Illegal Phoenix Activity: Is a 'Phoenix Prohibition' the Solution?

Company and Securities Law Journal, Vol. 35, No. 3, pp. 184-203, 2017

25 Pages Posted: 18 May 2017

See all articles by Helen L. Anderson

Helen L. Anderson

Melbourne Law School

Jasper Hedges

Australian National University, Research School of Social Sciences

Ian Ramsay

Melbourne Law School - University of Melbourne

Michelle Anne Welsh

Monash Business School

Date Written: May 17, 2017

Abstract

Phoenix activity is not inherently illegal but illegal phoenix activity is generally understood to be those actions, undertaken in the phoenix context, that breach laws because they involve wrongdoing. Because illegal phoenix activity continues to cause significant harm to creditors of companies, employees and revenue authorities, it is not surprising that many continue to suggest a specific phoenix prohibition as the answer. To date, however, this has not been achieved. This paper considers attempts to define or proscribe illegal phoenix activity before examining the existing laws, including directors’ duties that already prohibit this behaviour. Working on the belief that illegal phoenix activity continues because these ‘generalist’ laws are under-enforced in the phoenix context, we suggest a new approach. Rather than devising a new prohibition that describes the circumstances of illegal phoenix activity, the enforcement of the existing directors’ duties should be bolstered by removing the financial benefits of phoenix activity and by substantially increasing the relevant penalties. Our suggested amendments – if taken up by the government – send a valuable signal to wrongdoers that their behaviour will be severely punished, and to ASIC that this is an area in which enforcement can produce significant benefits.

Keywords: Phoenix Activity; Enforcement

Suggested Citation

Anderson, Helen L. and Hedges, Jasper and Ramsay, Ian and Welsh, Michelle Anne, Illegal Phoenix Activity: Is a 'Phoenix Prohibition' the Solution? (May 17, 2017). Company and Securities Law Journal, Vol. 35, No. 3, pp. 184-203, 2017. Available at SSRN: https://ssrn.com/abstract=2970302

Helen L. Anderson

Melbourne Law School ( email )

University of Melbourne
Melbourne, 3010
Australia
+61 3 90355467 (Phone)

Jasper Hedges

Australian National University, Research School of Social Sciences ( email )

Canberra
Australia

HOME PAGE: http://www.anu.edu.au

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

Michelle Anne Welsh

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

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