A legitimate means to phoenix an insolvent company.

Crouch Amirbeaggi is one of Australia's pre-eminent business recovery and turnaround service providers.

In late 2010 we developed Australia's most progressive method of saving a small business from insolvency. Our unique approach gives company Directors a second chance to legally buy back their business and start again, while simultaneously ensuring the rights of creditors are protected.

It's not a sales pitch. It's a fact.

Our process is called a pre-pack and it's a hybrid of the statutory framework utilised in the UK and USA. In colloquial language, our pre-pack model is a legitimate means to phoenix an insolvent company. It is generally the cheapest method to save a small business from insolvency.


How does a pre-pack work?
Is a pre-pack legal?
The UK's pre-pack experience
Illegal phoenix sales
Directors banned for phoenix behaviour
52% of liquidation sales are to a related party
Who are Crouch Amirbeaggi?
Our submission to the Federal Government insolvency enquiry
Our fees

How does a pre-pack work?

Typically, an initial pre-appointment review of the insolvent company is undertaken to determine if a pre-pack is viable. If a pre-pack sale is possible a liquidator is appointed to the insolvent company.

During the first few days of the liquidation, the Director (or related party) will execute a conditional sale agreement to buy the company assets and enter into a licence agreement to continue to trade the business for the next few weeks.

The sale price is estimated at a figure somewhere between the "auction" and "going concern" value of the company. But the sale price is not finalised until the assets are valued by a registered valuator and a public sale process is completed by the liquidator. The estimated sale price will be required to be paid upon execution of the conditional sale agreement.

The conditional sale agreement will become binding after a two to four week period where the liquidator will advertise the business as "for sale" and invite tenders from the public to purchase the business as a going concern.

If the liquidator receives an offer to buy the business from a member of the public, the Director will be given the chance to outbid the offer received from the public. If the Director or related party cannot outbid the offer from the public, the business will be sold to the alternative public purchaser and the amount paid by the Director will be refunded in full.

During the two to four week sale process, the Director will trade on the business via a new company under a licence agreement.

This process ensures the business is sold for market value. Also, there can be no argument the Director was involved in an illegal phoenix sale.

Our approach, which is modelled on the UK approach, ensures that the business will continue to trade up until the date of its sale. It is clear that a quick sale of an insolvent company offers the following benefits:

  • It preserves the goodwill of customers;
  • It retains staff;
  • It avoids the personal exposure of voluntary administrators, particularly the Work Health & Safety (WHS) obligations which terrify liquidators;
  • It avoids funding a trade on administration, which is always difficult, and therefore avoids significant liquidator/voluntary administrator fees.

At Crouch Amirbeaggi we ensure every sale we undertake is conducted in a manner that protects the rights of creditors and maximises the value from the available assets for the creditors' benefit.

If you, as the Director or related party of an insolvent company, wish to implement a pre-pack during the week before the liquidator is approached, together we will need to attend to the following:

  • Obtain a valuation of plant and equipment;
  • Obtain a Work Health & Safety report of the trading premises;
  • Provide details of the current insurance policy;
  • Complete a stock take;
  • Prepare accounting information for the sale of business information memorandum;
  • Prepare business for sale advertisements; and
  • Provide names and addresses of all staff and creditors.

These pre-requisites will normally take seven days to complete at a cost of about $5,000 to $10,000.

Additionally, you will need to instruct a solicitor or accountant to register a new company and you will need to meet with your landlord and lessor to determine if an assignment of all relevant leases or new leases is available. We can introduce you to new accountants or solicitors who can assist you to review the business licence and sale agreements, or alternatively we are happy to work with your existing professional advisers.

It is vital that during this process you act in the interests of creditors and do not place yourself in a position where you derive a benefit at the expense of creditors.

Is a pre-pack legal?

Our pre-pack process is new in Australia and is entirely legal and legitimate. As official liquidators we are officers of the court who must satisfy and discharge our fiduciary and statutory obligations to avoid any illegal phoenix sale.

In late 2010, we shared our research and new pre-pack process with the Federal Government's Senate Economics Committee Enquiry into Insolvency when it undertook its report entitled "The Regulation, Registration and Remuneration of Insolvency Practitioners in Australia: The Case for a New Framework", which was released on 14th September 2010.

