Insolvent trading laws to change amid COVID-19 crisis

March 23, 2020 Roger Blow

The Federal Government has announced urgent changes to insolvent trading laws to provide companies with the confidence to continue to trade during the Covid-19 crisis that currently grips the world.

One key change is to temporarily relieve directors, for six months, of the risk of being held personally liable for insolvent trading by the company.

Others include a 10 times increase to the minimum debt amount necessary to seek the winding up of an insolvent company (from $2,000 up to $20,000) and pushing out the period to satisfy any statutory demand from 21 days to 6 months. These are significant and vital amendments given that almost overnight we have seen widespread and deeply damaging developments across almost all markets and sectors.

The ATO has also released information on temporary arrangements (including tax rebates and deferred payments) being introduced to respond to the economic crisis and new Government economic measures are being announced almost daily to try and preserve jobs and allow companies to ride out the storm.

Legal, accounting and financial advisors are needing to update their advice on a daily basis as new measures are announced and new impacts are felt from the virus measures.

Cove Legal provide specialist advice to clients facing possible insolvency outcomes or facing actual or threatened ATO debt action. If you are attempting to address director personal liability issues or an insolvency situation generally, either now or in the future, do get in contact as we would love to try and help.

https://www.afr.com/policy/economy/insolvency-law-to-be-changed-as-avalanche-expected-20200322-p54con

Roger Blow, Principal, P: +61 8 6381 0326 or E: roger@covelegal.com.au

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

Tough penalties for Directors involved in phoenix transactions

August 13, 2019 Roger Blow

The Federal Government has introduced into Parliament tough new criminal and civil penalties for Company Directors who engage in illegal phoenix activity.

Illegal phoenix activity is when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements.

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 will give the ATO, ASIC and liquidators a range of new powers to target directors, individuals and advisors who conduct illegal phoenix transactions, such as where a Director sells the assets of the company at less than market value (known as a creditor-defeating disposition).

The other key reforms include:

New powers to ASIC to recover property that is the subject of a creditor-defeating disposition and return it to the company for distribution to the creditors;
Preventing directors from resigning and leaving the company with no directors and from backdating their resignation to avoid personal liability;
Extending the existing director liability provisions by making directors personally liable for their company’s GST liabilities;
Increased power of the ATO to withhold tax refunds where tax lodgments are still outstanding.

Company directors and their advisers should be aware of the proposed changes.

Cove Legal provide specialist advice to clients facing possible insolvency outcomes or facing actual or threatened ATO debt action. If you are attempting to address director personal liability issues, director penalty notices, garnishee orders, winding up applications, statutory demands or need advice on an insolvency situation generally, speak to us today.

Roger Blow, Principal, Ph: +61 8 6381 0327 or roger@covelegal.com.au

New Director ID laws proposed

April 11, 2019 Roger Blow

It is being proposed that all existing and future directors of registered corporations be required to apply for a permanent identification number which will keep track of their various directorships.

The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 proposes amendments to the Corporations Act 2001 making it compulsory for all newly appointed directors to apply for a unique Director Identification Number (DIN) within 28 days of becoming a director. For existing directors, it is proposed that there will be transitional provisions giving a currently appointed director 15 months to apply for a DIN once the new requirement commences. Those considering becoming a director within 12 months could also apply for a DIN.

With the current system, directors are only required to lodge their details with ASIC but there is no process in place to verify their identity. The new requirements will improve the traceability of a director’s relationship across all companies and allow the regulators to quickly investigate a director’s involvement in what may be repeated unlawful activity, in particular illegal phoenixing.

There will be civil and criminal penalties introduced for directors who do not have a DIN or that fail to apply for a DIN within the applicable timeframe. A director also commits an offence if they knowingly apply for multiple DIN’s or misrepresent a DIN to a registered body or government agency.

Whilst the draft legislation was introduced to Parliament in February, experts recommend that companies prepare for its enactment. We will keep you updated on its progress.

Cove Legal provides legal advice on a wide range of commercial issues. We specialise in dispute work, but Principal Roger Blow’s 20+ years working in some of the largest commercial law firms allows us to address a wide range of client legal needs with fee structures that are tailored to the commercial issues being addressed. Give us a no-obligation call to see if we can help.

Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au