Shelter from the Storm: Phoenix Activity and the Safe Harbour
37 Pages Posted: 25 Jul 2018
A ‘safe harbour carve out’ from insolvent trading liability is intended to encourage directors, particularly of large companies, not to prematurely liquidate financially troubled companies which could be rescued. While the federal government has been successful in introducing this measure, which was part of its 2016 National Science and Innovation Agenda, this article argues that some of the underlying justifications for the safe harbour are flawed and that it may not be effective. A more significant objection is that the safe harbour could lead to a greater prevalence of illegal phoenix activity, sheltering under the appearance of business rescue. The benefit of the liability carve out to the ‘big end of town’ is not worth this risk.
Keywords: phoenix activity, insolvency, liquidation
JEL Classification: K00, K22
Suggested Citation: Suggested Citation