In 2011, after the Senate Committee finalised its report, the Chairman of the Senate Enquiry, Senator John Williams, met with us in Sydney and in Canberra to discuss our pre-pack concept and other legislative reforms.

The former Insolvency Practitioners Association of Australia(the professional association for liquidators in Australia, now called the Australian Restructuring Insolvency & Turnaround Association) published our concepts and research in its national journal to assist companies, directors and the industry as a whole. The feature article was entitled "Pre-Packs: A Legitimate means to Phoenix an Insolvent Company". The article was published in Volume 23, Number 1 of its 2011 journal. A copy of the article is available here.

The Association of Business Recovery Professionals, also known as R3, is the UK's peak professional body for liquidators. Its journal is called "Recovery" and R3 published an extract of our Senate Enquiry submission titled "Pre-Packs: A Legitimate means to Phoenix an Insolvent Company" in its 2011 summer publication. A copy of this article is available here.

In June 2011 we submitted, as part of broader legislative reform proposals, details of our pre-pack model to the Federal Government's Attorney-General and the Parliamentary Secretary to the Treasurer in response to their options paper "A Modernisation and Harmonisation of the Regulatory Framework Applying to Insolvency Practitioners in Australia".

In summary, our pre-pack process has been widely promoted to the government and regulators... it's new and it's legal.

The UK's pre-pack experience

In the UK there are around 100 pre-packs or legitimate phoenix sales undertaken each month.

The UK's Government Insolvency Service (the UK's equivalent of our Commonwealth Government's AFSA) has stated:

"A pre-pack (a legitimate phoenix) may offer the best chance for a business to be rescued, preserve goodwill and employment, maximise realisations and generally speed up the insolvency process."

The UK's insolvency regulatory bodies have issued a guidance note to insolvency practitioners which sets out the basic principles and essential procedures which insolvency practitioners must comply with when they undertake a pre-pack. That's right, the UK government has sanctioned pre-pack sales or legal phoenix sales and issued a guidance note to accountants and lawyers to assist them in undertaking pre-packs.

Statement of Insolvency Practice 16 has been adopted by each of the United Kingdom's professional bodies, including:

  • The Association of Chartered Certified Accountants;
  • The Insolvency Practitioners Association;
  • The Institute of Chartered Accountants in England and Wales;
  • The Institute of Chartered Accountants in Ireland;
  • The Institute of Chartered Accountants of Scotland;
  • The Law Society;
  • The Law Society of Scotland

The website of the UK Attorney General states:

"It is perfectly legal to form a new company from the remains of a failed company. Any Director of a failed company can become a Director of a new company."

Illegal phoenix sales

In ASIC's 2010 Annual Report, ASIC defined phoenix trading as the process "...where Directors evade creditors by moving assets from an indebted company to another entity and then put the business into administration".

The process must be distinguished from the legally sound method of a liquidator selling the company's assets to a new company or Directors and their related parties.

In Australia it is a commonplace activity for the business of an insolvent company to be sold prior to the company's liquidation. Unfortunately a lot of this activity is undertaken by advisors who intentionally seek to pay less than the market value for the business via illegal phoenix behaviour. It is well established that when a business is sold for less than market value prior to the appointment of a liquidator then it is an illegal phoenix sale.

At Crouch Amirbeaggi we know that ASIC estimated illegal phoenix behaviour costs the Australian economy between $670 million to $1.3 billion per annum. We also know in 2010 the ATO estimated that the current stock of suspected phoenix cases that it is monitoring poses a risk to revenue of around $600 million. It is well known that both ASIC and the ATO have taskforces which seek to identify and prosecute parties for illegal phoenix sales.

The ASIC annual report highlights that ASIC has conducted a long running campaign to crack down on phoenix behaviour.

Directors banned for phoenix behaviour

ASIC's 2010 annual report indicates that ASIC banned 70 company directors from managing companies for insolvency and phoenix related offences during that year.

