Government trying to make order on the phoenix

Government trying to make order on the phoenix

A move to stamp out phoenix companies is welcomed by the ag sector, but there are calls to make sure there are no loopholes.

A move to stamp out phoenix companies is welcomed by the ag sector, but there are calls to make sure there are no loopholes.


The agriculture sector is behind plans to clamp down on directors setting up 'phoenix' companies but say more work is needed.


AGRICULTURE industry representatives welcome a push to implement tighter regulations on company directors in order to minimise the problem of phoenix companies.

The government is working on legislation design to crack down on the creation of phoenix companies, which is the practice of liquidating a business and moving assets across to the newly created entity to avoid debt.

High profile grain trading insolvency cases which administrators have said have seen companies created with the hallmarks of phoenix companies, mean the sector is aware of the dangers of phoenix activity.

“We welcome anything that would stamp out rogue operators,” said National Farmers Federation (NFF) vice president David Jochinke.

“Grain is one area that has been impacted by this sort of activity, as has labour hire and water, so it is a real problem in agriculture and we’d love to see workable solutions to the problem.”

The government has proposed that company directors have to register for a lifetime ID number

A company 'director identification number' is designed to allow regulators to keep a track of directors even as they move onto other companies.

Having the DIN will be a deterrent to the director simply shutting up one business and starting up another, often with only a subtle difference in the name and avoid paying creditors.

Grain growers in particular have suffered in liquidation cases due to their lowly rank as unsecured creditors, often joining the queue after the secured creditors have taken what they are owed, leaving payouts tallying just cents in the dollar to growers seeking to recoup their losses.

However, Stuart Ellis, a farmer from Burrumbeet in Victoria’s Western District, who has been involved in a long-term battle to recoup debts from failed South Australian grain trader Sapphire, said more work was needed to create a viable deterrent.

“We’ve seen cases with companies where the new director is not the same person, what is to stop companies putting in a relative or a mate or whatever, as it stands I don’t think the DIN scheme would stop anyone really wanting to stop a phoenix company being set up.”

“It has been a problem in agriculture and its good there is some work going into stopping businesses not paying their debts but I’m fairly cynical about whether simply putting an ID number on directors is going to stop the problem, it’s a lot more complex than that.”

In order to try and minimise the risk of directors and companies looking to get around the legislation, the draft includes provisions for penalties for applying for multiple numbers or misrepresenting a director ID number.

On the company front, there are fines of up to a million dollars for body corporates trying to misrepresent themselves or applying for multiple numbers.


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