COVID-19 and illegal phoenix activity


COVID-19 has caused many businesses to experience financial distress. Sometimes, when businesses are in financial distress, pre-insolvency advisers may initiate contact and offer to help.

Some of these advisers don’t understand the law and some may have dishonest intentions. This means that by acting on their advice directors might in engage in criminal activities, such as illegal phoenix activity.

Illegal phoenix activity is usually where a new company is created to continue the business of an existing company that has been deliberately liquidated or abandoned to avoid paying outstanding debts, including taxes, creditors and employee entitlements.

Illegal phoenix activity can involve breaches of directors' duties, fraudulent concealment or removal of assets and fraud by company officers under the Corporations Act 2001. Penalties include large fines and up to 15 years imprisonment for company directors and secretaries and those involved.

ASIC recommends that people should always seek the advice of an independent, qualified trusted business adviser, such as a lawyer or accountant or registered liquidator when approached on such matters.

ASIC works with other government agencies to detect, deter and disrupt directors and advisers who engage in illegal phoenix activity.



ASIC is Australia’s corporate, markets and financial services regulator.