BULAW5915 | Corporate Law| Phoneix activity
Added on 2020-03-04
12 Pages3621 Words66 Views
Running head: CORPORATE LAWPhoenix activityName of the student:Name of the university:Author note
1CORPORATE LAWPART A1.In a business country like Australia, there are numerous companies set up to continuetheir businesses and try to make profit from it. However, with the growing nature of thebusiness, the companies are taken many steps or tricks to evade the tax system and avoid thegovernment norms with an intention to earn money in an illegal way. In recent times, phoenixactivities are observed in the society of Australia (Anderson, Hedges, Ramsay & Welsh,2016). There are certain conceptions behind the origin and objectives of such activity. As perAustralian Securities and Investments Commission, where a new company is set up based onassets of another old company and the intention of directors of such company is to avoid thetax and the creditors of the old company. The predecessor of the new company is same as theold one (Price, 2016). The business objectives of such newborn companies are same as theolder company. However, the style to continue the business is quite different than the old oneas the intention of the directors of the company is to avoid the creditors of the old company.In Giudice v Bolwell [2012] VSC 280, the principle of the phoenix activity had beenobserved. In Australia, two institutions are dealing with the phoenix activity. They areAustralian Securities and Investigation Commission and Australian Tax office. 2.It is a fact that the phoenix activities are observed during the financial difficulties ofan existing company and the intention of the directors are most of the times illegal in nature,but the nature of the activity is not illegal (Anderson et al., 2015). There is a scope for the legalway of the company. If there is a possibility to maintain the assets of the old company in aproper way and the employee of the newly born company can continue their businesses in alegal way. There are certain types of Phoenix activities are to be observed and one of the type
2CORPORATE LAWare the legal phoenix activities that can be proved as a beneficial for the society. They aretermed as a way of business rescue (DeMott, 2016). From the various definition of the phoenixactivity, it is clear that a new company is set up in that process to carry on the business of theold company and the directors of both the companies are remaining unchanged. In case of thelegal phoenix activity, there is no bad intention of the directors to defraud the creditors. Themain objective of such company is to protect the business of the old company by adoptingnew techniques (Watson, 2015). Another societal approach of the activity is that it helps toincrease the level of entrepreneurship. Often, there is a problem takes place regarding theappointment of new directors or the new officials in a newborn company. The problem can beavoided by such activity where the composition of the company remains unchanged. Thestaff and the employees of the company are encouraged by the system. In legal phoenixactivity, there is no scope for the directors to breach the duty and there are certain legal toolsare available to it (Barnes, 2013). In case of the winding up of the company, the rules of theCorporation Act 2001 mentioned under section 489EA will be applicable. If there is a scoperegarding the evasion of tax liability, notice will be submitted to the directors of the companyunder section 269 of the Taxation Administration Act 1953. If there is any breach regardingthe Fair Work Act 2009 made by the company, section 550 will be applicable. Therefore, itcan be stated that the legal phoenix activity is beneficial for the society as it abide by all thelegal norms of the Corporation Act and encourage the system of entrepreneurship (Brubaker,2013). 3.In general, the phoenix activity is used in some illegal purpose. There are certainpurposes laid down behind such activity. They are as follows:
3CORPORATE LAWThe directors of the company are often engaging themselves in such activity to avoidthe creditors and the debts unpaid by them.The activities are adopted with a view to avoid the bankruptcy.The directors of such company incorporated new company by transferring all theassets of the old company and evade the tax liability.The directors of such corrupted companies have a bad intention to avoid the fees ofthe ASIC and establish a new company as an excuse (Brubaker, 2013). There are certain phoenix activities that are legal in nature. The purposes of such activity areas follows:Secure the interest of the employees and staff of the old company by unchanged thecomposition of the new company (Lanis & Richardson, 2015). An attempt has been made by transferring the money of the older company andfollows up the rules of the Australian Security and Investment Commission.An initiative has been made for the purpose of encourage the entrepreneurship.As in this process, all the legal aptitudes are maintained; there is no scope to breachthe director’s duties in this process (Richardson, Taylor & Lanis, 2013).4.The idea of the phoenix activities is not illegal in nature. However, there are certainpersons or directors who are using the activity as a weapon to reinvest their assets in a newlyincorporated company to avoid the creditors and the taxes. Mainly, when there is a financialcrisis is occurred regarding the function of a company, the directors or the owners of thecompany set up another company to deal with this problem (Knaplund, 2015). There arecertain essentials are present regarding the activities where it has been mentioned that thedirectors of the companies are engaged themselves in the activity when they have failed to
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
BULAW5915 Corporate Law - Phoenix activitylg...
|13
|3201
|239
Assignment BULAW5915 Corporate Lawlg...
|13
|3150
|232
Director Duties and Corporate Law Regime in Relation to Illegal Phoenix Company Activitylg...
|9
|2865
|190
Corporate Law: Black Economy and Phoenixing Activities in Australialg...
|10
|2538
|97
BULAW5915 Corporate Law - Phoenix Activity in Australialg...
|13
|3321
|190
Corporate Law Assignment || Phoenix Activity - HI6027lg...
|15
|3565
|62