At the end of 2011, the Federal Government introduced two draft
Bills directed at clamping down on companies that engage in
"phoenix" activity.
A phoenix company is a vehicle used by directors of a failing
company. Like the bird in Greek mythology, the failing
"phoenix" company rises from the ashes of a former
version of itself and trades with the assets and customers of the
old failing company whilst leaving the debts and other liabilities
in its shell. In this way, the directors are able to block
unsecured creditors of the failed company from accessing the
phoenix company's assets. Often the phoenix company bears a
name very similar to the failed company, making it easy to take
advantage of the failed company's goodwill. Where the failed
company has a poor reputation however, the phoenix company will
often trade under an entirely different name.