A critical point to consider from these statistics is that all 70 directors banned by ASIC chose to sell their company's assets prior to the appointment of a liquidator. By undertaking a sale of the company's assets on their own, or with the assistance of a turnaround specialist, accountant or solicitor, the directors have exposed themselves to prosecution by ASIC for illegal phoenix related activity. Critically, this risk could have been eliminated if directors had chosen to engage a liquidator to facilitate the sale of their assets to a new company.

Where a liquidator is engaged to undertake the sale of a company's assets, the risk of the sale being below market value and therefore an illegal phoenix sale passes from the director to the liquidator. The liquidator has a fiduciary and statutory obligation to avoid an illegal phoenix sale.

ASIC's annual report stated its focus is to continue to prosecute directors and their legal and accounting advisors who fail to sell assets at market value.

In 2010 the Supreme Court of NSW found eight directors of unrelated companies acted in breach of the Corporations Act and engaged in illegal phoenix activity. All of the directors had independently sought advice from a lawyer who specialises in insolvency. The eight directors and the insolvency lawyer were collectively banned from managing corporations for a total of 22 years. This is the first time ASIC has successfully taken action against a solicitor for involvement in facilitating illegal phoenix behaviour.

Our submission to the Government's Senate Enquiry also highlighted the clear distinction between the illegal phoenix sale of assets to related parties for less than market value and the legally sound sale of an insolvent company's assets to a director or related party at market value.

In Australia there is no prohibition on a director or shareholder of a failed company buying the assets of the insolvent company and starting again. But the director or shareholder must be careful how this sale is undertaken. Get the sale wrong and the director will be party to an illegal phoenix sale. Get it right and the director can start again and not be responsible for the insolvent company's debts, including any tax debt. But creditors' interests must be protected and directors must ensure creditors get the best possible return in the circumstances.

The critical question here is, what is the market value of the business? ASIC and creditors will typically argue market value is the going concern value of a business which includes a premium calculated by an open and free market assessment of its intangible value. Objectively this can only be calculated following a comprehensive public sales campaign.

Some turnaround "experts" argue that market value is merely the auction value, or auction value less auction costs, or even auction value less employee entitlements. There are some arguable points in these valuation techniques and there is no hard and fast rule to determine what market value actually is. It changes based on the facts and circumstances of each instance. But be assured that if you want to avoid a clash with ASIC, creditors or a liquidator, the best way to determine market value is to put the business on the market via a liquidator who has a statutory obligation to sell at market value.

52% of liquidation sales are to a related party

During the eight years pre-packs have been used in the UK, some research into the process has been undertaken which is summarised below:

Particulars Pre-pack sale Insolvency sale
All employees transferred to new company 92% 65%
Secured creditor return 42% 28%
Average return (unsecured creditors) 1% 3%
Sale of assets to related party 59% 52%

The key statistic from this table is 52 - 59% of all insolvency sales by a liquidator in the UK involve a sale of some assets to a related party.

That's right, 52 - 59% of all UK insolvency sales involve some form of legitimate phoenix sale of assets. At Crouch Amirbeaggi we believe the number of insolvent small businesses that are sold to related parties in Australia exceeds 60%.

It is our experience that the most important asset of any small business is the staff, the "key people" and existing management that know how to run the business. It is for this reason that most small companies' insolvent businesses are purchased by staff and related parties.

The existing directors, shareholders and staff know the value of the insolvent business, the good and bad suppliers and the real value of the location, goods and services sold. The related parties know the value of the business if it can start again without its existing debt.

Who are Crouch Amirbeaggi?

Crouch Amirbeaggi can't rectify the past, but we can facilitate the formal or informal restructure of an insolvent business.

The partners of Crouch Amirbeaggi are official liquidators and trustees in bankruptcy. Currently we are appointed to hundreds of liquidations and bankrupt estates across the country, and are responsible for various liquidations worth in excess of half a billion dollars of claims by creditors in matters we control.

Our practice is over ten years old, and our senior staff members have about twenty years of insolvency experience. We have always operated nationwide via a network of strategic alliances with good operators in each state. Our clients include three of the four big banks and hundreds of accountants and lawyers all around Australia.

Our Managing Partner, Ms Shabnam Amirbeaggi, is a former state finalist of the Telstra Business Women's Awards and is the only woman in Australia who is both a Managing Partner of an insolvency practice and dual qualified official liquidator and trustee in bankruptcy. She was recently selected by the CPA as one of their 40 Young Business Leaders of 2013.

