Corporations Amendment (Phoenixing and Other Measures) Proclamation 2012

Overview

The Corporations Amendment (Phoenixing and Other Measures) Act 2012 was enacted to address the problem of phoenixing, where directors abandon a company and create a new one to avoid paying employee entitlements. This Act amends the Corporations Act 2001 by giving the Australian Securities and Investments Commission (ASIC) the discretionary power to place a company into liquidation under certain circumstances, such as when the company has not paid its annual review fee within one year or ASIC believes the company is no longer carrying on business. This measure aims to facilitate the payment of employee entitlements through the General Employee Entitlements and Redundancy Scheme (GEERS). Additionally, the Act removes print media advertising and gazettal requirements, replacing them with a regulation-making power to publish all external administration notices via a single website, as recommended by the Corporations and Markets Advisory Committee. The Parliament of Australia introduced this legislation to provide a more efficient and modernised process for handling company external administration.

Scope and Application

The Corporations Amendment (Phoenixing and Other Measures) Act 2012 applies to companies operating in Australia and provides measures to address the issue of "phoenixing," which involves the creation of a new company to avoid paying debts and entitlements of a previously deregistered or insolvent company. This Act amends the Corporations Act 2001 to give the Australian Securities and Investments Commission (ASIC) the power to place a company into compulsory external administration under specific circumstances, such as when the company has not paid its annual review fee within the stipulated period, or when ASIC believes the company is no longer carrying on business and there is no objection to its liquidation. The Act also revises the method of publishing notices relating to events before, during, and after external administration, replacing print media advertising with electronic publication on a single ASIC-administered website. This change aligns with recommendations from the Corporations and Markets Advisory Committee. The proclamation accompanying the Act sets its commencement date as 1 July 2012 and ensures compatibility with human rights as outlined in the Human Rights (Parliamentary Scrutiny) Act 2011.

Key Provisions

The Corporations Amendment (Phoenixing and Other Measures) Act 2012 (the Act) amends the Corporations Act 2001 (the Corporations Act) to introduce new measures concerning the administration of companies, particularly focusing on situations where companies have been abandoned by their directors. Section 1 provides for the commencement of the Act, specifying that it comes into effect on 1 July 2012. Section 2 outlines the short title of the Act, and Section 3 gives effect to the Proclamation, setting the commencement date. Under the Act, the Australian Securities and Investments Commission (ASIC) is granted a discretionary power to place a company into liquidation (Part 1, Schedule 1). This power is exercisable when ASIC has the authority to deregister the company, the company has failed to pay its annual review fee within one year of it being due, ASIC has reinstated the registration of a deregistered company, or ASIC has reason to believe the company is no longer carrying on business and there is no objection to its liquidation. These provisions aim to provide a mechanism for ensuring that employees of abandoned companies can receive payments from the General Employee Entitlements and Redundancy Scheme (GEERS). The Act also includes a regulation-making power for the Governor-General to prescribe methods of publication of notices relating to events before, during and after the external administration of a company (Part 2, Schedule 1). This amendment replaces the previous requirements for print media advertising and gazettal with a streamlined process where all notices are to be published on a single website administered by ASIC. This change aligns with recommendations from the Corporations and Markets Advisory Committee’s 2008 report, Issues in External Administration, which advocated for transitioning to electronic publication. In terms of obligations, companies subject to these provisions must ensure compliance with the notice publication requirements, and ASIC has the responsibility to monitor and enforce the new regulatory framework. Companies must also maintain up-to-date contact information and financial records to facilitate ASIC's ability to deregister or liquidate them if necessary. The Act outlines specific offences and penalties for breaches of its provisions. For instance, failure to comply with notice publication requirements could result in civil penalties, and directors found to be engaging in phoenix activities might face criminal charges, including fines and imprisonment. The maximum penalties for such offences can vary depending on the specific breach and the courts' discretion, but they are designed to deter non-compliance and ensure that the provisions of the Act are effectively enforced.