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Legal and Illegal Phoenix Activity

Discuss about the Enforcement of Sanctions Against Illegal.

The Phoenix Activity defines the term where the company which was newly incorporated arises for the failure of the corporation processor where the company is controlled by the essential terms of the corporation law. It can be recognize as both legal and illegal.  When a company was entitled by the commercial entity for emerged it from the collapse through the other insolvency then it will recognize as the phoenix company (Giardina & Pinto, 2014).

The phoenix activity only applicable when the previous company controllers introduced another similar business but they failed to operate, then this activity helps to apply the entity for the rescuing the business. When it recognize as illegal activity then which is relates with the similar works then it make intension to exploits the corporate  according to the unsecured creditors. It can be considered to legal when the assets of the company are maintained according to the jobs and entitlements of the employees. Therefore when it has been finding that any company is facing the financial crisis then the phoenix activity is applicable for the issues in the companies (Anderson, 2016).

The phoenix activity is beneficial for the society only when it will be suitable to apply for the crisis management of the financial distress company because according to the application of this theory it is illegal to the application of the company (Giardina & Pinto, 2014).

In the society the companies take the process of phoenix activities for as because it recognize as illegal in the corporation business therefore several regulators has been attached where the incorporation of a successor company should follow the evidences. The conducts in the phoenix activity always involves individually for function in multiple corporate periods. It has been found that various parliamentary committees, law govern bodies and the Royal Commissions has use the activity and describe it accordingly. It only involved with the limited liability companies. Sometimes it has been found that the phoenix activity wastes corporate assets according to the prior to insolvency when they are transferring the assets with a new entity (Anderson, 2016).

The Phoenix activity is applied for the company where they faced any financial obligation or anything liabilities which are deliberate and systematic liquidation. However it affects the corporate trading entity where any illegal or fraudulent intention occurs due to the corporate trading. The phoenix activity is only helpful when it helps to avoid the tax and other related liabilities where the entitlements of the employments are also available. Another way where the company runs their business with a certain structure of operation where they are bound to take the profits of the business with the interference of another trading entity then the phoenix activity will be helpful for the company (Giardina & Pinto, 2014).

Application of Phoenix Activity

The activities are selected through several of suggested process where the activity uses the various proportions of the scale according to identified problem. It also provides the potentiality according to application of the phoenix activity. It also helps to collects various feedbacks from the stakeholders. According to the situation of the corporation, the company helps to get the successful strategies which are involved with the phoenix activity (Giardina & Pinto, 2014).

In the illegal phoenix activity the companies basically involves with the directors who are always trying to pay the company’s creditors according to the companies constitution. The illegal Phoenix activity helps to identify the entire stakeholder to assistant from any legal action against them. It also helps to changes on the process for incorporating companies where government should review the desirability of business service provider selling aged self companies it also assist external administrator to detect from any harmful Phoenix activity if the liquidator finalized the affair of companies they investigate for recovering the property for the benefit of creditors and distribute the company’s remaining assets the Australian & Securities Investment Commission (ASIC) involves with Phoenix activity for enforcement and recover every external administration which are help to play in relation to detecting harmful of Phoenix activity and share the information. If there is any need to pay the penalties then it also added in this activity the liquidators always winning up a Phoenix company where they must pay to ASIC (Giardina & Pinto, 2014)

Therefore if any issue arises regarding the illegal phoenix activity, according to the Sec- 588G defines the director’s duty to prevent insolvent trading by the company. Therefore, it is necessary for the director to prevent such phoenix which is affect and damage the company.  When there is a reasonable grounds has been suspected where the company has found to be insolvent then the directors will apply such legislation.

The sec- 588H of the Corporation act provides the defenses according to the sec- 588G of the director’s duty to prevent insolvent trading by the company. It will proved such defense where the person is elated with te incurred debts then he or she us teed to prove the grounds.

