The Government has released the Exposure Draft – Corporations Amendment (Phoenixing and Other Measures Bill) 2012 and the Exposure Draft – Corporations Amendment (Similar Names) Bill 2012 for consultation.

The Similar Names Bill imposes personal liability upon directors for the debts of ‘phoenix’ companies that are set up using a similar name to a failed company that has left unpaid creditors behind.

A person is liable to discharge the liability of a company (the debtor company) for a debt incurred by the debtor company if:
(a) when the debt was incurred, the person was a director of the debtor company; and
(b) the person was a director of a failed company at any time during the 12-month period ending at the start of the relevant date in relation to the winding up of the failed company; and
(c) when the debt was incurred, the debtor company was known by a name that:
(i) is the same as a pre-liquidation name of the failed company; or
(ii) is so similar to a pre-liquidation name of the failed company as to suggest an association with the failed company; and
(d) the debt was incurred during the 5-year period beginning at the start of the relevant date in relation to the winding up of the failed company; and
(e) the debt was incurred after the commencement of this section; and

A person is exempt from liability in relation to any debts incurred by the debtor company mentioned in that section if the failed company mentioned in that section has paid all of its debts in full.

The draft Phoenixing Bill includes amendments to the Corporations Act to provide ASIC with an administrative power to wind up abandoned companies and to facilitate the online publication of notices and gazettals relating to external administrations.

This will ensure employees will be able to swiftly access the Government’s General Employee Entitlements and Redundancy Scheme (GEERS), which is only triggered once a company is wound up.