Illegal phoenix activity means taking a step to establish a new company to continue operations of an already existing organisation purposely dissolved in order to avoid payment of that organisation’s debts.
This adversely impacts the business community, employees, contractors and the government by the non-payment of wages, taxes, employee benefits and other creditors by the dissolved organisation.
You can increase your chances of being protected from phoenix activity in the marketplace by conducting due diligence and background on a company prior to engaging with it in any commercial way.
At a minimum, these checks should include:
- Confirming that the organisation is registered with Australian Securities & Investments Commission (ASIC) and has an ABN;
- Conducting a credit check on the organisation;
- Seeking references for the organisation within the business community;
- Obtaining ASIC’s latest report for the organisation;
- Conducting thorough research with respect to the organisation, its business activities and its board. Check whether the organisation and / or its directors have been involved in any form of misconduct or non-compliance;
- Appropriately ollect payment from the company upfront for services you provide to them;
- Include a warranty in your agreement with the organisation that it has and will pay all taxes as and when they fall due. This will create a contractual binding obligation.
In a bid to counter illegal phoenix activity, the Federal Government has set up a Phoenix Taskforce that comprises 20 Federal, State and Territory government agencies/bodies including the ATO, ASIC, Department of Employment and the Fair Work Ombudsman. The Phoenix Taskforce seeks to combat phoenix activities. It provides tools to assist parties in identifying, managing and monitoring suspected phoenix organisations, deals firmly with those identified and mitigates such organisations posing substantial risk to the integrity of the corporate system.
For further information or assistance in this areas, please contact our Commercial Division on +61 3 9822 8588 or supportteam@burkelawyers.com.au.
