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Two directors found guilty of phoenix activity

Two directors found guilty of phoenix activity

A crackdown on harmful phoenix activity has already caught out the directors of two businesses, who each owed thousands to unsuspecting business creditors.

Queenslander Sheila Anne McAulay pleaded guilty in the Brisbane Magistrates Court to one count of breaching director’s duties in relation to the operation of a franchise.

Ms McAulay’s company, Greenlay Enterprises, was found to have engaged in illegal phoenix activity by “selling” assets to another company of which she was also a director – Pasta on the Run – for $20,000.

However, the $20,000 was never paid, meaning there was no money or assets for Greenlay to pay creditors once it was placed into liquidation in July 2013.

She was placed on a two-year good behaviour bond.

Meanwhile Victoria man James Meaden was fined $5,000 and disqualified from managing a business for five years for similarly stripping assets from a failing business into another company of which he as the sole director.

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According to ASIC, Mr Meaden transferred $34,800 from Brimarco to Tough As, the day before a court hearing to wind up Brimarco in 2015.

In addition to Brimarco creditors being left out of pocket by more than $2 million, the transfer also meant that employee wages and entitlements went unpaid.

In September, the federal government announced a long-awaited crackdown on phoenix activity, which then Minister for Revenue and Financial Services Kelly O’Dwyer said: “hurts all Australians, including employees, creditors, competing businesses and taxpayers”.

That announcement came with the proposal to instigate a new director identification system. SMEs baulked at the idea amid fears of an increased red tape burden.

Two directors found guilty of phoenix activity
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