Restricting Phoenix Activities in Australia: A Need for Legislative Reform

The article discusses the illegal phoenix activity in Australia, where a company is liquidated to avoid paying debts and then re-emerges under a new name, often with the same directors. This activity is problematic as it can lead to revenue losses for the government and harm creditors. The article highlights that there are no specific laws or regulations that prohibit this activity, making it difficult to detect and prosecute. It also notes that the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) have provisions in place to deal with phoenix activities, but more needs to be done to prevent these illegal actions from occurring.

Running head: CORPORATE LAW
Phoenix activity
Name of the student:
Name of the university:
Author note

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Answer to part A
1. Meaning of phoenix activity:
. The term phoenix activity is related to the commercial entity of Australia. It is
incorporated with an idea either to rescue an old business or to defraud the creditors. The
conception of phoenix activity observes in three stages of the Australian corporate world.
Australian Securities and Investments Commission has characterised three parts where
the activity forms such as innocent phoenix operators, occupational hazard and careerist
offenders (Anderson, et al., 2016). Intention of the directors that are involved in such
activity can be of legal and illegal. Object of legal phoenix activity is to rescue an old
business and object of the illegal activity is to defraud the creditors of the old company
and to evade tax.
2. Can it is beneficial to society:
Yes, phoenix society can be beneficial to society.
It has been observed that the activity regarding the subject maintained a common
pattern. A company has been incorporated for a period of six to twelve months. During the
period, it tries to take large debts and allows creditors to invest money in the company.
However, when the company feels that it becomes impossible for them to meet the loan, it
goes into the winding up proceeding (Barnes, 2013). However, the activity involves legal
proceeding too. The activity is using as a process to rescue the old business that becomes
insolvent and it transfers all the liabilities of the old company to the new one without changes
its structure. Therefore, there is a chance avails regarding the possibilities of entrepreneurship

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and the employees are become more reliable in the companies. Even the legal phoenix
activities are follow up the rules regarding the Corporation Act 2001 (Brubaker, R. (2013).
3. Purpose of the activity:
It has been observed that the directors who are engaged in such activities, use the same as
a safeguard to defraud the creditors and evade the government revenue. However,
phoenix activity can be used for certain legal proceedings too (DeBacker, Heim & Tran,
2015). There are certain purposes stated under the phoenix activity that are divided into
two parts. The purpose of the legal phoenix activities are as follows:
 To rescue a business;
 To encourage the idea of entrepreneurship;
 To maintain the legal ideology in both the companies;
 To secure the interest of the employees of the old company by reappoint them in
the new company.
The purposes of the illegal phoenix activity are as follows:
 To defraud the creditors;
 To escape the large debts if any;
 To evade the taxes;
 And to transfer all the assets of the old company to the new company.
4. Who are getting benefit and who losses:
It has been stated under the provision of the phoenix activity, it has two different spheres,
legal and illegal (Knaplund, 2015). In recent times, there are many allegations made

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regarding the illegality of the activity. The directors of the companies are incorporated a
company for a period of six to twelve months and take huge loan for certain reasons.
After a certain period, when the company collapsed, they transferred all the money to a
newly incorporated company and tried to avoid the creditors and evade the taxation
liabilities. In this process, the directors of such companies are getting benefit and the
creditors and the government are facing loss (Lanis & Richardson, 2015).
Where the activity of the phoenix maintains all the principles of law, there is no scope for
loss. The directors of the company and the creditors and the government, all are getting
benefit. The intention of the directors of such companies is not to defraud the creditors
and therefore, there is no chance for loss.
5. Prohibitory section of phoenix activity:
It has been observed that in the provinces of Australia there is no particular Act or law
that it’s deal with the Phoenix activity. The general law of the Corporation Act and
certain areas of taxation Administration Act and fair work act has been applied in this
case. Phoenix activities are reported now a days as a one of the most illegal corporate
practices in Australia. The director of those companies who are involved in the Phoenix
activity used to open a company for a term of 6 to 12 months and used to take huge
amount of loan from the banks and after certain times they wind up the company and
when to incorporate another new company and transferred all the money is of that old
company to the new company. Therefore it can be observed that the directors of those
companies have failed to follow their minimum duty of care and they don’t even pay the
tax to the government and therefore certain professions of the taxation Administration Act
has also been attracted.

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The company related matters in Australia is governed by the Corporation Act 2001. When
the director of a company has failed to perform their duty to take reasonable care to the
employees of the clients and when this raised to act diligently section 180 of the Corporation
Act applied as against those directors. In the case of Phoenix activities section 180 of the
Corporation Act will be applicable (Lynch et al., 2016).
6. Provision breached by phoenix activity:
It is a fact that Australia has not enacted any separate law to prohibit the growing
nature of the Phoenix activities. It has been observed that when a director of the company
has breached the profession mentioned under the law section 180 and section 181 of the
Corporation Act will be applicable on them (Muhammadi, et al., 2016). It has also seen that
in most of the Phoenix activities, the winding up proceeding of the companies are not
follow the guidelines mentioned under section 489EA of the Corporation Act. It is the
utmost duty of the directors of a company to take reasonable care and ac diligently while
dealing with the stakeholders all colleagues and the creditors. In case of Phoenix activities
there is a spree two different the creditors and is it the tax has been observed. That makes
the Phoenix activity as an illegal process and Corporation law help to carved doors
processes by way of implementing laws and policy.
7.
Case law on phoenix activity:
Case name: Giudice v Bolwell [2012] VSC 280
issue:

