The new Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019

What it means for Credit Managers and how you can tackle Phoenixing activity.


It is likely that when Parliament resumes the new Anti-Phoenixing Bill (Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019) will pass into law, as it has bipartisan support. 

We were invited by both the House of Representatives and the Senate to comment on and make submissions on the Bill, so have a detailed knowledge of it.

In brief summary, the Bill is a disappointment as it goes nowhere near enough in stamping out the scourge of Phoenixing activity.

The Bill is focused basically at high-level, criminal phoenixing activity.

By far the bigger problem for credit managers is the problems caused by “incidental phoenixing”.  This is the term we used to describe small scale activity, which is usually an outcome of undercapitalised businesses, lack of a workable business plan, lack of business experience and businesses which are undercapitalized.



- Dispositions of company property where the intent is to weaken the company in the event of liquidation will be more easily attacked by a liquidator.  The relation back period has been increased to 12 months prior to the appointment of external administrators.

- Accountants and lawyers will be less likely to provide advice and to facilitate the transfer of assets, because they will be exposed to criminal charges, penalties and claims for compensation.

- Directors will not be able to resign where no other director has been appointed.

- It will be more difficult for directors to resign from insolvent companies.

- The ATO benefits because Director Penalty Notices (DPN) will include GST and GST estimates.



The provisions are really aimed at shonky activity by directors and their advisors, so it is likely that they will be more inclined to cease trading and put a tottering company into liquidation, rather than taking action to essentially defraud creditors.



Most credit managers experience “incidental phoenixing” rather than criminal phoenixing activity.

It is not uncommon to do a company search on a director and find that he has been a director of five, six, or even eight or nine companies which have basically failed and ceased trading.

The new act will do nothing to help creditors faced with that situation.



As the situation is essentially unchanged, the best form of reducing and even avoiding losses from incidental phoenixing are the age old techniques.

  • - Before advancing credit, obtain a completed Credit Application Form. The Form should include the names of three suppliers and contact should be made with at least one of those suppliers.
  • - Ensure that you have trading terms which have been prepared by a lawyer and which incorporate a penalty clause, providing that in the event of default, the customer will be liable for all legal and debt collection costs incurred by the creditor.
  • - Do a full credit search on the customer and check the status of other companies of which the directors have been directors of.  If there are companies which have been liquidated or deregistered by ASIC, warning bells should ring.
  • - Your default position should always to obtain guarantees from the directors.
  • - If you have concerns, be prepared to lose the business and, insist on a substantial deposit and a payment program which will ensure that the ultimate exposure at any time is low.

While the above points may seem obvious to any professional credit manager, our experience is that the step which is usually missed out is doing a search of all companies of which the directors of the applicant company have been a director of.  This process will increase the approval time and also approval cost but it will also raise alarm bells and lead to good quality credit decisions.


The reality is that if a director has been involved in companies which have failed to pay their creditors, there is a high risk of this reoccurring.  It then becomes a particularly difficult issue to recover monies from companies which are usually little more than a shell.



In our submission, we proposed that ASIC set up a Statutory Demand Register.  At present, each creditor has and is acting in a silo.  If it was aware that Statutory Demands had been served on the potential creditor, this would ring alarm bells.


We then proposed that any company which had appeared on the Statutory Demand Register should also be required to complete a Solvency Statement within 14 days of being requested by a potential creditor.  The Statement would be signed by all directors and would state that at the time of the Statement, the company is solvent (defined as being able to pay its debts as and when they fall due).


Amongst other recommendations, we suggested that ASIC adopt the New Zealand process, whereby it is simple and cheap and immediate to search company information which leads to a relatively informed decision about the credit worthiness of the company, before advancing credit.


  • Roger Mendelson
  • CEO
  • Prushka Fast Debt Recovery Pty Ltd and is principal of Mendelsons National Debt Collection Lawyers Pty Ltd. 
  • E:
  • T: 1800 641 617.


May 2019 - FNSCRD505 - Respond to corporate insolvency situations - FNS51520 Diploma of credit management and FNSCRD401 - Assess credit applications and BSBRSK501 - Managing Risk

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