The Federal Government has introduced the Corporations Amendments (Similar Names) Bill 2012 which will be directed at companies that engage in ‘phoenix’-related activities through imposing personal liability on directors.
The Bill seeks to impose liability for payments on the director behind the failed company to ensure they do not exploit the concept of limited liability. These measures rely on the notion that many phoenix companies use similar trading names as the company that was liquidated.
Liability would extend to debts incurred within five years of the commencement of the winding up of the failed company.
Under the proposed amendments, directors can apply to the court or to the liquidator to seek that they be exempt from liability, if they have acted honestly and without the intention of seeking to avoid paying creditors. Directors can also avoid liability when the failed company has paid all of its debts in full.
Matters the court must take into account when determining whether to grant an exception include whether, at the time the failed company incurred debts, there was reasonable ground for suspecting that it was insolvent, and the extent to which the assets, employees, premises and contact details of the failed company have become that of the new company.