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The main issue of this case is that whether Mr. Giudice is liable to Breach the provision of
the Corporation Act as amazed by the Australian securities and investment Commission or
not. This is a case where the Phoenix activities was observed. It was released by the
Australian securities and investment Commission that the alleged company is involved in the
illegal process of Phoenix activities and the director of the company is trying to transfer the
money to a new incorporated company from the old company and there is every possible
chance to defraud the creditors and event the taxation system of the Government (Richardson,
Taylor & Lanis, 2013).
Observation by Court:
It was held by the court that there is no evidence submitted by the Australian
securities and investment Commission that can point out the fact of the allegation against the
director of the company. It has been stated by the ld court that the direction of the company
has maintained every legal documents and cost and account documents and he has relevant
papers that can show that is not illegal motive of him to defraud the creditors or event that
tax. It has also been mentioned by the code that the director of the company has not
concealed any facts regarding the old as well as new company. Therefore it was observed by
the court that the Phoenix activities where the present company is involved is not a legal in
nature rather it is legal as the director of the company has submitted all the relevant
documents regarding the cost and accounts and other before the court.
Answer to part B
8.
Regarding the recent sources that is available in case of the Phoenix activities it can be
observed that there are some common criteria present. Some of those criteria are there should

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be a second company Incorporated and the route of the second company will be engraved
with the predecessor company. It has been observed that there are two kinds of Phoenix
activities takes place in the corporate world of Australia. Sometimes it can be seen that the
activities of the companies involved in such activities for lose all the legal professionals of
the Corporation Acts and other applicable Acts. These companies are said to involved in the
illegal activities and sometimes it is observed that the directors of the company is involved in
the Phoenix activities have an intention to defraud the creditors or evade the taxation system
of the Government and this process is called as the illegal Phoenix activities. Not only the
intention of the directors regarding the creditors or tax, but the winding up process of such
companies is also not according to the positions of Corporation Act 2001.
The main problem regarding the growing nature of the Phoenix activities is there is no
specific know that can especially during the illegal out sources of the Phoenix activities.
Therefore the cunning mentality of the directors of the company are in rise. It has been
observed that when the companies are facing hurdles regarding its financial activities as well
as administration process the directors of company price to transfer the money from the old
company to the new company and different the creditors without informing them about the
Incorporation of the new company and such activities is dangerous as against the interest of
the creditors. Therefore there is a need to make relevant rules act in this regard and it is
important to make the rules picture so that the directors have to change the mentality of the
intention to different the creditors event the tax system of the government (Price, 2016).
In most of the cases it has been observed that the Phonics activities involve illegal processes.
One of the most common hurdle to prove the illegality off the Phoenix activity is that there
should be certain accurate documents to prove that the company is involved in the Phoenix
activities or the legal process of company law. All the important database regarding the

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director of the company has been mentioned under the Australian securities and investment
commissions and ATO (Watson, 2015).
There is no restriction mentioned under any law of Australia that the effects of one company
cannot be transferred to another company. However it is to be kept in mind that all the money
that are transferred to another company should be followed the rules mentioned under the act
of Australia. The directors of the company should maintain the process of legal outsourcers
and shoot a property tax to the government. It has been observed that by the year 2012 the
Australian government has to face a huge revenue loss due to the directors intention to evade
tax.
As there is no specific apps that can prohibit or restrict the illegal acts of the director of the
company regarding the Phoenix activities, the malpractice by the director of such companies
are not stoppable. Therefore it is important to implement certain rules or certain laws to deal
with the offence.
If the Phoenix activities that is illegal in nature can be regarded as an options and there
should be certain strict law regarding the same the green nature of the Phoenix activities can
be resolved. The main loopholes of the Phoenix activities is that Australia has not enacted
any special law regarding the same and if any provision regarding the Phoenix activity can be
made, the problem regarding the same can be resolved effectively.
9.
It has been reported by many sources that the activities regarding the Phoenix system
can affect the whole system of the Government of Australia. It is not ok to say that the
Australia is a business country and their economic structure of Australia is depend on the
industries. However if there is any illegal process involved in such activities it is very tough

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to gain proper redressalregarding the corporate future. Therefore there is a need to develop
the structural process of the general law and make it strict so that the directors will refrain
them to involve in such heinous crime.
It has been mentioned earlier that certain provisions of the Corporation Act has been followed
up to address the problem. Section 180 of the Corporation Act will apply in the cases where
the directors of the companies are involved in the process against the interest of the creditors
and section 184 of the corporation at will apply in those cases were the director will fail to
disclose proper documents to other stakeholders. Is the wanting a procedure of the company
is not follow the guidelines of the law section 489EA will be applicable on them (Ormerod,
Smith & Hogan, 2015).
Apart from the Corporation Act 2001 there are certain other law that should be applicable in
this procedures. One of the most common intention of the directors that is involved under the
illegal Phoenix activities to evade tax. Therefore certain rules under the taxation
Administration Act of Australia will be applicable here. it is not out to state that if the
directors of the company transferred the money from the old company to the newly
incorporated company then the interest of the creditors will be at risk. It is obvious to say that
the activities of the directors in these cases is not follow up the rules regarding the fair work
act and therefore certain provisions especially section 50 of the fair work Act 2009 will be
applicable here.
Jaipur it can be observed that there are several sections mentioned under different acts of
Australia but there is necessity regarding a unique code that can structurally restrict the
Phoenix activities. A systematic approach is needed to cast the social phenomena. It can be
structured by way of taking special resolution by the government of the legislative bodies of
Australia. Amendment can also be regarded as one of the latest version regarding the

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structure of the offences. Certain rules are needed to be implemented to restrict the orphans in
this case.

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