Australia’s anti-phoenixing regime, introduced through the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020, gave the Australian Securities and Investments Commission (ASIC) and liquidators significantly stronger tools to pursue directors and advisors who strip company assets before a business collapses. A landmark judgment in early 2025 provided the first major test of these provisions — and the outcome sent a clear message to Queensland directors about the consequences of phoenixing activity.
What Are Anti-Phoenixing Laws?
Illegal phoenixing occurs when a company’s assets are stripped or transferred to a new entity — leaving the original company unable to pay its debts to creditors, employees, and the ATO — while the directors effectively continue the same business under a new structure.
The 2020 reforms inserted Part 5.7B, Division 7A into the Corporations Act 2001 (Cth), creating a new category of creditor-defeating dispositions (CDDs). A transaction is a CDD if:
- The company transferred property below its market value (or for less than the best price reasonably obtainable); and
- The transaction had the effect of preventing the property being available to satisfy creditor claims, or significantly delaying or hindering that process.
Unlike the earlier uncommercial transaction provisions under s588FB, a CDD does not require proof that the company was insolvent at the time — making it far more powerful for liquidators pursuing asset recovery.
The Landmark Judgment: What the Court Found
The case that tested these provisions in early 2025 involved a director and a third-party restructuring advisor who worked together to transfer company assets to a related entity at undervalue. The transfer was deliberately structured to frustrate creditor recovery before the company entered external administration.
Key findings included:
- The asset transfer constituted a creditor-defeating disposition under s588GA(1)
- The restructuring advisor, though not a director, fell within the extended definition of a “facilitating advisor” under s588GA(3)
- Both the director and the advisor were ordered to compensate creditors jointly and severally for the full value of the transferred assets
The court’s willingness to hold a third-party advisor liable alongside the director was the defining feature of the judgment. It expanded the reach of Australia’s anti-phoenixing laws well beyond the boardroom.
Civil and Criminal Penalties for Phoenixing
The 2020 reforms created both civil and criminal consequences for CDD conduct:
- Civil penalties: Up to 5,000 penalty units ($1,650,000 for individuals as at 2024–25) for engaging in or facilitating a creditor-defeating disposition
- Criminal penalties: Up to 10 years imprisonment for deliberate CDDs involving dishonesty
- Compensation orders: Courts can order parties to compensate creditors for the value of the assets disposed of
- ASIC enforcement powers: ASIC can apply for orders voiding a CDD and restoring assets to the company — regardless of whether a liquidation has commenced
These penalties apply to both the director who authorises the transaction and any advisor who facilitates it — including restructuring advisors, accountants, and lawyers who knowingly assist in a CDD.
Implications for Queensland Directors
The judgment reinforces four critical rules for directors facing financial difficulty in Queensland:
- Asset transfers must be at market value: Any transfer of company property to a related entity during financial distress will be scrutinised. Undervalue transfers — even if structured to appear commercial — can constitute a CDD.
- Intent is not required for civil liability: Civil CDD liability does not require proof of dishonest intent. The transaction’s effect on creditors is what matters.
- Your advisor can be personally liable: Restructuring advisors who recommend or facilitate a CDD face the same compensation orders and civil penalties as the director. Choose your advisors carefully.
- ASIC is actively pursuing CDDs: ASIC has flagged illegal phoenixing as a standing enforcement priority. The regulator’s new pre-insolvency powers mean directors can face action before a company even enters liquidation.
The Role of Professional Legal Support
Navigating a company in financial difficulty requires carefully considered legal advice — not a quick restructuring transaction. Engaging experienced legal professionals can:
- Advise whether a proposed asset transfer would constitute a creditor-defeating disposition
- Implement legitimate safe harbour protections (s588GA of the Corporations Act) to shield directors from insolvent trading claims
- Represent directors in ASIC investigations or liquidator recovery proceedings
- Negotiate with creditors and administrators to achieve the best available outcome
If your company is under financial pressure, speak to an insolvency lawyer in Brisbane before making any decisions about restructuring, asset sales, or intercompany transfers.
Frequently Asked Questions
Can ASIC void a creditor-defeating disposition before the company goes into liquidation?
Yes. Under s588GF, ASIC can apply to the court to void a CDD even if the company has not yet entered administration or liquidation. This is a major departure from the earlier voidable transaction regime, which required a liquidation before action could be taken.
What is the difference between a creditor-defeating disposition and an uncommercial transaction?
An uncommercial transaction (s588FB) requires the company to have been insolvent at the relevant time, and is typically challenged by a liquidator after insolvency. A creditor-defeating disposition can be pursued regardless of insolvency, and can be actioned by both liquidators and ASIC directly. CDDs are significantly broader in scope and harder to defend.
If you are involved in a commercial dispute and need experienced legal representation, Boss Lawyers can help. Contact our commercial litigation lawyers Brisbane for strategic advice. Call 1300 267 711.
Can Boss Lawyers help directors being investigated for phoenixing?
Yes. Boss Lawyers acts for directors and companies facing ASIC investigations, liquidator recovery claims, and creditor-defeating disposition proceedings. Early legal advice is critical — contact us on 1300 267 711 to discuss your situation in confidence. This is general information only and is not legal advice.
Need Legal Advice?
If you are a director facing a phoenixing investigation, a liquidator’s claim for creditor-defeating dispositions, or any insolvency-related dispute, contact Boss Lawyers on 1300 267 711 or visit bosslawyers.com.au for a confidential discussion about your matter.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances. For expert advice, contact Boss Lawyers on 1300 267 711.
