Associate Professor Helen Anderson Professor Ann O’Connell Professor Ian Ramsay Associate Professor Michelle Welsh Hannah Withers Electronic copy available at: http://ssrn.com/abstract=2677081 QUANTIFYING PHOENIX ACTIVITY: INCIDENCE, COST, ENFORCEMENT TABLE OF CONTENTS GLOSSARY OF COMMON ABBREVIATIONS ................................................................................................. vii EXECUTIVE SUMMARY ................................................................................................................................. ix PART 1: INTRODUCTION ......................................................................................................................... ix PART 2: QUANTIFYING THE INCIDENCE OF ILLEGAL PHOENIX ACTIVITY ............................................ x ASIC ...................................................................................................................................................... xi ATO ...................................................................................................................................................... xii OTHER ................................................................................................................................................. xiii PART 3: QUANTIFYING THE COST OF ILLEGAL PHOENIX ACTIVITY ................................................... xiii ASIC .................................................................................................................................................... xiii ATO ..................................................................................................................................................... xiv FEG, GEERS AND THE PWC REPORT ................................................................................................... xiv TREASURY ............................................................................................................................................ xv PART 4: QUANTIFYING THE ENFORCEMENT OF LAWS TACKLING PHOENIX ACTIVITY ..................... xv ASIC ..................................................................................................................................................... xv ATO ..................................................................................................................................................... xvi CDPP .................................................................................................................................................. xviii FWO ................................................................................................................................................... xviii CONCLUSION .......................................................................................................................................... xix THE PROJECT ............................................................................................................................................... xix THE PHOENIX RESEARCH TEAM .................................................................................................................. xxi THIS REPORT ............................................................................................................................................. xxiii WHY QUANTIFY? ...................................................................................................................................... xxiv 1. INTRODUCTION ..................................................................................................................................... 1 1.1. THE ROLES OF KEY REGULATORS .................................................................................................. 1 1.1.1. AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION .............................................. 1 1.1.2. AUSTRALIAN TAXATION OFFICE ........................................................................................... 1 1.1.3. COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS .................................................. 2 ii Electronic copy available at: http://ssrn.com/abstract=2677081 QUANTIFYING PHOENIX ACTIVITY: INCIDENCE, COST, ENFORCEMENT 1.1.4. DEPARTMENT OF EMPLOYMENT [FORMERLY THE DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS] ..................................................................................... 2 1.1.5. FAIR WORK OMBUDSMAN ................................................................................................... 2 1.1.6. STATE AND TERRITORY REVENUE OFFICES ........................................................................... 2 1.2. RELATIONSHIPS BETWEEN AGENCIES .......................................................................................... 2 1.2.1. MEMORANDA OF UNDERSTANDING .................................................................................... 3 1.2.2. THE PHOENIX WATCH LIST ................................................................................................... 3 1.2.3. INTER-AGENCY PHOENIX FORUM AND TASKFORCE ............................................................. 3 1.2.4. INFORMATION FLOWS .......................................................................................................... 4 1.3. METHODOLOGY ............................................................................................................................ 5 1.3.1. PUBLICLY-AVAILABLE DATA .................................................................................................. 6 1.3.2. DATA REQUESTED FROM REGULATORS ............................................................................... 9 1.3.3. DISPLAYING THE DATA.......................................................................................................... 9 1.4. LIMITATIONS OF THE DATA .......................................................................................................... 9 1.5. COMPANIES IN AUSTRALIA – BACKGROUND DATA ................................................................... 10 1.5.1. ASIC COMPANY REGISTRATION STATISTICS ....................................................................... 10 1.5.2. ABS STATISTICS ................................................................................................................... 10 2. QUANTIFYING THE INCIDENCE OF ILLEGAL PHOENIX ACTIVITY .......................................................... 12 2.1. BUSINESS FAILURES AND PHOENIX ACTIVITY ............................................................................. 12 2.2. RELEVANT BACKGROUND INFORMATION .................................................................................. 12 2.2.1. INSOLVENCY STATISTICS ..................................................................................................... 13 2.2.2. LIQUIDATION STATISTICS .................................................................................................... 15 2.2.3. DORMANT AND DEREGISTERED COMPANIES .................................................................... 16 2.2.4. EXTERNAL ADMINISTRATORS’ REPORTS STATISTICS .......................................................... 17 2.2.4.1. EXAD REPORTS - POSSIBLE MISCONDUCT .................................................................. 17 2.2.4.2. NUMBER OF EXAD REPORTS BY INDUSTRY ................................................................ 21 2.2.4.3. EXAD REPORTS 2013-14 - ASSETS ............................................................................... 21 2.2.4.4. EXAD REPORTS - NOMINATED CAUSES OF FAILURE BY INDUSTRY (1 JULY 2011 TO 30 JUNE 2014) 22 iii Electronic copy available at: http://ssrn.com/abstract=2677081 QUANTIFYING PHOENIX ACTIVITY: INCIDENCE, COST, ENFORCEMENT 2.2.4.5. SUMMARY OF KEY EXAD STATISTICS .......................................................................... 22 2.2.5. THE BUILDING AND CONSTRUCTION SECTOR .................................................................... 23 2.2.6. REPORT AS TO AFFAIRS BREACHES ..................................................................................... 25 2.3. INCIDENCE OF PHOENIX ACTIVITY .............................................................................................. 26 2.3.1. ASIC ..................................................................................................................................... 26 2.3.1.1. ASC PHOENIX ACTIVITY RESEARCH PAPER ................................................................. 26 2.3.1.2. ASIC’S EVIDENCE TO THE COLE ROYAL COMMISSION ................................................ 26 2.3.1.3. ASIC ANNUAL REPORT 2013-14 .................................................................................. 27 2.3.1.4. ASIC MEDIA RELEASES ................................................................................................ 27 2.3.2. ATO ..................................................................................................................................... 29 2.3.2.1. ATO DATA THAT IS PUBLICLY AVAILABLE ................................................................... 29 2.3.2.2. THE ATO AND PROPERTY DEVELOPERS ...................................................................... 30 2.3.2.3. DATA OBTAINED FROM THE ATO ............................................................................... 31 2.3.2.3.1. CONFIRMED AND CANDIDATE PHOENIX GROUPS .................................................. 31 2.3.2.3.2. CHARACTERISTICS OF THE CONFIRMED AND CANDIDATE PHOENIX GROUPS ......