On 29 October 2012, the ACT Magistrates Court ordered Adaptive Frameworks Management Group Pty Ltd to pay debts and costs amounting to $74K to P3 Practices. Adaptive Frameworks Management Group Pty Ltd traded as Adaptive Frameworks. On 31 October this company went into voluntary liquidation and cannot pay its debt to P3 Practices.
However, Adaptive Frameworks continues to trade. It has the same website, the same owners and Directors, the same staff and the same courses as Adaptive Frameworks Management Group Pty Ltd. The only difference is that the ABN has changed and the company name is now Adaptive Frameworks Pty Ltd. The accountant for both the old and new entities freely admits that the change of company name was to avoid the judgement of the court for a debt owed.
Such actions are known as ‘phoenix schemes’ because a new, substantially identical entity arises from the ashes of the old. Clearly this practice is immoral and has severe consequences for small businesses affected by unscrupulous traders. Phoenix schemes are often the focus of regulator activity and law reform. Where the debt is owed to the Australian Taxation Office, then the debt is likely to be unavoidable. The ATO has the resources to pursue tax evaders. ASIC has set up a Phoenix Team to deal with activities involving other creditors. Their attention must be devoted to larger cases where the public interest is more directly affected. However, small businesses continue to remain out of pocket. Their options are to incur further expensive legal costs which often threaten their own survival or to write off the debt. Hence this unprincipled and deceitful practice is allowed to flourish amongst ruthless businesses and their advisers.
Where consumers become aware that they are dealing with a phoenix company they should avoid any commitment. There is a much increased risk of having their own fingers burnt. Government Departments and large businesses should implement checks as part of their procurement processes that they are not dealing with a phoenix entity.
For more information download this information sheet or search for ‘phoenix’ on dissolve.com.au.