PJC insolvency inquiry – deregistered companies submission

An early submission to the Parliamentary Joint Committee inquiry into corporate insolvency from Mr Russell Morgan, liquidator, of 15 November 2022, has raised issues likewise being raised by myself and Professor Jason Harris, as to the numbers of companies deregistered by default by ASIC with no oversight as to their trading history and financial position.  The disposal of such deregistered companies under s 601AB is linked by Mr Morgan to possible phoenix activity, and tax avoidance.

These are issues raised by me and Harris in our Insolvency Law Bulletin article and in our various website comments.  It was Professor Helen Anderson and others that initially researched and pointed out the unsatisfactory nature of the ease with which companies, including assetless ones, could be deregistered without inquiry.  That concern goes back over 20 years. 

Without repeating our arguments, there are good reasons why there should be some process of oversight of assetless companies.  While Mr Morgan suggests a private practitioner role for oversight of funded estates, the primary responsibility and expertise lies with government, even if the private profession is engaged to assist. 

It was through concern about unfunded work that the government in 2017 abolished the role of official liquidator. Creditors would need to fund liquidations, although it was accepted by the government that this could result in more assetless companies by-passing the system.[1]  The government also rejected, as a means to deal with unlawful phoenix activity, government funded liquidators on a cab rank system, and/or to establish a government liquidator to conduct a streamlined external administration of SMEs with the option of appointing a private registered liquidator if circumstances warranted it. Neither proposal proceeded further.[2]

The concern of Mr Morgan is explained by Professor Anderson, referring to losses to creditors from abandoned companies, being those where the directors have not initiated any form of external administration, that:

“ … both employees and general unsecured creditors … are in a difficult position. They will need to fund the company’s liquidation themselves if they hope to recover anything of what they are owed, and risk further losses if it eventuates that company has no assets. As a result, many of these creditors do nothing, and the abandoned companies are eventually deregistered by ASIC for failure to return documents or pay annual fees”.[3]

Anderson found in 2016 that five times as many companies were deregistered by this default process as those which proceeded through an external administration.[4] As recent ASIC figures show, referred to by Mr Morgan, that proportion is now well over ten. 

Mr Morgan also suggests the need for an “oversight body with considerable powers and control given to the insolvency profession.”   The industry was not entrusted with regulation by the ILRA 2016 and it is doubtful if it would be now.  An insolvency regulator is needed, but not in the present form and, with respect, not as suggested by Mr Morgan.   


[1] Explanatory Memorandum ILRb at [9.135]

[2] Combatting Illegal Phoenixing, September 2017

[3] Insolvency – it’s all about the money (2018) 46(2) FLR 287-312, Helen Anderson

[4] Insolvency – it’s all about the money, Anderson.

[5] The Protection of Employee Entitlements in Insolvency, Helen Anderson, 2104, MUP, at p 94.


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