Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 holds four measures that were originally announced in the 2018-19 budget.
- Prohibit creditor-defeating dispositions of company property and penalise those who engage in such transactions and allow liquidators and ASIC to recover the property.
- Prevent directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors.
- Extend the estimates and director penalty regime to GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances.
- Authorises the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide information about Commissioner refunds.
In the past, companies were known to close and then reopen under another name with the same assets. With that, the corporate insolvency laws of Australia aim to balance the freedom of companies when it comes to engaging in commercial risk-taking against the legitimate interests and expectations of creditors, including company employees.
Enabling company liquidators to recover compensation from directors that fail to prevent insolvent trading, Part 5.7B of the Corporations Act 2001 also seeks court orders voiding certain transactions, including insolvent transactions and uncommercial transactions.
The prohibition against insolvent trading is subject to an important defence known as the safe harbour. Introduced as part of the Government’s National Innovation and Science Agenda, the safe harbour encourages companies in legitimate financial difficulty to undertake a restructure in certain circumstances. It is intended to encourage directors to engage early with financial hardship, keep control of their company and take reasonable risks to facilitate the company’s recovery, rather than prematurely placing the company into voluntary administration.
There is so much to understand about this Bill including creditor-defeating disposition, resignation of directors, GST liabilities and many more. Learn more about it from Effective PD’s “GST Liability for Directors” webinar.
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