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Phoenixing companies: time for a clampdown? - Andy McCourt et al

While this publication is independant, we do have a collegiate association with the Sprinter/Australian Printer group, under Intermedia Pty Ltd. We can only heartfully endorse Sheree Young's latest article regarding company directors' phoenixing of companies; atributed to Labor policy but with the rider that it should be a trans-party intitiative, a-political, for the greater good of the industry, economy and small buisness in particular. Maybe it's time for a clampdown on the bad guys?

Phoenix in the Classical sense may be glamorous, but it is ugly in the commericial business arena

Limited liability is a bedrock principle of a free and democratic business environment. Indeed, it may be why Western democracies have prospered; allowing risk-taking, while controlled economies have stagnated, or succeed only until they confront market realities. However, as with all liberties, a section of society sees this as an opportuity for exploiltation, a chance to be a 'chancer' without conscience or concern for those who may lose vast sums of money in planned collapses. Irrespective of political allegience; there is a common ground that abhors deliberate phoenixing - the strategic liquidation of a company in a 'pre-packed' arrangement wherby the same directors may assume control over a company having wiped off all of iits debts.  In this regard, we can add no more to Sheree Young's article that appeared this week on Sprinter.com.

(with acknowlegement to Intermedia Pty Ltd)

The Australian Labor Party is attempting to force through a vote on phoenixing laws first proposed by the Turnbull coalition government in 2017, in which directors are given identification numbers so that they could be tracked from company to company, making the transfer of assets much simpler to identify.

The Director Identification Number (DIN) proposal had bipartisan support prior to the dissolution of parliament in April.

Shadow Assistant Treasurer Stephen Jones notes that, “Phoenixing is a widespread and corrupt practice, hurting employees, legitimate small businesses, and denying the tax office revenue, costing over $5bn a year.

“Experts agree that the single most effective measure to track dodgy developer phoenix operators is the Director Identification Number.

“There is widespread support for the measure from the Australian Small Business and Family Enterprise Ombudsman, the ACTU, the Australian Chamber of Commerce and Industry, and Master Builders Australia, to name a few. It is the top recommendation of the Regulating Fraudulent Phoenix Activity research project run by Melbourne University and Monash University.”

Australian Small Business and Family Enterprise Ombudsman Kate Carnell is also on record supporting the DIN laws, noting, “The dilemma actually is not whether we do this but how. Everyone supports the director ID number, everyone supports the fact that it would dramatically address our capacity to reduce other inappropriate behaviour.”

Assistant Treasurer Michael Sukkar has said that the Government plans on introducing the DIN laws, as a part of its proposed Modernising Business Registers Program, though the Morrison Government is yet to add it to its proposed list of bills.

With both sides of politics in agreement on the fundamental issue, there is no reason why print business should suffer from phoenixing, which “leaves a bad taste in your mouth” as reported by ProPrint editor Sheree Young in August.

Young explains that, “Printers are regularly burnt by companies that run themselves into the ground and re-emerge with a slight name change or call in the administrators, pay a minimal amount of debt and circumnavigate the whole mess legally.

“The degree of the burn varies but it is still pain for any business, no matter the size.

“Being forced to write off debts from the hundreds of thousands (often hundreds of thousands - Ed), of dollars to a just a few hurts any business. As any printer will tell you once it happens, you can never get the taste out of your mouth.”