The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed the announcement by Shadow Assistant Treasurer Andrew Leigh of a proposal to name and shame directors of companies that phoenix.
The proposal would enable the Commissioner of Taxation to publicly name directors who deliberately “burn” companies to avoid their obligations to small businesses, employees and government.
“This is another approach that could help deal in part with the problem of company phoenixing, which destroys small businesses,” said Carnell.
“The proposal extends to ensuring a closer and more effective working relationship between the Australian Taxation Office and the Australian Securities and Investments Commission to obtain director disqualification orders.
“Approaches like naming and shaming can help alongside the already announced measures to combat phoenixing, such as the Director Identification Number.
“However, there is still a need for other practical on-the-ground approaches to help combat the impact of phoenixing on small businesses in supply chains, such as creating deemed statutory trusts to ring-fence moneys owed to subcontractors so they cannot be instead used to help shore up insolvent businesses.
“Subcontractors in supply chains are particularly vulnerable as, unlike employees, they are not protected by the government’s fair entitlements guarantee; a safety net to pay unpaid entitlements.
“Currently, small business subcontractors sit at the bottom of the pecking order.”