Q. Corporate form based definition of phoenix activity?

As phoenix activity entails the manipulation of the corporate form, it can be defined in these terms. A definition could specify the common manipulations of the corporate form that companies use to engage in phoenix activity. For example, ASIC identifies three common characteristics of phoenix activity including "within 12 months of closing, another business commences which may use some or all of the assets of the former business and is controlled by parties related to either the management or directors of the previous company". Such a definition could include reference to the asset stripping of the former business and the transfer of the assets to the new business as well as the other common forms of phoenix activity such as the liquidation of the labour hire entity.

There are some limitations to such a definition. A number of years ago, asset stripping was very common in phoenix activity. However anecdotal evidence suggests it is now less so, though it is recognised that stakeholders such as ASIC still consider asset stripping as a key element of phoenix activity. The FWO have indicated that they do not consider asset stripping as necessarily determinative.

It is now common for the liquidated company to be the 'services' entity within a group of entities that form the company and for it to have few, if any, assets. The dynamic nature of phoenix activity would mean that a corporate form based definition would have to withstand the changes in phoenix activity or be updated to evolve with phoenix activity.