As at February 2011, there were approximately 664 registered liquidators and 208 Trustees in bankruptcy in Australia. Collectively, we will administer approximately 28,000 personal bankruptcies and 9,500 corporate appointments each year. We are the acknowledged qualified experts in the insolvency field.

We invite you to call or email us and ask to speak with one of the following:

  • Official Liquidator;
  • Trustee in bankruptcy;
  • CPA or Chartered Accountant with law or accounting qualifications;
  • Member of ARITA (Australian Restructuring Insolvency & Turnaround Association); or
  • Court Officer.

If you would like to engage us to implement a turnaround or restructure solution, you will be charged at our normal hourly rates. By reviewing the Federal Government's Senate Enquiry Report, you will see that our charge-out rates are amongst the lowest in the industry and typically about one third cheaper than larger firms. The overall costs are less than the lump sum fees charged by some insolvency advisers.

At Crouch Amirbeaggi, we know we are experts in insolvency. From our years of experience, we understand that needing the services of an insolvency practitioner can be emotional. We pride ourselves on delivering viable, legal and responsible solutions to your financial difficulties. We want to educate you about your options so you understand the alternatives available to you.

ASIC statistics show 93% of all insolvent companies will not pay a dividend. About 5% of companies will pay a dividend of less than ten cents in the dollar. Australian Financial Security Authority (AFSA) bankruptcy statistics show that only 5% of bankrupt estates will pay a dividend and it will typically be less than seven cents in the dollar.

Arguably the biggest losers in the insolvency industry are the directors who suffer not only financially, but emotionally. That suffering has typically been ongoing for months, and even years before we get the call for assistance.

Our submission to the Federal Government insolvency enquiry

In 2011, of the 273 insolvency firms around the country, our firm was one of a handful that elected to make a submission to the Federal Government's Senate Economics Reference Committee into Insolvency.

The research in our submission to the Government showed that over the past ten years, on average there were 8,500 formal insolvency appointments each year, but only 5% of these jobs resulted in a successful restructure of an insolvent company via a voluntary administration and deed of company arrangement.

We believe small businesses simply can't afford to use the existing voluntary administration framework. So we set about finding a way to change the way insolvency is done in Australia specifically with the intention of helping small businesses. We think it's fair to say our motive was equally driven by the desire to expand our practice and make meaningful industry reform. From this, we decided to develop the pre-pack for Australia.

Our fees

If we do a pre-pack of your company's business, our fees will be paid from the amount you pay to buy the insolvent company's assets. Our fees are required to be approved by creditors. After our fees are paid, any surplus of sale proceeds shall be paid to employees and creditors in the order of priority prescribed by the Corporations Act.

Click here to see a schedule of our fees.


If you wish to use our pre-pack model to sell your business, we encourage you to also engage a lawyer to advise you on the pre-pack process, specifically including the formation of a new company and the assignment of leases to the new company.

Our office is happy to recommend several lawyers who specialise in insolvency for you to consider using during this process. They will typically charge $500 to $2,000 for their services.


Here is a little disclaimer for you. Before you chat to one of our qualified insolvency experts, we will need your financials so we can vet your position. If we think we can help you, we would be delighted to offer you our time, but if we think we can't help, we will suggest other parties that might be better suited to offer you advice. Finally, a pre-pack will generally be unable to provide relief to a director's personal guarantee or director penalty notice that has expired, as these debts are personal debts.

A pre-pack will require the appointment of a liquidator who has a statutory obligation to litigate all recovery actions including insolvent trading and breach of director's duties. We encourage you to consider the impact of the appointment of a liquidator by reading our guidebooks on turnaround options and liquidation on our Publications page.


Our pre-pack model was developed in late 2010. It is Australia's cheapest, most progressive method of saving a small business from insolvency.

We encourage you to use it to save your business.

We invite you to discuss pre-packs with our office.

Our Services

Click here to see more information about the services we offer, which include:


Click here to view a list of documents provided by the Australian Government offering information and advice for creditors, employees, debtors, directors and shareholders.

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