The regulator is turning its attention to illegal phoenix activities in the SME sector of the building and construction industries.
The Australia Securities & Investment Commission has announced that it will crack down on phoenix activity in the construction industry, placing as many as eight large-scale building projects under scrutiny.
Speaking at a conference of the Council of Small Business in Sydney, commissioner Greg Tanzer said that ASIC would focus its attention on phoenix activity by small and medium-sized companies in the sector, as well as the issuance of false statutory declarations by contractors in order to obtain paid goods and services.
Illegal phoenix activity refers to the owners of a company eluding their debt obligations by winding up an existing company and shifting its assets to a new company beyond the lawful reach of creditors.
According to Tanzer small and medium-sized business have a near exclusive monopoly on phoenix activity in the building and construction sector.
"It's important to note that almost all cases of illegal phoenix activity occur in the SME sector," said Tanzer. "SME businesses are not only among the entities who engage in illegal phoenix activity, but also among those companies and businesses who suffer when illegal phoenixing occurs.
"ASIC and partner government agencies consulted with key industry stakeholders and we were told that small businesses often experience financial distress in the construction sector, as a result of non-payment of funds for services performed."
Tanzer also pointed to the unfair competitive distortions created by phoenix activity as a major motivation for the crackdown.
"Perpetrators that engage in this activity have a distinct commercial advantage over competitors that operate lawfully," he said. "With less or no debt, they're then in a position to undercut their competitors by offering goods or services at lower prices."
According to a 2013 report from PricewaterhouseCooper phoenix activity is costing the Australian economy as much as $3.2 billion each year. This includes the loss of $1.93 billion in debts owed by wound-up companies to creditors, $655 million in unpaid wages and entitlements to workers, as well as $610 million in missing government revenue.