New Laws Introduced to Combat Illegal Phoenixing

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The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2019 (Cth) (“the Act”) came into effect earlier this year to combat Phoenix activity.

Illegal Phoenixing arises when the assets of a company are transferred for minimal, if any, value to a related company to avoid payment of the transferor company’s debts. Commonly, the transferor company is wound up and its former business operations resumed through the transferee company. The transferor company is usually left with insufficient funds to sustain any proceedings, brought by the liquidator, against its officeholders for breach of duty or pay any significant dividend to creditors.

The new laws will give significant powers to ASIC and liquidators to deal with any illegal Phoenix activity, which we summarise as follows:

  1. A new type of voidable transaction will be created and a liquidator, on application to a Court, may unwind any “Creditor-Defeating Dispositions”.
  2. New criminal offences and civil penalty provisions for Directors and officers to prevent “Creditor-Defeating Dispositions”. The civil penalties can extend to other persons who procure, incite, induce or encourage the making by a company of “Creditor-Defeating Dispositions”. The laws may therefore capture pre-insolvency advisors and lawyers.
  3. ASIC, on its own motion or at the request of a liquidator, may issue administrative orders requiring a person to return any property subject to “Creditor-Defeating Dispositions”.
  4. A Director’s resignation will be ineffective unless ASIC is notified within 28 days and he or she is not the sole Director of the company.

Creditor-Defeating Dispositions” consists of a Director of a company selling its assets to a new company for less than the market value or the best price that may have been obtainable for the assets.

There are also changes to the Director Penalty regime, which has been extended to include the GST liabilities of the company. For further information on the Director Penalty regime, please see the following link to our previous article.

The amendments have attracted some criticism, especially regarding ASIC’s power to unwind low value transactions, but overall, it is a positive step forward to reduce the occurrence of illegal Phoenix activity.

How we can help

If you would like to arrange a telephone or online appointment with one of our expert Insolvency Lawyers to discuss your options, please contact us on 1300 553 343 or

By Amanda Crosbie,
Director, Senior Solicitor

Amanda Crosbie