Posted by: Angelo Venardos | Date: 5 October 2012
If a company is having difficulty paying its employees, creditors or taxation liabilities, the directors may believe that one way out of the situation is to liquidate the company and commence trading under a new entity controlled by the same person or group, but free of debts.
A company seeking to avoid payment of its debts in this way is commonly referred to as a phoenix company. Phoenix companies take their name from the mythical bird which rises from the ashes and never dies.
Some directors mistakenly believe that liquidating a company and starting up a new company will provide an opportunity for rebirth and will allow them to wipe the slate clean so to speak.
However, recent amendments to tax laws strengthen the Commissioner of Taxation’s ability to make directors personally liable for the company’s taxation obligations.
The changes allow the Commissioner of Taxation to:
The changes provide:
If you are a director of a company, it is important to ensure:
For more information on directors duties, please do not hesitate to contact me.