Sydney lolly king behind Bon Bon chocolates banned by ASIC
A confectionary boss once behind a NSW boutique lolly empire with a popular store in the CBD has been caught using complex business structures to evade creditors.
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The Australian Taxation Office is clamping down on illegal phoenix activity as experts warn a wave of bust companies “propped up” by the government’s JobKeeper scheme could soon fold under the pressure of mounting debt.
It comes as the man behind a Sydney lolly empire is banned by ASIC for phoenix activity.
Illegal phoenixing – where businesses intentionally liquidate companies to rip off investors and evade tax – is expected to spike once the government’s JobKeeper scheme and bankruptcy safe harbour laws lapse in September.
Like a phoenix rising from the ashes, these companies create a dummy entity under a different name to conduct the same business using the cash and assets of the imperilled company.
The scourge is estimated to cost the economy between $2 and $5 billion a year and send droves of innocent businesses into financial trouble and leave taxpayers out-of-pocket.
Many of the creditors left behind by these illegal phoenix companies are small businesses, employees or subcontractors already struggling because of the pandemic.
Now a high-level task force is circling phoenix companies as they brace for a wave of insolvencies when the government’s JobKeeper subsidy lapses in September.
Lolly king owes $6.4 million to creditors
The Sydney man once behind the Bon Bon chocolate and lolly empire has been banned by ASIC for using complicated business structures to evade debt.
Confectionary boss Andrew Yiasemides has been disqualified from managing corporations after the corporate watchdog found he used a phoenix structure to avoid paying $6.4 million in creditors’ bills.
The West Gosford man was involved in managing a string of lolly companies including the exclusive Sydney CBD shop Bon Bon in The Strand, Bon Fleur Australia and Nougat Limar.
He took over the Bon Bon business in 2002 after managing the original Double Bay chocolate shop in the late 1990s before opening a store in Sydney CBD in 1999.
But he has been forced to step down after ASIC found he played a role in the failure of five different companies including Bon Bon Strand, Bon Fleur Australia and Nougat Limar.
ASIC also found he didn’t maintain proper company records or lodge tax returns and created a fake company to avoid debt and personally benefit as director. No criminal charges have been laid against him.
The ban comes as the ATO’s corporate cops say their “major focus” is on clamping down on phoenix trading by targeting suspicious activity where businesses attempt to evade creditors by using falsified documents and dummy directors.
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In the past year alone, the Australian Taxation Office’s 38 member Phoenix Taskforce has raised more than $109 million in liabilities from suspected phoenix activities and returned more than $45 million in cash to the community.
The ATO’s tip-off line has received thousands of calls about suspected phoenix activity in the year to 1 June, leading to nine criminal prosecutions.
But corporate lawyer Hannah Griffiths has warned the worst is yet to come, with some businesses kept afloat by the JobKeeper scheme likely to collapse when it ends.
“Many of the businesses that have been propped up by the government’s stimulus could collapse … [and] there is a high likelihood of an increase in phoenix activity in light of COVID-19.”
She says new coronavirus laws giving bankrupt companies six months to comply with creditors’ demands means we are “kicking the can along the road” in terms of insolvencies. These safe harbour laws are set to end in September – leaving bust businesses in the dark.
Sam Wilson, head lawyer at CCS Legal, said he has already encountered some companies leveraging the new COVID-19 laws to fold and form phoenix operations.
“A lot of phoenix companies are taking this opportunity to go down knowing that the bankruptcy laws have been weakened by COVID-19 and ASIC has no time.
“There’s a lot of companies that are almost zombie companies – they’ve been unprofitable for years and now with JobKeeper they’re doing far better but as you can imagine a lot of those businesses won’t be back after September.”
But the corporate watchdog ASIC is well-equipped, already on high alert for this type of activity despite a 36 per cent drop in overall insolvencies on the same time last year.
“We have not seen an uptick in phoenix activity, but we are seeing continuing indications of phoenix activity. As part of the multi-agency Phoenix Taskforce, ASIC will continue to work to detect, deter and disrupt directors and advisers that engage in illegal phoenix activity,” a spokesman said.
New laws introduced in February to combat illegal phoenix activity give ASIC broadened powers to tackle the issue, as well as creating a new criminal offence for phoenix offences including tough new penalties.
Anyone who suspects a phoenix company may be operating illegally is urged to contact the tax Integrity centre on 1800 060 062.
Originally published as Sydney lolly king behind Bon Bon chocolates banned by ASIC