Phoenix Activity in Australia

This report provides a comprehensive analysis of Phoenix activity in Australia. It defines Phoenix activity as the deliberate liquidation of companies to avoid liabilities, detailing its benefits and drawbacks for various stakeholders. The report examines the legal framework, specifically sections of the Corporations Act 2001 that can be breached by such activities, and discusses the liabilities faced by directors involved. A case study ('Giudice v Bolwell') illustrates the complexities of legal action. The report further explores methods to prohibit Phoenix activity, including the creation of a specific offense and the role of ASIC in detection and prevention. It also analyzes different types of Phoenix activity and proposes effective structures for a Phoenix prohibition, emphasizing the importance of individual director liability.

Running head: PHOENIX ACTIVITY IN AUSTRALIA
Phoenix Activity in Australia
Name of the University:
Name of the Student:
Authors Note:

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Table of Contents
Part A...................................................................................................................................2
Question 1........................................................................................................................2
Question 2........................................................................................................................2
Question 3........................................................................................................................3
Question 4........................................................................................................................4
Question 5........................................................................................................................5
Question 6........................................................................................................................6
Question 7........................................................................................................................7
Part B...................................................................................................................................8
Question 8........................................................................................................................8
Question 9......................................................................................................................10
References..........................................................................................................................13

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Part A
Question 1
Phoenix activity can be defined as “certain evaluation of tax along with different
liabilities that includes employee entitlements by means of deliberate, systematic along with
cyclic liquidation of certain corporate trading companies”. Illicit phoenix movement includes the
purposeful transfer of assets from an obliged organization to another organization to abstain from
paying creditors, tax or worker entitlements (Abdennabi et al., 2016). The directors leave the
obligations with the old organization, regularly putting that organization into organization or
liquidation, leaving no assets for pay creditors. In the mean time, another organization,
frequently worked by similar directors and in an indistinguishable industry from the old
organization, proceeds with the business under another structure. By participating in this illicit
practice, the executives abstain from paying obligations that are owed to creditors, employees
and statutory bodies (e.g. the ATO). Illicit phoenix movement is a genuine wrongdoing and may
bring about organization officers (executives and secretaries) being detained (Ahmad et al.,
2013).
Question 2
Phoenix movement can offer certain benefits to the society as it is characterized as "the
evation of expense and different liabilities, for example, employee privileges, through the
deliberate, efficient and now and then cyclic liquidation of related corporate exchanging entities"
(Al-Fredan, 2013).
Phoenix movement, or "phoenixing", encourages the process of being in least complex
shape, exchanging the assets of an obligated organization into another organization under the

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control of the same director(s). The director(s) at that point either puts the underlying
organization into organization or liquidation (or abandons it to be ended up on the utilization of a
creditor), in either case abandoning it without any advantages for addressing leaser claims (Al-
Qurainy et al., 2017). It offers advantages to the new organization, then, proceeds with the matter
of the first organization, free of the first organization's liabilities and with its benefits out of the
scope of the banks of the first organization.
This enables the business to proceed in operation while the first organization's creditors
are left to guarantee against the now-assetless original organization. Further, the liquidator of the
first organization is left with no assets to explore or seek after cases against the director(s) of the
first organization. Fradulant phoenix plans are beneficial for they are regularly more advanced,
including a complex corporate structure, various substances holding distinctive parts and
isolation of asset holding, creating liability and work procure companies (Anderson, 2016).
Question 3
Organization phoenix movement has the purpose of enrolling another organization to
takeover (resurrection) the fizzled or indebted business of an antecedent organization. Phoenix
movement may not include unlawful (e.g. deceitful) conducts. Certified organization failure and
liquidation (where a chief dependably deals with an organization and its business accordingly
proceeds after liquidation utilizing another organization), is an effective utilization of the
corporate form (Anderson et al., 2015).
Unlawful (e.g. false) phoenix movement includes organization executives purposely
attempting to abstain from paying the organization's lenders. For instance, directors may run an
organization dependably in any case, regardless of this; the organization cannot pay its

