Assignment BULAW5915 Corporate Law
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Added on 2019-10-30
Assignment BULAW5915 Corporate Law
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 company law in the provinces of Australia.Australia is a business country and most of its income is gained through the businessprocess (Anderson et al., 2015). The main object of the businesses is to gain profit and it isthe common nature and mentality of the entrepreneurs of Australia. However, in certaintimes, it has observed that the directors or the entrepreneurs are engaging themselves incertain illegal conducts such as avoid the creditors and evade the taxes etc. This activity isknown as phoenix activity. Recently, in Giudice v Bolwell, the principle and aspects ofphoenix activity has been observed. 2.Can it is beneficial to society:Yes, it can be beneficial to the society.From all the recent allegations made against the phoenix activity, it is presumed thatthe effect of the activity is negative in nature. However, there are certain positive impactspresent in case of the activities. The phoenix activities are treated as the process ofbusiness rescue (Barnes, 2013). The reason behind the same is to maintain the assets of theold company by incorporating a new company without changing its directors or theemployees. In the case of legal phoenix activity, there is no scope to defraud the creditors;rather the same have increased the possibilities of the entrepreneurship. All the legal rulesof the Corporation Act 2001 have been follows in the case of the winding up of thecompany and in case of the taxing liabilities. Therefore, it can be stated that the phoenixactivities have certain beneficiary impacts created on the society.
2CORPORATE LAW3.Purpose of the activity:The following are the purpose of the activity:The activities are identified certain steps that are taken by the directors of thecompany to avoid the creditors of an insolvent company;When an old company has become insolvent, new company has beenincorporated to avoid the bankruptcy of the old one through the activity;Sometimes, the directors of such companies are trying to evade taxes;In certain times, the phoenix activities are used as a process to rescue thebusiness segment and secure the interest of the employees;The activity is featured to provoke the entrepreneurial mentality in case ofbusiness. When the newly incorporated company followed up all the legal norms regardingthe Corporation Act 2001, there shall have no scope to breach any duties of thecompany rules.Therefore, it can be observed that there shall be more than one purpose.4.Who are getting benefit and who losses:The directors of the companies who are involving in the phoenix activities can bebenefitted and on the other side, the creditors and the government can be affected.Reasons: Apart from certain positive nature of the phoenix activities, the same is used to denotecertain illegal purposes too. When certain directors of the company transferred all themoney of an old company to a new one with an intention to avoid the creditors, they aregetting benefits by way of gaining profits from the process (Brubaker, 2013). The
3CORPORATE LAWsituation accrues when the directors of the company become incompatible to pay off thedebt or meet the requirements of the creditors. Tax evasion also leads the directors of thecompany to gain profits.From the very nature of the purpose of the activity, it can be stated that thegovernment has to face huge loss regarding the tax evasion. The government has to facehuge loss and crisis regarding the revenue system. The creditors of the old companies arealso faced certain problems as there are risk to loss their invested money. 5.Prohibitory section of phoenix activity:It has been stated under that in certain circumstances, the phoenix activity followslegal rules contained under the provision of the Corporation Act 2001. However, nospecific rules under the Corporation Act have been mentioned that attracts the rulesregarding the phoenix activity (DeBacker, Heim & Tran, 2015). In this case, generalprinciple of rule will be applicable such as section 180 for the breach of Director’s dutyand section 489EA for the winding up of the company. Australian Security andInvestigating Commission have the power to deal with the matters address for theproblems relating to phoenix activity. 6.Provision breached by phoenix activity:It has been stated earlier that there is no specific provision mentioned under theCorporation Act that particularly deal with the phoenix activity (DeMott, 2016). Thegeneral law of the Corporation Act is applicable in this case. In any case, where the director of a company wind up the company by notmaintaining the appropriate provisions regarding the Corporation Act 2001, he shall beliable for the violation of section 489EA of the Corporation Act. If any of the directors of
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