Lisa Ho has a new entity. Photo: Tamara Dean
The Australian Taxation Office has flagged concerns that designer Lisa Ho is attempting to ''phoenix'' her failed fashion empire, which collapsed this year with debts of at least $17 million.
The accusation comes after external administrators sold the rights to the Lisa Ho apparel brand for an undisclosed amount to a new company recently founded by the fashionista.
A "phoenix company" is a commercial entity which has emerged from the collapse of another through insolvency. The new company is set up to avoid paying tax debts of the old company, but continues to trade in the same or similar activities.
ATO representative Thilaga Prabhakharan raised the agency's concerns at a creditors' meeting late last month, saying the sale of intellectual property from now-defunct company Lisa Ho Designs to new entity Lisa Ho IP Holdings may have ''indicated phoenixing''.
But administrator Todd Gammel of HLB Mann Judd denied the deal was a phoenix transaction.
''The administrators had gone through the sale process and that the best offer they had received was from the director [Ms Ho] … The business was offered for sale to the general public, the transaction that took place was at arm's length and the business was not continuing to trade,'' according to minutes of the creditors' meeting filed with the Australian Securities and Investments Commission.
''[Mr Gammel] noted that one of the difficulties in the fashion industry was separating the designer's name from the brand.''
In a separate deal, the Lisa Ho Eyewear brand was sold to Face Optics in late June, also for an undisclosed amount.
The administrators of Lisa Ho Designs and Lisa Ho Retail have also found that problems within the fashion group began as early as 2009 and centred around the ''management structure'', problems obtaining favourable trading terms from new suppliers, and an accidental stock over-buy that cost $1 million.
There were also several instances where company funds were allegedly misappropriated by a former manager as well as ''a person known to the director'', leading to losses estimated at $335,000. The revelations are likely to raise questions about a decision to attempt a float earlier this year to raise $1.7 million in capital.
The group posted a $2.3 million loss in financial year 2011-12. Despite staff cuts that saved $1 million, Ms Ho was forced to sell personal assets in order to inject $1.7 million in the business, as well as borrowing money from a personal friend to meet a tax bill. The Age has revealed that during this period the fashion label received a federal government grant of $188,731 to ''drive innovation and renewal'' in the textile and clothing industry.
The initial public offering was abandoned in April 2013 and Mr Gammel said later attempts to sell the business were stymied by ''incomplete financial information''.
One creditor, owed more than $107,000 by Lisa Ho Designs, has also lashed out at the way the fashionista ran the company. ''[He] noted that being a designer was not an excuse and that the director of the Lisa Ho Group should have had a better understanding of the financial position of the business in the lead-up to the administration,'' the creditors' minutes stated.
The $17 million owed to creditors includes a $7.7 million debt owed by Lisa Ho Retail to Lisa Ho Designs.
Ms Ho could not be reached for comment.