On 30 June 2026, the financial services regulator ASIC laid its first-ever criminal charge under the relatively new “creditor-defeating disposition” provisions of the Corporations Act.
A restaurateur is now facing charges carrying up to 15 years in prison under the creditor-defeating disposition provisions of the Corporations Act for allegedly redirecting over $1 million in sale proceeds away from his restaurant’s creditors before the company collapsed. It’s a NSW case, but the law behind it applies just as directly in Queensland.
What happened?
ASIC alleges that the defendant was an employee of a company that owned a restaurant in Camden, NSW. The company is now in liquidation.
ASIC alleges that between August 2023 and April 2024, the defendant used his position to redirect $935,000 in proceeds from the sale of the business to himself, at the expense of company creditors. That conduct is charged under section 184(2) of the Corporations Act 2001, which carries a maximum penalty of 15 years’ imprisonment.
A second charge alleges that he induced the company to redirect a further $96,793 in sale proceeds while the company was insolvent, contrary to section 588GAC(1) of the Act – a creditor-defeating disposition, carrying up to 10 years’ imprisonment.
While this case is based in NSW, the Corporations Act applies in the same way in Queensland, and the conduct it targets is common wherever a business is under financial pressure, including on the Gold Coast.
What is a creditor-defeating disposition?
Under the Corporations Act, directors have many duties, including duties (in some circumstances) to prevent their company from entering into a transaction that prevents, hinders or significantly delays that property from being available to creditors if the company is wound up – called a creditor-defeating disposition
This duty applies once a company is insolvent, or becomes insolvent because of the disposition itself.
Common examples include selling business assets to a related entity at an artificially low price; transferring the business to a new company with a similar name shortly before the old one collapses; or moving stock, equipment or goodwill out of reach of creditors ahead of liquidation. This is the conduct commonly referred to as phoenix activity, or phoenixing. The business appears to shut down, then reopens under a different name with the same operations, while unpaid creditors are left with an empty shell to chase.
In other situations, the activity simply involves stripping out assets of the company before it is liquidated, in circumstances where creditors suffer.
Importantly, ASIC also warns that liability is not necessarily limited to directors. People who procure, induce, encourage or assist a creditor-defeating disposition, including pre-insolvency advisers and lawyers involved in structuring the transaction, may also face legal consequences.
What has this case changed?
Directors have long faced civil penalties, disqualification and personal compensation orders for creditor-defeating dispositions. What’s new here is that ASIC has, for the first time, laid criminal charges under the creditor-defeating disposition legislation. A civil penalty results in a fine and possibly disqualification. A criminal conviction results in a criminal record, and in some cases, the possibility of a prison sentence.
For directors of Gold Coast businesses under financial pressure, this could be a warning that decisions made in the final months of a struggling business – about who gets paid, what happens to equipment and stock, and whether a “new” entity picks up where the old one left off – can now attract criminal prosecution, not just a civil enforcement.
For creditors, the case is a reminder that if a business that owes you money has closed and a suspiciously similar operation has then opened, parties involved may still have liabilities.
When should you get advice?
If your business is under financial pressure, the time to speak to an insolvency lawyer is before any assets move, not after a liquidator or ASIC starts asking questions. A Gold Coast business lawyer and Gold Coast insolvency lawyer can advise on lawful restructuring options, including voluntary administration and small business restructuring and help directors document the reasoning behind decisions made during a downturn. This is an important step if those decisions are ever scrutinised later.
If a director’s own property, or a family member’s, has been used as security for business debts, a Gold Coast property lawyer or property litigation lawyer can advise on what happens to that security if the business fails.
If you’re a creditor – such as a subcontractor, supplier or landlord – owed money by a business that has ceased trading, a debt recovery lawyer can advise on statutory demands, winding-up applications and whether a related company might be pursued. If the dispute is heading to court, a civil litigation lawyer can advise on your prospects and the process ahead.
What happens next?
The prosecution is the first of its kind, but it is unlikely to be the last. ASIC has demonstrated that it is prepared to pursue criminal charges for alleged creditor-defeating dispositions where it believes the evidence warrants it. Gold Coast directors under financial pressure need to remember that the decisions made in the final months of a struggling business, about assets, entities and who gets paid, are no longer just commercially risky. They may be criminal.
Whether you are a director managing a business through financial pressure or a creditor trying to recover money from one that has closed its doors, contact the team at QBM Lawyers to speak with an experienced insolvency lawyer on the Gold Coast. Early advice often provides the clearest path forward.
Frequently Asked Questions
Yes. Illegal phoenix activity breaches the Corporations Act 2001, which applies across Australia. It typically involves moving a company’s assets to a new entity at an artificially low price while the original company is insolvent, leaving creditors unpaid. Directors and, in some circumstances, other people involved in the transaction can face civil penalties, disqualification or criminal charges.
Yes, in some circumstances. Creditor-defeating disposition offences carry up to 10 years’ imprisonment, and related offences like dishonest use of position carry up to 15 years. Although the legislation has long contained criminal offences, ASIC’s enforcement had previously focused on civil remedies. In June 2026, it laid its first criminal charges under the creditor-defeating disposition provisions.
If you suspect a business has phoenixed to avoid paying you, options can include lodging a statutory demand, applying to wind up the original company or investigating whether the new entity can be held liable for the old company’s debts. A debt recovery lawyer can advise on which option suits your situation and the evidence needed to support it.
No. Closing an insolvent business and starting a genuinely new one isn’t unlawful on its own. Phoenixing generally involves transferring company assets for less than market value, or otherwise putting them beyond the reach of creditors, while the company is insolvent or becomes insolvent because of the transaction.
