WHAT DO ADVISORS NEED TO KNOW?
While not defined in the legislation, illegal phoenix activity is generally seen as conduct whereby people in control of a failed company transfer the company's assets to a new entity that has zero obligations to the failed company's creditors and did not pay proper consideration for those assets.
One measure to curb illegal phoenix activity was legislation1 introducing, among other things, a voidable transaction provision in the Corporations Act 2001 that allows a liquidator or the Australian Securities and Investments Commission (ASIC) to recover property through a creditor-defeating disposition claim.
Not only do the new provisions have potential civil and criminal implications for company officers, but anyone involved in facilitating such dispositions—so parties that advise companies in a restructure ought to be across this detail.
