A Shorten Labor Government will act to protect employees and small businesses from dodgy phoenix activity through a package of reforms.
Labor will crack down on dodgy directors who engage in ‘phoenix activity’, where they deliberately burn companies in an attempt to avoid their obligations to employees, government and honest businesses
The package will see employees and business owners benefit from new enforcement tools for the Australian Securities and Investments Commission, tightened laws protecting employee entitlements, and harsher penalties to deter and punish insidious phoenix activity.
Currently it is easier to become a company director than open a bank account, yet the Government has barely raised a peep about phoenix activity.
The Coalition has chosen to continue its narrow, ideological agenda of delivering billions of dollars in tax cuts to multinational corporations and millionaires.
Labor’s new plan will:
- Require all company directors to obtain a unique Director Identification Number with a 100-point identification check.
- Increase penalties associated with phoenix activity
- Introduce an objective test for transactions depriving employees of their entitlements
- Clarify the availability of compensation orders against accessories
- Consult on targeted integrity measures based on the recommendations of the Melbourne Law School / Monash Business SchoolPhoenix Research Team recommendations.
Estimated in 2012 to cost up to $3.2 billion annually, fraudulent phoenix activity hurts employees, small businesses, subcontractors, and families.
Phoenix activity occurs when the directors of a struggling business transfer its assets to a new company (generally owned by the same people) then actively ensure the struggling business fails.
This process allows them to avoid paying the money owed to the failed company’s creditors, which are often the company’s employees, other small businesses and the Australian Tax Office.
Labor joins the Productivity Commission, the Australian Institute of Company Directors, the Senate Economics References Committee, the Phoenix Research Team and the Australian Restructuring Insolvency & Turnaround Association calling for a Director Identification Number to help detect, disrupt and deter pernicious phoenix activity.
Existing and prospective directors would be required to acquire a Director Identification Number with a 100-point identification check.
The unique Director Identification Number is integral for small businesses, liquidators and enforcement agencies to access information on directors including accurate information about director histories.
At present, the registration of an Australian company simply requires the name, address, and date and place of birth of each proposed officeholder. This makes it easier for fraudulent directors to escape their obligations.
It’s time the Turnbull Government focused on protecting workers and the vast majority of scrupulous businesses from the harm caused by the crooked few.