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Phoenix activity: systematic, wilful and cyclic liquidation

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Federation University of Australia

   

BULAW5915 Corporate Law (BULAW5915)

   

Added on  2020-02-23

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In such cases where the organization is unable to pay its debts and acts in such a manner where the equal access to the organizations assets are deliberately denied to the unsecured creditors, which could allow them to meet them unpaid debts, and where within a single year a new business is established in which the assets, whether partly or wholly, of the old business are used and is controlled by the same people who controlled the previous organization (Taylor David, 2014). Phoenix activities contain different practices, which are responsible for

Phoenix activity: systematic, wilful and cyclic liquidation

   

Federation University of Australia

   

BULAW5915 Corporate Law (BULAW5915)

   Added on 2020-02-23

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Phoenix activity: systematic, wilful and cyclic liquidation_1
QUESTIONS2ContentsPart A...............................................................................................................................................3Q. 1..............................................................................................................................................3Q. 2..............................................................................................................................................3Q. 3..............................................................................................................................................4Q. 4..............................................................................................................................................4Q. 5..............................................................................................................................................6Q. 6..............................................................................................................................................6Part B...............................................................................................................................................7Q. 7..............................................................................................................................................7Q. 8..............................................................................................................................................8Q. 9............................................................................................................................................11References......................................................................................................................................12
Phoenix activity: systematic, wilful and cyclic liquidation_2
QUESTIONS3Part AQ. 1. Phoenix activity can be defined as the evasion of liabilities, like tax and employee entitlements, by systematic, wilful and cyclic liquidation of such entities which involves related corporate trading (Parliament of Australia, 2017). In the words of Australian Securities and Investment Commission, short for ASIC, phoenix activities involve a specific kind of conduct. Insuch cases where the organization is unable to pay its debts and acts in such a manner where the equal access to the organizations assets are deliberately denied to the unsecured creditors, which could allow them to meet them unpaid debts, and where within a single year a new business is established in which the assets, whether partly or wholly, of the old business are used and is controlled by the same people who controlled the previous organization (Taylor David, 2014). Phoenix is a mythological bird, which dies and is reborn from its ashes. This analogy proves to be of held for defining phoenix activities, where a new business is formed from the ashes of the old business. Phoenix activities contain different practices, which are majorly concerned with the management of the old company, using the assets of the old company, to form a new company, for avoiding its different liabilities towards different stakeholders (Margret& Peck, 2014).Q. 2.No, the phoenix activities can never be beneficial for the society. The reason behind this lies in the very purpose for which such activities are undertaken. The purpose of the indulging in
Phoenix activity: systematic, wilful and cyclic liquidation_3
QUESTIONS4such activity for a small group of people is to evade their liabilities, which they owe to different stakeholders. These stakeholders are a part of the society and include the creditors, the employees and even the government, which ultimately works for the benefit of the society. A small group of individuals indulge in activities which can be deemed as fraudulent and benefit themself by not having to pay their dues. The workers are not paid their entitlements, the creditors are not paid their debts and the nation has to bear millions of dollars in cost due to such activities (ASIC, 2017). This proves that phoenix activities are not beneficial for the society. Q. 3.The purpose of phoenix activity is not just one but many. The easiness of indulging in phoenix activities, along with the same being an easy way to not fulfil the liabilities and remaining invisible from compliances are some of the factors for which the phoenix activities areindulged in. The management of the previous company evades the liabilities of such company, by forming a new company and saving costs by using the assets of the previous company (Oakes& Clark, 2017). The other purpose of taking part in phoenix activities is accumulating the debts, without having the intent of ever making repayments to such debts, and when the debt is claimed, liquidating the company to avoid the repayment of the debt obligations (Australian Government, 2009). Q. 4.As has been stated earlier also, by taking part in the phoenix activities, a certain set of people obtain benefit by avoiding their liabilities in the matter of repaying what they took from others, apart from what they had to pay others for their services or as taxation. This set of people
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