Phoenixing Explained: Buying Your Business Back From the Liquidator — The Legal Way

Phoenixing Explained: Buying Your Business Back From the Liquidator — The Legal Way

One question comes up more than almost any other: is buying your business back from the liquidator illegal phoenixing? People have heard the word "phoenixing," they've seen the ASIC warnings, and they assume that keeping their business going after a liquidation must be dodgy.

Short answer: no — not when it's done properly. There's an illegal version that's rightly treated as fraud, and there's a legal, transparent version that's a recognised commercial outcome. The difference between them is a single, specific thing, and once you see it the whole subject gets clear.

What illegal phoenixing actually is

Illegal phoenix activity is when a director winds up a company to walk away from its debts — especially ATO debt and unpaid employee entitlements — and then resurrects the same business under a new entity, usually by quietly shifting the assets across for nothing or next to nothing.

Picture it. The old company owes the ATO and hasn't paid staff their entitlements. The director quietly moves the gear, the vehicles, the customer list into a new company for free — or for a token amount that's nowhere near what it's worth — then lets the old company die. The new company keeps trading as if the old debts never existed. Creditors got nothing. The assets that should have paid them down walked out the door before the liquidator ever got near them.

The problem — the whole problem — is the asset transfer at undervalue. The director didn't pay for the gear. Creditors were left with an empty shell.

ASIC, the ATO, and the courts treat that as fraud against creditors, and the penalties are serious: director banning, personal liability, criminal charges, and creditor-defeating disposition claw-backs that can unwind the whole transaction. There's no comfortable time limit hiding behind you on those clawbacks. That is not what we do, and it's not what anyone should do.

The legal version — a CVL with a buy-back

Now the version we coordinate, which is the transparent one — a recognised commercial outcome, not a workaround.

When a Creditors' Voluntary Liquidation (CVL) with a buy-back is done properly, the process runs like this:

• The company is wound up properly, through a registered liquidator.
• The liquidator takes control of all the assets. Not the director — the liquidator.
• The assets are independently valued at fair market price.
• The liquidator offers the assets for sale — often to the open market, not just to the director.
• If the director wants to buy them back, they pay full fair market value, in cleared funds, like any other arm's-length buyer.
• Every dollar paid for the assets goes back to creditors.
• The liquidator signs off that the transaction was at arm's length.

Look at what happens at the end. The director ends up with the gear needed to keep operating. Creditors get the best return the assets can fetch — real money, not an empty shell. The liquidator, an independent registered professional, confirms nobody walked away with anything for free. Nobody was cheated.

The one difference that decides everything

Put the two side by side and the whole thing comes down to a single fact: the asset transfer.

In the illegal version, the assets move for nothing, or below value, before liquidation — so creditors are stripped. In the legal version, a registered liquidator controls the assets, they're independently valued, they're offered around, and the buyer pays full fair market value that flows straight back to creditors.

Remove the transfer-at-undervalue, and what's left is an ordinary, recognised commercial outcome — the same thing that happens whenever a viable business is bought out of a liquidation by anyone. It doesn't magically become illegal because the buyer happens to be the former director, as long as they paid what anyone else would have had to pay.

What this looks like in practice

Say you run a service business — a trades outfit, a small agency, a consultancy. The value isn't in a warehouse of plant; it's in your customers, your work in progress, your name, and a modest kit of equipment. The company has built up ATO debt it can't trade its way out of.

Wind it up through a registered liquidator. The liquidator values the assets — let's say the gear and goodwill come to a fair figure — and puts them up for sale. You set up a new entity and buy them back at that valued price, in cleared funds. That money goes to creditors. The liquidator signs off the sale was at arm's length. The historic debt stays properly behind in the wound-up company (subject to Director Penalty Notice rules on PAYG, GST and super, which have to be managed correctly). You keep serving your customers through the new entity, on a clean foundation.

That's a legal, transparent buy-back. The old company died; the business — the work, the customers, the equipment — continued, out in the open, with creditors paid the best return the assets could fetch.

Where I fit is holding that whole picture together. I'm not a liquidator or trustee — I work for you, not the creditors — and my job is to coordinate the right registered practitioners around you so the process is done properly, valued at arm's length, and signed off, rather than done in a way that lands you in front of ASIC years later. Done properly, this isn't a loophole. It's just the honest way to keep a viable business alive.

Talk it through — before the next letter arrives

If any of this is sitting on your desk right now, the next move is a confidential strategy session. Phone or video, whichever suits you — we'll look at your whole position, tell you straight where you stand, and map the options while you still have them.

Book at resolvency.com.au or call 0457 099 099.

I'm not a liquidator or trustee — I work for you, not the creditors. In 36 years I've never once heard someone say they acted too early.

General information only — not financial, legal or tax advice. Everyone's position is different, so get advice specific to yours before you act.

Related service: Liquidation — see how we can help.