Contempt for corporations law a growing culture in construction industry

The Senate Economics References Committee has criticised the contempt that some directors show for company laws, the “mild” consequences of non-compliance and the low likelihood that unlawful conduct will be detected.

In its report “Insolvency in the Australian construction industry: I just want to be paid” – published 3 December 2015 – the Senate Committee states:

The committee considers that the estimates of the incidence of illegal phoenix activity detailed in this report suggest that construction industry is being beset by a growing culture among some company directors of disregard for the corporations law. This view is reinforced by the anecdotal evidence received by the committee which indicates that phoenixing is considered by some in the industry as merely the way business is done in order to make a profit.

The committee is particularly concerned at evidence that a culture has developed in sections of the industry in which some company directors consider compliance with the corporations law to be optional, because the consequences of non-compliance are so mild and the likelihood that unlawful conduct will be detected is so low.

This culture is reflected in the number of external administrator reports indicating possible breaches of civil and criminal misconduct by company directors in the construction industry. Over three thousand possible cases of civil misconduct and nearly 250 possible criminal offences under the Corporations Act 2001 were reported in a single year in the construction industry. This is a matter for serious concern. It suggests an industry in which company directors’ contempt for the rule of law is becoming all too common.

[from Executive summary, Phoenixing (page xix) and paragraph 5.100 (page 87)]

Contents of Senate Report

For an overview of the numerous insolvency issues considered in the report, the Table of Contents is reproduced below (minus the page numbers).