Discuss About The Activity Observes Stages Australian Corporate World?
The term phoenix activity is related to the commercial entity of Australia. It is incorporated with an idea either to rescue an old business or to defraud the creditors. The conception of phoenix activity observes in three stages of the Australian corporate world. Australian Securities and Investments Commission has characterised three parts where the activity forms such as innocent phoenix operators, occupational hazard and careerist offenders (Anderson, et al., 2016). Intention of the directors that are involved in such activity can be of legal and illegal. Object of legal phoenix activity is to rescue an old business and object of the illegal activity is to defraud the creditors of the old company and to evade tax.
It has been observed that the activity regarding the subject maintained a common pattern. A company has been incorporated for a period of six to twelve months. During the period, 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, it goes into the winding up proceeding (Barnes, 2013). However, the activity involves legal proceeding too. The activity is using as a process to rescue the old business that becomes insolvent and it transfers all the liabilities of the old company to the new one without changes its structure. Therefore, there is a chance avails regarding the possibilities of entrepreneurship and the employees are become more reliable in the companies. Even the legal phoenix activities are follow up the rules regarding the Corporation Act 2001 (Brubaker, R. (2013).
It has been observed that the directors who are engaged in such activities, use the same as a 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 into two parts. The purpose of the legal phoenix activities are as follows:
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 regarding the illegality of the activity. The directors of the companies are incorporated a company 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 a newly incorporated company and tried to avoid the creditors and evade the taxation liabilities. In this process, the directors of such companies are getting benefit and the creditors 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 for loss. The directors of the company and the creditors and the government, all are getting benefit. The intention of the directors of such companies is not to defraud the creditors and therefore, there is no chance for loss.
It has been observed that in the provinces of Australia there is no particular Act or law that it’s deal with the Phoenix activity. The general law of the Corporation Act and certain areas of taxation Administration Act and fair work act has been applied in this case. Phoenix activities are reported now a days as a one of the most illegal corporate practices in Australia. The director of those companies who are involved in the Phoenix activity used to open a company for a term of 6 to 12 months and used to take huge amount of loan from the banks and after certain times they wind up the company and when to incorporate another new company and transferred all the money is of that old company to the new company. Therefore it can be observed that the directors of those companies have failed to follow their minimum duty of care and they don’t even pay the tax to the government and therefore certain professions of the taxation Administration Act has also been attracted.
The company related matters in Australia is governed by the Corporation Act 2001. When the director of a company has failed to perform their duty to take reasonable care to the employees of the clients and when this raised to act diligently section 180 of the Corporation Act applied as against those directors. In the case of Phoenix activities section 180 of the Corporation Act will be applicable (Lynch et al., 2016).
It is a fact that Australia has not enacted any separate law to prohibit the growing nature of the Phoenix activities. It has been observed that when a director of the company has breached the profession mentioned under the law section 180 and section 181 of the Corporation Act will be applicable on them (Muhammadi, et al., 2016). It has also seen that in most of the Phoenix activities, the winding up proceeding of the companies are not follow the guidelines mentioned under section 489EA of the Corporation Act. It is the utmost duty of the directors of a company to take reasonable care and ac diligently while dealing with the stakeholders all colleagues and the creditors. In case of Phoenix activities there is a spree two different the creditors and is it the tax has been observed. That makes the Phoenix activity as an illegal process and Corporation law help to carved doors processes by way of implementing laws and policy.
The main issue of this case is that whether Mr. Giudice is liable to Breach the provision of the Corporation Act as amazed by the Australian securities and investment Commission or not. This is a case where the Phoenix activities was observed. It was released by the Australian securities and investment Commission that the alleged company is involved in the illegal process of Phoenix activities and the director of the company is trying to transfer the money to a new incorporated company from the old company and there is every possible chance to defraud the creditors and event the taxation system of the Government (Richardson, Taylor & Lanis, 2013).
It was held by the court that there is no evidence submitted by the Australian securities and investment Commission that can point out the fact of the allegation against the director of the company. It has been stated by the ld court that the direction of the company has maintained every legal documents and cost and account documents and he has relevant papers that can show that is not illegal motive of him to defraud the creditors or event that tax. It has also been mentioned by the code that the director of the company has not concealed any facts regarding the old as well as new company. Therefore it was observed by the court that the Phoenix activities where the present company is involved is not a legal in nature rather it is legal as the director of the company has submitted all the relevant documents regarding the cost and accounts and other before the court.
