Dodgy operators helped by lax company registration checks
They are meant to protect unsuspecting customers from dodgy operators. But a leading industry advocate says company registration checks are so lax a dog could be named as a director without raising red flags.
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Company registration checks are so lax a dog could be named a director without raising any red flag in a system that assists dodgy operators avoid detection and escape creditors.
“You could register Fido Winter without a second’s problem,” boss of the peak liquidators’ industry advocate John Winter said.
Mr Winter’s Australian Restructuring Insolvency & Turnaround Association has called on the federal government to urgently introduce laws requiring directors to prove who they are and be assigned a unique and permanent director identification number (DIN) in the battle against dodgy phoenixing directors.
“It’s harder to get a library card because you have to show ID before you can get it,” Mr Winter said.
Rogue directors strip assets and fold companies to avoid debts and set up new companies using dummy directors in a practice known as phoenixing.
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“Phoenixing is plaguing the construction industry, and the DIN is completely the federal government’s responsibility — any delay in a DIN is all on the federal government,” said federal opposition spokesman on small business and industry Brendan O’Connor.
The architect of the DIN, academic and anti-phoenixing expert Helen Anderson, said: “It is certainly not of itself going to magically fix phoenixing.
“What is does is flush out directors who give incorrect dates of birth and names to make detection harder. Phoenixing is a phenomenon of darkness, this sheds light.”
Assistant Treasurer Michael Sukkar said the DIN has been attached to a major project to modernise business registration systems at regulators and agencies including the Australian Securities and Investments Commission and the Australian Taxation Office.
The government in 2018/19 allocated $19.3 million on the business case to modernise the systems but is yet to release the results of that investigation nor announce how much the reforms would cost.
Ms Anderson said the DIN could and should be enacted “sooner rather than later”, instead of waiting years for the modernisation reforms.
But Mr Sukkar is not persuaded to split the measures.
“Integrating DINs with the old registration system would add little value given the need to modernise these systems,” Mr Sukkar said.
“Progressing DINs as part of the registry modernisation initiative will also allow DINs to use the most advanced identity verification process.”
Mr Winter said corporate cop ASIC also needed to be a “strong cop on the beat” but was letting directors get away with phoenixing, pursuing no more than 20 dodgy directors a year from the 10,000 referrals of suspect directors received from liquidators every year.