which only now is the government considering. Why would a person set up a phoenix company in their correct name?

A more productive measure is to open up ASIC’s data for free public access, as the governments in England and New Zealand have done.  Or as the University reports say, “make information about directors’ corporate histories available free-of-charge where possible. Establish an online, free-of-charge, publicly searchable register of disqualified directors and associated companies”.  

Instead, the government charges fees for the business community to assess the phoenix background of their customers and others with whom they deal, and to whom they extend credit, whose name may not be theirs. 

Then, when the phoenix operator goes into its planned insolvency, there may well be no liquidator willing to take on an assetless insolvent company, or, if a liquidator does, the government charges them to investigate.

A crazy system.  No wonder PWC reports the size of the problem. 

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