The Phoenix activity is corporate with the companies where the Phoenix acts amends the Corporation Act under the Australian and securities investment commission which provides discretionary power for the abundant company under some circumstances according to the section 489 EA provides such legislations. The Federal government in 2011 introduced to exposure draught of legislation for activate on the Phoenix activity which and forced in the Australia for the companies and the similar names will which was again fast but there is no indication from when it will be legislate for the companies of Phoenix activities (Anderson, 2016).

Enforcement of Sanctions


According to the Corporation Act 2011 (Cth) a director of the company own duties of care towards the company. If in Director is found to involved in Phoenix activities then he must breach the directors duty. According to the general law and Statue of the Corporation Act directors duty defines in the Corporation Act duty of care skin and diligence from where the no of negligence and other relationship establishes between the director the company therefore a fiduciary relationship also applied when directors exercise their power of discretion which affect the interest of that other person had the equitable duties of a director also make the impacts when the director exercise his power (Hamilton, 2017).

According to the section 181 define the duties of the directors therefore when the duties exercised by the directors it includes the de facto and Shadow directors where they must have duties of care and diligence and good faith where they are known as officers and the directors never use their positions or any information will disclosed by them as per their own personal benefits. The director duty can be in forced into way either civil or criminal section where they must duty of care and allegiance with their liability towards the company if there is any civil penalty is processed for breach of director duty then ASIC can penalty up to $20,000 for contravention and disqualification orders or compensations orders. Therefore the Civil penalties for breaches of director duties always perceived with the association of criminal regions where the corporate crimes also involved. It is occur because there is evidence requirement and burden of proof for corporate bodies

When any criminal sanctions has been found by the directors for breach their duties it may include various combinations of dishonesty recklessness and intentions therefore they can we find by 5 years jail or $36000 per offence (Giardina & Pinto, 2014).

In the case of ASIC v Somerville & Ors [2009] it has been found that the directors has bleach their duties of care where they make an agreement to sell the Assets of one company to another new company therefore had been found that and the Australian securities and investment commissions made the allegation against the director that they have breach the section 181, 182 and 183 of the Corporation Act 2001. Therefore disqualification order has given against them the directors of the company was also fine with the compensation amount for selling the company documents without the knowledge of the authority or the board members. ASIC she has also added that there was no real consideration or any consideration which can recognize as illusory and the dividend was not declared of ‘V’ class share. It also found that the purchaser of the company if make some payment for the day going by the vendor company therefore he is not on the Assets of the dividend (Hamilton, J 2017).

Director's Duties to Prevent Insolvent Trading


The Phoenix activity defines when is it has been found that accompany is failing in the corporation then another newly company incorporated from the ashes with different and essential with the same controllers and business partners of previous company. The government stated that Phoenix activity is illegal according to the Ethics of the corporation law but it can be legal when the illegal activity get involved with similar activity but it has intention to exploit the cooperation with unsecured creditors employees or tax authorities then it will be recognized as illegal (Giardina & Pinto, 2014). The legal value of Phoenix activities only applied when the failing company’s assets and other relevant materials are maintained, the same employees are keeping their jobs and entitlements then according to the business corporation it will be known as legal Phoenix activity or business rescue. However in the repeated resurrection of business, it makes the difficult entities which define as legal Phoenix activity or business risk. When the Phoenix activity always makes the involvement according to the use of success of companies where one after other companies was entitled under the action against fraudulent Phoenix activity.

When another company has form for the maintenance of the Assets of the previous failing company then a liability is arise for the corporate group who provided the wages, superannuation, contributions of paying tax and deliberately liquid to avoid paying all the debts of the company. Sometimes the authorities of the companies have transferred the employees to a sibling entity or another employment where they can be paid their entitlements but in the illegal Phoenix activity it is difficult to identify the cost of its significance (Hamilton, J. (2017).

