8. Do you think prohibiting phoenix activity by creating a phoenix offence, or a phoenix prohibition is likely to be successful? Why, or why not?9. How could an offence or prohibition be structured?

Do you think prohibiting phoenix activity by creating a phoenix offence, or a phoenix
prohibition is likely to be successful? Why, or why not? How could an offence or
prohibition be structured?
Phoenix activity is a deliberate attempt to liquidate a corporate trading entity systematically
that happens with a wrongful and illegal intention to avoid taxation and employee liabilities
y continuing the business operation including profit taking by forming another trading
entity. This concept
oadly rests on the concept of one company failing giving rise to a new
company with basically the same management and nature of business. Phoenix activity may
e legal or illegal in nature. Legal phoenix activity is when its controllers create similar
usinesses by forming a new enterprise upon the failure of their previous company, for
escuing their business. On the other hand, Illegal phoenix activity consists in ca
ying out
similar activities but with a fraudulent intention of exploiting the unsecured creditors
including its previous employees and taxation authorities.
A Phoenix activity could be legal and sometimes desirable when the failed company’s worth
and assets are maintained and there is no loss of employee jobs and their entitlements.
Phoenix activity may not be illegal inherently but its illegal form is generally considered as
actions undertaken to
each laws due to wrongdoing. As illegal phoenix activity causes great
harm to company’s creditors including its employees and taxation authorities, therefore, it is
un-surprising that there is a public advocacy for a specific phoenix prohibition. However, the
prohibition has not been achieved till date.
Illegal phoenix activity still exists due to generalist laws that remain under-enforced to
effectively cu
phoenix activity. An effective phoenix prohibition and modification of
existing laws to make them stricter with effective enforcement is required to stop illegal
phoenix activity. Instead of creating a new prohibition describing the context of illegal
phoenix activity, stricter enforcement of existing directors’ duties must be ca
ied out by
increase in penalties and eliminating financial benefits that accrue from illegal phoenix
activity and by substantially increasing the relevant penalties. By doing so, the government
can send an important signal
to these fraudulent practitioners to desist from such behaviour which could be severely
punished and to ASIC that enforcement could produce significant gains in this area.
Phoenix activity is not considered illegal inherently, and there exists no express prohibition in
this regard. Considering that phoenix activity has remained a longstanding issue, therefore, it
is un-surprising that many solutions have been proposed. One such is creation of a specific
legislative prohibition on deliberate phoenixing that is intended to deprive creditors. In my
view, efforts to proscribe phoenix activity that involve fraudulent wrongdoing are difficult to
meet any success. A
oader prohibition would more likely capture legitimate business
escues and...