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How to protect your business from phoenixing

While most businesses work hard to do the right thing, a small number look for ways to avoid paying their debts. Some may intentionally wind up or liquidate, then start a new company to continue the same business activities without the debt. This is called phoenixing and it’s illegal.

Protect yourself from the risk of illegal phoenix activity by taking these simple steps before entering into a business arrangement with someone.

  • Search online for information about the company and its directors.
  • Confirm the company and its ABN are valid using ABN LookupExternal Link.
  • Search the ASIC Connect registersExternal Link to check the company is a registered entity and if it’s in liquidation or external administration. You can also conduct a formal credit check through a credit check agency, seek references, or purchase a company report through ASIC.
  • Make sure the people you choose are licenced to do the work you’re asking them to do, by checking with your relevant state authority.
  • Ask for references and take the time to contact them.
  • Request a written contract or tax invoice and get a receipt for payment to protect against issues with insurance, warranties, consumer rights and government regulations.
  • Make sure that any work the company has done is complete and at the correct standard before paying the balance of any invoices.
  • Ask for upfront payments, cash on delivery or payments in instalments, and ensure you are taking a large enough deposit.

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