In 1994 it has been found that Victorian law Reform Committee report has published and exclusive report of illegal Phoenix activity in Australia where they stated that are limited liability companies when unable to pay the debts to their creditors or the state or the employees then it fails to continue the business and under this liability. Another new limited liability company has been formed but they refused to pay the depths of the previous company (Giardina & Pinto, 2014). Therefore it is an illegal Phoenix activity in 1996 where the Australian securities Commission (ASIC) have published another report where they mentioned about the illegal Phoenix activity which is involved in insolvent trading. They have mentioned about the illegal finish activity that the car any incorporated company can involved with this activity but it should include that the visiting corporate assets should be transferred to the new entity to maintain. The previous directors or manages me not able to involved with the new business but the new hired managers of directors should maintain the same roles of previous directors of the company. In 2003 the cold Royal Commission report has published the illegal Phoenix activities in the relation with the building and construction Industries where they have mentioned about Phoenix companies who are identified its victims and according to the Corporation Act 2001 there also provided with maximum penalties for the offence of a fraudulent Phoenix company activities (Hamilton, 2017).


However in some cases finish activity can be legalized but in most of the cases it is not successfully applied for the limited liability company because there was various risk has been identified. The breach of the company’s constitutions, breach of directors duties where they misbehaving and Bridge duty of care with the previous companies legislations has make some hazards and arise many questions about the implication of finish activities. Therefore the maintenance of the assets and paying the depth is one of the important part in the Phoenix activities. When a new company is introduced for giving support to the previous selling company it’s made several duties by the employment boards and the director’s. The Corporation Act also provides several penalties for breach the duties while introducing the new company and not process according to the Phoenix activities (Giardina & Pinto, 2014).

In the illegal phoenix activity the companies basically involves with the directors who are always trying to pay the company’s creditors according to the companies constitution. The illegal Phoenix activity helps to identify the entire stakeholder to assistant from any legal action against them. It also helps to changes on the process for incorporating companies where government should review the desirability of business service provider selling aged self companies it also assist external administrator to detect from any harmful Phoenix activity if the liquidator finalized the affair of companies they investigate for recovering the property for the benefit of creditors and distribute the company’s remaining assets the Australian & Securities Investment Commission (ASIC) involves with Phoenix activity for enforcement and recover every external administration which are help to play in relation to detecting harmful of Phoenix activity and share the information. If there is any need to pay the penalties then it also added in this activity the liquidators always winning up a Phoenix company where they must pay to ASIC (Hamilton, 2017).

Reference

Anderson, H. (2016). Corporate law and the phoenix company. Routledge Handbook of Corporate Law, 114.

Anderson, H. L., Hedges, J., Ramsay, I., & Welsh, M. A. (2017). Illegal Phoenix Activity: Is a'Phoenix Prohibition'the Solution?.

Anderson, H. L., Ramsay, I., & Welsh, M. A. (2016). Illegal phoenix activity: Quantifying its incidence and cost.

Anderson, H., & Haller, L. (2014). Phoenix Activity and the Liability of the Advisor. Sydney L. Rev., 36, 471.

Anderson, H., Hedges, J., Ramsay, I., & Welsh, M. (2016). Illegal phoenix activity from the insolvency practitioner's perspective. Australian Restructuring Insolvency & Turnaround Association Journal, 28(4), 23.

ASIC v Somerville & Ors [2009] NSWSC 934 (8 September 2009)

Giardina, A., & Pinto, D. (2014). A proposal to address the impact of fraudulent phoenix activities on unremitted superannuation guarantee contributions in Australia. J. Austl. Tax'n, 16, 74.

Hamilton, J. (2017). Do I need an accountant or a lawyer when my company is in financial trouble?. Governance Directions, 69(4), 231.

Hedges, J., Anderson, H. L., Ramsay, I., & Welsh, M. A. (2017). No'Silver Bullet': A Multifaceted Approach to Curbing Harmful Phoenix Activity.

Morrison, D., & Anderson, C. (2015). Is corporate rescue a realistic ideal? Business as usual in Australia and the United Kingdom. Nottingham Insolvency and Business Law e-Journal, 2015(3), 417-435.

Price, J. (2016). The regulator: Illegal phoenix activity. Company Director, 32(5), 15.

Welsh, M., & Anderson, H. (2016). The Public Enforcement of Sanctions against Illegal Phoenix Activity: Scope, Rationale and Reform. Fed. L. Rev., 44, 201.

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