ASIC’s latest wins against phoenix activity
While many of us were focused on the upcoming festive season in December, the Australian Securities and Investments Commission (ASIC) was making headway in its moves against directors suspected of being involved in illegal phoenix activity.
In one case, Sheila Anne McAulay pleaded guilty on 12 December in the Brisbane Magistrates Court to dishonestly using her position as a director of a company.
This followed an ASIC investigation which found that McAulay, a former director of Greenlay Enterprises, had engaged in illegal phoenix activity by organising to sell Greenlay’s assets to a related company called Pasta on the Run, of which she was also the director, for $20,000.
No independent valuation of the assets was conducted and Pasta on the Run made no payments to Greenlay.
According to ASIC, McAulay had stripped Greenlay of its assets, leaving none for the liquidator to use to pay Greenlay’s creditors after it was placed in liquidation in July 2013.
McAulay was discharged without conviction after entering into recognisance in the sum of $2,000 on condition that she would be of good behaviour for two years.
In another Queensland case, John Thomas Shannon and his son Jason Thomas Shannon have been disqualified from managing corporations for three and half and four years, respectively.
This follows the liquidation of the five transport companies they managed which left creditors more than $4.15 million out of pocket.
ASIC’s concerns were raised after the liquidator’s reports suggested that both men had engaged in conduct amounting to illegal phoenix activity. Not only had they accrued large debts owing to the Australia Taxation Office, WorkCover Queensland and unsecured creditors, they also failed to lodge required documents with the ATO and to keep written financial records.
Meanwhile, James Meaden was convicted and fined $5,000 by the Ballarat Magistrates Court on 12 December after pleading guilty to dishonestly using his position as a company director.
Meaden, the former and sole director of Brimarco, operated a business specialising in building custom-made vehicles in Ballarat, Victoria.
An ASIC investigation found that he had engaged in illegal phoenix activity by causing $34,800 to be transferred from Brimarco to a related company called Tough As, of which he was also the sole director.
The transfer occurred one day before a court hearing to wind up Brimarco. After the transfer and being placed into liquidation in April 2015, Brimarco had no funds to pay employees' wages and other entitlements. Its many creditors were collectively owed more than $2 million.
As a result of his conviction, Meaden is automatically disqualified from managing corporations for five years.