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obligations. The executives exchange the organization's resources for another organization with
the same or comparative name (and for no or little esteem) before giving the organization over to
an external administrator (enrolled liquidator) (Anderson, Ramsay & Welsh 2016). Along these
lines through conducting phoenix activity, the executives look to abstain from paying any
creditors including employees through the collapsed organization's liquidation.
Question 4
The individuals those attain benefits from phoenix activities are explained under:
The ASC Research Paper recognized three sorts of phoenix administrators that attains benefit
from phoenix activities:
 "Pure" administrators who do not have the thought regarding exchanging resources from
the collapsed business to the new organization may constitute a break of the law;
'workplace risk' administrators who claim a business in an industry where losses are
normal. Here, just few resources might be exchanged to the new element;
 "Careerist" accountable parties who purposely structure their organizations so as to take
part in phoenix movement and keep away from recognition (Coggins, Teng &
Rameezdeen, 2016). The directors leave the obligations with the old organization,
regularly putting that organization into association or liquidation, leaving no assets for
paying creditors.
The individuals those face the losses from phoenix activities are explained under:
This illicit phoenix movement impacts the business group, workers, contractual workers, the
administration and condition, including:

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 non-installment of wages, superannuation and collected representative qualifications
 getting an out of line upper hand over different organizations
 non-installment of providers
 loss of government income and expanded observing and requirement costs
 Shirking of administrative commitments (Ghnimi et al., 2017).
Phoenix movement doesn't simply affect those individuals specifically influenced. It denies
the entire group of vital assets that could have added to healing centers, streets, training and other
fundamental administrations.
Question 5
There are sections in Corporations Act 2001 that can specially prohibit phoenix activity.
If a director is associated with phoenix exercises, he or she is probably going to rupture a number
of executives' obligations which come from the general law and statute. The general law
obligation of care, aptitude and industriousness emerges from the law of negligence and the
connection between the executive and the organization (Hedges et al., 2017). A guardian
relationship emerges when an individual embraces to follow up in the interest of another in the
activity of a power or watchfulness which influences the interests of that other individual. The
impartial obligations of an executive come from the trustee connection between a director and
the organization. In addition the general laws obligations of directors are in light of their trustee
association with the organization and their general obligation of care, directors have certain
statutory obligations under the Enterprises Act 2001 (Cth) (the Act). For the most part, these
statutory obligations are notwithstanding, not in discrediting of general law obligations.

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It must be considered that the obligations forced on directors (counting accepted and shadow
directors) are additionally, in specific occurrences, forced on different classes of individuals
(Marfella Richardson & Vaz-Serra, 2016). For illustration:
 the obligations of care and tirelessness and great confidence are forced on 'officers'; and
 the obligations not to make uncalled for utilization of position and data are forced on
officers and on workers.
"Officers" incorporate organization secretaries, individuals who make (or take part in
making) choices which influence the entire or a part of the organization's business and
individuals who have the ability to influence altogether the organization's financial position
(Matthew, 2015). In connection to phoenix exercises, the specific obligations of an executive or
officer is probably going to incorporate the obligation of good confidence and the obligations in
connection to legitimate utilization of data and position.
Question 6
The sections of Corporations Act 2001 that can be breached by phoenix activity are
explained under:
(a) Misuse of position: Segment 182(1) explains that an executive must not dishonorably
utilize their position to pick up leeway for themselves or another person, or to make problem for
the organization. The arrangement is to be translated with a purposive importance as opposed to
a causative importance (White & Weinstein, 2014). That is, an executive will be in breach of this
obligation where they take part in such activities with the reason for acquiring an advantage for
anybody or causing a disservice to the organization, paying little attention to what really happens
actually.

