Submissions on the legislation close on March 26 and following this the bill will be debated in the House of Representatives.
The bill makes four changes to the Corporations Act. It includes new civil and criminal penalties for when company officers make a “creditor defeating disposition”, or allow assets to be sold or transferred in a way that could make it harder for creditors to recover debts later.
It would also stop directors from being able to resign from a company if that left the company with zero directors, as well as making company directors personally liable to pay back GST liabilities in certain circumstances.
Penalties on the table include imprisonment of up to 10 years for some offences.
These tough new requirements should be accompanied by “clear competency requirements of directors and the tightening of regulations on entry”, Maurice Blackburn said in its submission.
“Compulsory business education” should also be considered before someone can become a director, it said.
Mr Sivaraman says Australia should discuss what kind of training business founders get before they are allowed to set up companies, because while there are genuinely unscrupulous operators out there, there are just as many “incompetent directors or bosses”.
“They’re just completely unaware of their responsibilities. I don’t think it’s too much to ask for some kind of training.”
The Australian Institute of Company Directors has been supportive of the legislation but says the idea of creating a new offence specifically for “illegal phoenixing” is unnecessary, as those acting in this way can already be punished for a breach of their duties as directors.
“We don’t think it’s necessary to introduce a new offence. We would like to see the existing laws enforced,” AICD general manager of advocacy Louise Petschler said.
Ms Petschler says it is clear there’s now a hunger on both sides of politics to hunt down illegal phoenix activity.
“We are heartened by the bipartisan agreement to crack down,” she said.
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Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.