NEW: Mr Banker
Friday, June 22, 2007/
Reading the ‘sporting news’ on a quiet afternoon, the report of a melee involving some of the game’s biggest names gave me an idea.
Government subsidies please!
Time passes slowly in head office on a Thursday afternoon – and one can be tempted to turn early to the football tipping competition. Must avoid temptation: that would leave me with nothing to do on Friday.
So on Thursday afternoons I turn to the collection of legal newsletters sent to the bank by the modern legal firms that have somehow arrived at the conclusion that impressing me with an insightful analysis into judicial events is somehow more beneficial to client relations than, say, a nice little lunch at Alfredos.
This week my attention was caught by a decision of the New South Wales Supreme Court – Roufeil & Anor v Noel Linder & Anor.
According to the judgement, a company called Easter Logistics Pty Limited acquired the business of a company called Macksville Haulage Pty Limited. The purchase price was a promise to pay the vendor’s liabilities to employees, trade creditors and sub-contractors. Notably, Easter Logistics was not required to pay any taxation liabilities. The judge described this transaction as “extraordinary”.
Easter Logistics sold the business about 12 months later to another company called Easter Group Pty Limited, again on the basis that the purchaser would assume liability for its trade debts and employee claims – and no other payment.
Noting that the vendors and purchasers had at least one common director and shareholder, the judge observed “a pattern of conduct by the officers concerned of ignoring the taxation liabilities of companies conducting the businesses, of transferring the company’s assets and business to a new shell, which would pay key trade creditors, and leaving behind a company without assets to meet its other liabilities”.
The directors of the company were not high-profile sportsmen or women, have not been featured in the financial press, and have never appeared on television, so it will come as no surprise that the legal action did not involve ASIC. In fact, it was an insolvent trading claim commenced by liquidators, who, if they can actually receive the amount of the judgement, will recover more than $1 million for creditors.
(Your correspondent will not waste any words observing any irony in ASIC’s inability to adequately resource the prosecution of insolvent trading – even though it generates sufficient funds to contribute hundreds of millions of dollars to consolidated revenue – impacting most significantly on the Australian Taxation Office.)
What piqued your correspondent’s interest was the observations by the judge who recorded his concern about “what appears to be the involvement of well-known firms of accountants and solicitors in the transaction” and explained that he was going to consider giving notice to the accountants and solicitors to show cause as to why their involvement should not be referred to their professional associations.
This struck your correspondent as a possible solution for the entrepreneurs currently inundating this website with complaints about the burdens of tax compliance.
After all, if the use of phoenix companies is acceptable (it must be, otherwise ASIC would do something about it), and if well known firms of accountants and solicitors are providing advice on setting up such arrangements, then perhaps what is needed is a program of government grants to subsidise professional advice.
That would ensure that such arrangements are freely and equally available to all businesses, whether large or small.
(Ed: Thanks very little for your very cynical remarks, Mr Banker. SmartCompany of course in no way endorses adopting phoenix strategies to escape their tax liabilities. And seriously, neither does Mr Banker.)
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