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(b) Misuse of Information: Likewise, s183(1) states that a man who gets data since they
are, or, on the other hand have been, a director of an organization must not disgracefully utilize
the data to pick up leverage for themselves or another person, or make drawback the
organization. In addition, the arrangement is to be deciphered with a purposive importance.
Under the above segments, which are considerable punishment arrangements, the goal of
the director or officer is not significant in deciding if the arrangement has been repudiated
(Sirisena, Ng & Ajlouni 2016). Nonetheless, for the motivations behind deciding whether a
criminal offense has been carried out under s184 (2) or (3) of the Act, the unfair expectation of
the director or officer will be important. It is likewise essential to consider that it is a bit much
that the repudiation of the arrangement results in a genuine gathering of favorable position or
hindrance.
Question 7
A current decision on phoenix activity issues demonstrates that, though existence of the
likelihood of ill-conceived phoenix movement, Australian courts are careful about rebuffing
agents who happen to be just tragic or uncivilized as opposed to ill-behaved, especially where the
Australian corporate controllers have declined to refuse those people: “Case of Giudice v
Bolwell VSC 280”.
Mr and Mrs Giudice's organization was ended up on the use of a creditor with a
moderately little obligation (Sewell, 2015). At the point when the vendor accepted control of the
organization, he found that the Giudices had not been tenacious in meeting their statutory
commitments – there were various exceptional lodgments with the assessment office and
statutory superannuation (representative annuity design) portions had not been paid.

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After the vendor's arrangement, the Giudices got the chance to take consider sorting out
their own funds. This arranged enough cash for them to pay off the organization's leasers. To
begin with, they needed to have the complex arrangement set aside and the organization came
back to their control. In spite of the fact that the “Giudices” were presently in a position to
guarantee that the organization was dissolvable, the outlet was worried about restoring the
organization to the control of directors who had neglected to meet their statutory commitments
(Al-Fredan, 2013).
In the event that they keep on engaging skillful counselors they will have a vastly
improved possibility of doing the same. However there is dependably a risk that they will
collapse. Considering the case in which the organization was involved in phoenix activities that
caused issues decision has been made to recommend Mr and Mrs Giudice to consider proceeding
to put up with business taking into account another element, that risks will not be improved by
declining this purpose of continuing he business.
Part B
Question 8
Phoenix activity can be prohibited through generating phoenix offense as there is a long
history of enthusiasm for the generation of an administrative arrangement that particularly
forbids unlawful phoenix action. ASIC appears to have embraced such an arrangement as of late
as July 2015 in its supplementary accommodation to the Productivity Inquiry into business set
up, exchange and closure. ASIC takes note of that 596AB of the Corporations Act, which denies
individuals from going into understandings or exchanges with the aim of denying employees
their privileges and which has constrained effectiveness (Al-Fredan, 2013). It likewise noticed

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that bringing activities under ss 180-184 or s 588G of the Act for breach of executives'
obligations can be expensive, despite the fact that it did not expand on this point. Therefore,
ASIC recommended that the Commission consider must the value of acquainting an arrangement
in adherence to s 121 of the Bankruptcy Act 1966 (Cth) that makes:
Unlawful Phoenix Activity: 'it an offense to exchange property from Company A
(where Company An is hence twisted up or deserted) to Company B, if the fundamental reason
for the exchange was to avert, obstruct or postpone the procedure of the exchanged property
from getting to be plainly accessible for division among Company A's creditors.' ASIC went
ahead to clarify that: 'Such an exchange ought to be both void against a vendor (so an outlet can
hook back the advantages) and an offense. Thought could likewise be given to whether such an
offense should offer ascent to leasers, vendors and ASIC to sue for income against:
(a) Directors who participate in the recommended direct; and
(b) The individuals who are intentionally engaged with that organization under s 79 of the
Corporations Act for the loss caused by the parties (e.g. legal counselors, indebtedness specialists
and accountants) (Coggins, Teng & Rameezdeen, 2016). This recommendation is obviously a
'phoenix disallowance', in spite of the fact that it would not address anticipated "modern"
phoenix courses of action inside corporate gatherings that do not include moving of assets. In its
Productivity Commission accommodation, ASIC contended that such a change would 'give a
reasonable sign of the reality with which the administration and its offices respect illicit phoenix
lead,' proposing that a phoenix prohibition would be to a limited extent a diminishing
mechanism.

