In the wake of the notorious Plutus Payroll scheme, the Federal Government is taking steps to protect itself.
The scheme, which saw cash funnelled into outside companies managed by fake directors, cost the Government an estimated $191 million. It was the first big case involving “phoenixing,” wherein companies are deliberately stripped down, liquidated and reopened under different names and leadership, leaving creditors and the Government to foot the bill.
But phoenixing isn’t an isolated incident—and the Federal Government’s latest move proves it.
The phoenixing problem
According to ABC, there’s a whole slew of “pre-insolvency advisers” who are helping companies liquidate, rebuild and cash in on the assets.
The news organisation explains that facilitators were manipulating the corporate system by installing ‘dummy’ directors in companies to shield the real directors from liquidators, creditors and the Australian Taxation Office. The facilitators backdated those appointments in the Australian Securities and Investments Commission’s system to make it appear the dummy director had been in place for much longer.
ASIC has identified more than 11,000 potential phoenixing situations and estimates losses to the country’s economy at around $3.2 billion a year.
To prevent further losses from phoenixing, the government has created a way for directors—dummy or not—to be tracked and monitored across the country. According to the law, all company directors will be given a Directors Identification Number, which will give Government authorities the ability to track and map their involvement with companies, organisations and other professionals.
The law will also include specific offences in an effort to make prosecution easier, and all parties suspected of phoenixing will be required to pay a security deposit before they can open a new company. They will also be held liable for all debts.
To learn more about the new law or how it affects your organisation, contact CharterNet. Our advisers can help you comply—and make sure you’re protected.