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Phoenix rules have ‘no chance’ of curbing losses

Adam Zuchetti
Adam Zuchetti
20 August 2018 1 minute readShare

The government’s proposals to restrict phoenix operators have “no chance” of reducing business losses, a specialist lawyer has claimed, just days after the draft laws were made available for public scrutiny.

“The government is cracking down on illegal phoenix activity for the benefit of all the hard-working Australians who are negatively affected by this abhorrent behaviour,” Financial Services and Revenue Minister Kelly O’Dwyer said last week in unveiling the draft laws for public consultation.

“This reform package is based on strong support provided from stakeholders in response to the consultation paper, and is informed by the work of the government’s Phoenix Taskforce. The package will give our regulators better tools to deter and disrupt this illegal activity.”


However, Ben Sewell, insolvency lawyer and principal of law firm Sewell & Kettle, claimed the measures will have little if any material impact on restricting dodgy operators avoiding creditors.

“There is no chance that this will dent the scale of phoenix activity in Australia. Phoenix operators will be able to continue business as usual with minimum fuss,” said Mr Sewell.


“Fair play to the government for these reforms, but what about the big picture? For example, the policing of phoenix activity is still left to ASIC and company liquidators – both of whom are underfunded and don’t have much of a track record for pursuing phoenix activity.”

As such, Mr Sewell claimed that the new laws would not actually change much at all.

“There isn’t any funding for regulation and there isn’t a definition of what phoenix activity actually is,” he said.

“If a liquidator has no funding when they’re appointed, no one can compel them to investigate and pursue phoenix activity.”



According to Mr Sewell, past academic research has been critical of the relative inactivity on addressing illegal phoenixing.

“A well-respected group of academics called the Phoenix Research Team recently produced three important research papers into phoenix activity. They called for a new definition of phoenix activity, active enforcement and new legislation. The key recommendations have not been pursued by the government,” he said.

“I predict a small change but the difficult choices that the Phoenix Research Team recommended have not been followed by the government. The government hasn’t even defined phoenix activity in the legislation.”

He added: “Serious researchers of phoenix activity know that more specific legislation and policy are required.”

On the same day Minister O’Dwyer unveiled the measures, another company director and accountant was given the maximum ban for phoenix activity after leaving creditors out of pocket to the tune of $1.4 million.


Phoenix rules have ‘no chance’ of curbing losses
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016. 

The two-time Publish Awards finalist has an extensive journalistic career across business, property and finance, including a four-year stint in the UK. Email Adam at [email protected]

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