Initiating Proceedings In The Name Of A Company: Lessons From Junior Academy

The recent decision of the Victorian Supreme Court in Re Junior Academy ELC Pty Ltd (No 3) [2019] VSC 161 serves to highlight how dishonest and deceptive conduct of one director is highly relevant when determining whether the Court could grant leave allowing that director to bring a claim against another director in the name of the company.

In this matter, Mr Urban brought an application seeking leave to bring an action against Mr and Mrs Lahmy (the Lahmys) in the name of a company of which they were equal shareholders. Mr Urban alleged that the Lahmys breached their director’s duties by developing a childcare centre on the same road as a child care centre they owned and operated jointly.

In refusing to grant leave, Justice Robson highlighted the circumstances where granting leave to bring a case is inappropriate, and what considerations about the person bringing an application are relevant.

Corporate Insolvency Regime Reform: The ‘Combatting Illegal Phoenixing’ Bill

Illegal phoenix activity is a significant problem that affects the government, businesses and employees. A report conducted by PricewaterhouseCoopers in July 2018 for the Phoenix Taskforce estimated that the annual direct cost of illegal phoenix activity was between $2.85 billion and $5.13 billion in 2015/16. As a result, on 13 February 2019 the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) (Bill) was introduced into Commonwealth Parliament as part of the government’s reform of Australia’s corporate insolvency regime. The Bill intends to amend the Corporations Act 2001 (Cth) to introduce penalty provisions for individuals and officers who engage in phoenixing-related conduct. It also proposes to give ASIC the power to reverse such transactions.

These proposed amendments have received significant public interest, and no doubt insolvency practitioners are already keeping tabs on the progress of the Bill. This article summarises the background to the changes set out in the amendments as at 13 February 2019 and outlines this area of insolvency laws for business owners to increase their awareness of phoenixing and detail courses of action if they fall victim.

The PAYG Penalty: Costly Implications for Directors

The PAYG Penalty can have very costly personal implications for directors of companies that become insolvent. In a recent decision, Stellar Corporate Solutions failed to remit PAYG tax to the ATO and as a result, their director was deemed personally liable for the substantial debt that was incurred. This article highlights the importance for directors to appreciate the personal finacial implications that may result from failing to pay this particular tax.

When Tax Avoidance And Directors’ Duties Intersect: The Binetter Appeal

23 Jan 2019

The recent appeal decision of BCI Finances Pty Limited (in liq) v Binetter [2018] FCAFC 189 illustrates the requirement of actual acts or omissions of a director to give rise to a breach of directors’ duties. The appeal concerned the liability of Gary Binetter, the son of Erwin Binetter. Erwin, alongside his brother, Emil, had orchestrated a tax avoidance scheme to avoid paying the ATO monies which would otherwise be payable, utilising offshore funds in Israeli Banks to maximise interest deductions on the family company’s tax returns in Australia. Gary had been a director of one of the family companies involved in the scheme, and the question was whether the inference of knowledge of the surrounding facts and circumstances was enough to give rise to a breach of his directors’ duties.