Regarding the recent sources that is available in case of the Phoenix activities it can be observed that there are some common criteria present. Some of those criteria are there should be a second company Incorporated and the route of the second company will be engraved with the predecessor company. It has been observed that there are two kinds of Phoenix activities takes place in the corporate world of Australia. Sometimes it can be seen that the activities of the companies involved in such activities for lose all the legal professionals of the Corporation Acts and other applicable Acts. These companies are said to involved in the illegal activities and sometimes it is observed that the directors of the company is involved in the Phoenix activities have an intention to defraud the creditors or evade the taxation system of the Government and this process is called as the illegal Phoenix activities. Not only the intention of the directors regarding the creditors or tax, but the winding up process of such companies is also not according to the positions of Corporation Act 2001.
The main problem regarding the growing nature of the Phoenix activities is there is no specific know that can especially during the illegal out sources of the Phoenix activities. Therefore the cunning mentality of the directors of the company are in rise. It has been observed that when the companies are facing hurdles regarding its financial activities as well as administration process the directors of company price to transfer the money from the old company to the new company and different the creditors without informing them about the Incorporation of the new company and such activities is dangerous as against the interest of the creditors. Therefore there is a need to make relevant rules act in this regard and it is important to make the rules picture so that the directors have to change the mentality of the intention to different the creditors event the tax system of the government (Price, 2016).
In most of the cases it has been observed that the Phonics activities involve illegal processes. One of the most common hurdle to prove the illegality off the Phoenix activity is that there should be certain accurate documents to prove that the company is involved in the Phoenix activities or the legal process of company law. All the important database regarding the director of the company has been mentioned under the Australian securities and investment commissions and ATO (Watson, 2015).
There is no restriction mentioned under any law of Australia that the effects of one company cannot be transferred to another company. However it is to be kept in mind that all the money that are transferred to another company should be followed the rules mentioned under the act of Australia. The directors of the company should maintain the process of legal outsourcers and shoot a property tax to the government. It has been observed that by the year 2012 the Australian government has to face a huge revenue loss due to the directors intention to evade tax.
As there is no specific apps that can prohibit or restrict the illegal acts of the director of the company regarding the Phoenix activities, the malpractice by the director of such companies are not stoppable. Therefore it is important to implement certain rules or certain laws to deal with the offence.
If the Phoenix activities that is illegal in nature can be regarded as an options and there should be certain strict law regarding the same the green nature of the Phoenix activities can be resolved. The main loopholes of the Phoenix activities is that Australia has not enacted any special law regarding the same and if any provision regarding the Phoenix activity can be made, the problem regarding the same can be resolved effectively.
It has been reported by many sources that the activities regarding the Phoenix system can affect the whole system of the Government of Australia. It is not ok to say that the Australia is a business country and their economic structure of Australia is depend on the industries. However if there is any illegal process involved in such activities it is very tough to gain proper redressalregarding the corporate future. Therefore there is a need to develop the structural process of the general law and make it strict so that the directors will refrain them to involve in such heinous crime.
It has been mentioned earlier that certain provisions of the Corporation Act has been followed up to address the problem. Section 180 of the Corporation Act will apply in the cases where the directors of the companies are involved in the process against the interest of the creditors and section 184 of the corporation at will apply in those cases were the director will fail to disclose proper documents to other stakeholders. Is the wanting a procedure of the company is not follow the guidelines of the law section 489EA will be applicable on them (Ormerod, Smith & Hogan, 2015).
Apart from the Corporation Act 2001 there are certain other law that should be applicable in this procedures. One of the most common intention of the directors that is involved under the illegal Phoenix activities to evade tax. Therefore certain rules under the taxation Administration Act of Australia will be applicable here. it is not out to state that if the directors of the company transferred the money from the old company to the newly incorporated company then the interest of the creditors will be at risk. It is obvious to say that the activities of the directors in these cases is not follow up the rules regarding the fair work act and therefore certain provisions especially section 50 of the fair work Act 2009 will be applicable here.
Jaipur it can be observed that there are several sections mentioned under different acts of Australia but there is necessity regarding a unique code that can structurally restrict the Phoenix activities. A systematic approach is needed to cast the social phenomena. It can be structured by way of taking special resolution by the government of the legislative bodies of Australia. Amendment can also be regarded as one of the latest version regarding the structure of the offences. Certain rules are needed to be implemented to restrict the orphans in this case.
Reference:
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