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Question 9
Phoenix prohibition or offense can be structured in an effective manner. Fundamental (in
a steady progression) or complex (inside corporate gatherings) phoenixing can occur inside every
one of the five of mentioned classes:
1. The lawful phoenix, or business protect
2. The risky phoenix
3. Illicit sort 1 phoenix: expectation to stay away from obligations framed as organization comes
up short
4. Illicit sort 2 phoenix: phoenix as a plan of action
5. Complex illicit phoenix action
In 2011 and 2012, Treasury discharged an Exposure Draft for proposed new laws for
"Phoenix and Other Measures". Accepting the new laws discover their way through Parliament
they are probably going to end up law in 2012 (Coggins, Teng & Rameezdeen, 2016). The new
laws would not get all Phoenix action yet it is a further move towards individual risk for
organization executives in this circumstance. Here are the fundamental focuses from the
proposed enactment:
In structuring the phoenix prohibition, it tries to recognize phoenix organizations and
make an executive and the new company obligated for the obligations of the new company. The
enactment concentrates on the name of the old company and new company if the name is the
same or comparative then the new company is attained by the enactment. In case that the new

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company has an indistinguishable name from the old company then an executive of the new
company is a subject for the obligations of the new company for a long time.
Along these lines, In structuring the phoenix prohibition the enactment does not look to
help recover stores for the advantage of the old company, yet rather unequivocally puts the
executive of the new company in the terminating line for individual obligation for all obligations
of the new company (Hedges et al., 2017). Basically, the proposed enactment is stating to
executives that they may escape with a Phoenix Company once, yet in the event that they do,
they will be on-the-snare for all obligations of the New company.
ASIC likewise runs focusing on observation of structuring the phoenix prohibition
intended to distinguish and deal with unlawful phoenix action. These emphasis on organizations
directors who have a background marked by association in failed organizations, are at present
working in certain highly risky industry segments, e.g. development, and who fit other criteria
created by ASIC for this program. ASIC gives free and simple tools like ASIC's Business
checks, which empower entrepreneurs to embrace essential due constancy in connection to
potential clients, or providers, with whom they might be going into new connections (Hedges et
al., 2017).
ASIC additionally adopts a genius dynamic strategy to supporting independent ventures
and helping them to shield themselves from corrupt administrators. This incorporates giving free
instruction to private ventures with respect to their commitments under the Corporations Act
2001. Illustrations incorporate a devoted "Independent venture Hub" on ASIC's site where
individuals from the general population can discover data about different business as well as

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phoenix resolving structures along with the standards and commitments related with maintaining
a business as an organization.

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References
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(2016). Phoenix dactylifera L. sap enhances wound healing in Wistar rats: phytochemical
and histological assessment. International journal of biological macromolecules, 88, 443-
450.
Ahmad, A., Soni Dutta, S., Varun Singh, K., & Santosh, M. K. (2013). PHOENIX
DACTYLIFERA LINN.(PIND KHARJURA): A REVIEW. International Journal of
Research in Ayurveda & Pharmacy, 4(3).
Al-Fredan, M. A. (2013). Peroxidase activity in male and female plants of date palm (Phoenix
dactylifera L.) growing in Al-Hassa, Saudi Arabia in vitro. El-Minia Sci Bull, 24(1), 37-
55.
Al-Qurainy, F., Khan, S., Nadeem, M., Tarroum, M., & Gaafar, A. R. Z. (2017). Antioxidant
System Response and cDNA-SCoT Marker Profiling in Phoenix dactylifera L. Plant
under Salinity Stress. International journal of genomics, 2017.
Anderson, H. (2016). Corporate law and the phoenix company. Routledge Handbook of
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Phoenix Activity: Incidence, Cost, Enforcement.
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Profiling Phoenix Activity.

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Anderson, H. L., O'Connell, A., Ramsay, I., Welsh, M. A., & Withers, H. (2015). The
Productivity Commission, Corporate Insolvency and Phoenix Companies.
Anderson, H., Hedges, J., Ramsay, I., & Welsh, M. (2016). Illegal phoenix activity from the
insolvency practitioner's perspective. Australian Restructuring Insolvency & Turnaround
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