BULAW5915 Corporate Law - Phoenix activity


Added on  2019-10-30

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Running head: CORPORATE LAWPhoenix activityName of the student:Name of the university:Author note

1CORPORATE LAWAnswer to part A1.Meaning of phoenix activity:. The term phoenix activity is related to the commercial entity of Australia. It isincorporated with an idea either to rescue an old business or to defraud the creditors. Theconception of phoenix activity observes in three stages of the Australian corporate world.Australian Securities and Investments Commission has characterised three parts wherethe activity forms such as innocent phoenix operators, occupational hazard and careeristoffenders (Anderson, et al., 2016). Intention of the directors that are involved in suchactivity can be of legal and illegal. Object of legal phoenix activity is to rescue an oldbusiness and object of the illegal activity is to defraud the creditors of the old companyand 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 commonpattern. A company has been incorporated for a period of six to twelve months. During theperiod, 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, itgoes into the winding up proceeding (Barnes, 2013). However, the activity involves legalproceeding too. The activity is using as a process to rescue the old business that becomesinsolvent and it transfers all the liabilities of the old company to the new one without changesits structure. Therefore, there is a chance avails regarding the possibilities of entrepreneurship

2CORPORATE LAWand the employees are become more reliable in the companies. Even the legal phoenixactivities 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 asa 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 intotwo 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 inthe 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

3CORPORATE LAWregarding the illegality of the activity. The directors of the companies are incorporated acompany 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 anewly incorporated company and tried to avoid the creditors and evade the taxationliabilities. In this process, the directors of such companies are getting benefit and thecreditors 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 forloss. The directors of the company and the creditors and the government, all are gettingbenefit. The intention of the directors of such companies is not to defraud the creditorsand 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 lawthat it’s deal with the Phoenix activity. The general law of the Corporation Act andcertain areas of taxation Administration Act and fair work act has been applied in thiscase. Phoenix activities are reported now a days as a one of the most illegal corporatepractices in Australia. The director of those companies who are involved in the Phoenixactivity used to open a company for a term of 6 to 12 months and used to take hugeamount of loan from the banks and after certain times they wind up the company andwhen to incorporate another new company and transferred all the money is of that oldcompany to the new company. Therefore it can be observed that the directors of thosecompanies have failed to follow their minimum duty of care and they don’t even pay thetax to the government and therefore certain professions of the taxation Administration Acthas also been attracted.

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