QUESTION
Joe is the sole director and shareholder of Homes Building Pty Ltd, a company that builds prestigious homes in Perth, Western Australia by mainly using sub-contractors and a few employees. Joe knew that due to the downturn in the building industry, the company’s business was in trouble. For the last 6 to 8 months, Joe had been making late payments to his sub-contractors and had accrued $200,000 in overdue payments. Joe had also missed some payments to the Australian Taxation Office (ATO) for taxes deducted from employees pay as well as superannuation contributions.
Joe sought advice from his accountant, Bill from Water & Young. Bill advised Joe that he should to take urgent steps to stop the company from collapsing. Bill introduced Joe to Ken, a pre-insolvency adviser who offered to restructure Homes Building Pty Ltd for $25,000, which Joe accepted.
Ken advised Joe to register a new company Homes Building (WA) Pty Ltd, with Joe still remaining the sole director and shareholder of the newly formed company. This name was chosen so as not to alert the building industry that there had been a change. Ken also advised Joe that the newly formed company should purchase the most valuable asset of Homes Building Pty Ltd, being its future business projects. This was formally done by drawing up a Purchase Agreement and obtaining a valuation through a friend to give an impression that everything was above board. However, the amount paid for the future business projects was below market value.
After the restructure, Homes Building Pty Ltd had no assets left, but had an abundant amount of outstanding liabilities. Ken appointed a friendly liquidator to wind up Homes Building Pty Ltd and deregister that company. By doing this, the creditors, the sub-contractors and the ATO have no means of being paid for their outstanding debts from Homes Building Pty Ltd.
REQUIRED:
Discuss the following matters [referring to the Corporations Act 2001 (Cth) and cases] and also uploaded research material in part (b).
- With reference to the concept of the veil of incorporation and lifting the veil of incorporation, discuss if Joe could be held liable for the debts of Homes Building Pty Ltd.
[30 Marks]
- Research and upload five Australian articles relating to phoenix activities that will assist you in answering parts (c) below. Your articles can be from cases, case notes, journal articles, opinions and publications from legal firms, Government bodies such as the ASIC, APRA, and other specific government bodies such as the ATO.
NOTE: Please upload the articles in the Australian Articles Link in a PDF format. Also, please upload all articles before you hit submit.
[25 Marks]
- Discuss what is phoenixing and in your discussion identify the differences between illegal phoenix activities and legal phoenix activities. Discuss whether illegal phoenix activities have occurred in the above scenario. What are the warning signs of illegal phoenixing and whether these warning signs existed in the above scenario?
[45 Marks]
TOTAL MARKS: 100
Note:
- Reference your answers to cases and the Corporations Act 2001 (Cth) where possible. Please refer to the unit outline on how to reference your assignment using the AGLC system.
- In answering the questions, a formal 4 step process is required. Where there are multiple parts/issues in the questions above, you can use the 4 step process for each part/issue separately.
- You do not have to discuss or apply Contract Law.
GUIDELINES FOR TEST 2
Where the question requires you to use the 4-step process, the 4 steps are:
- Step 1: Introduce the area of the law
- Step 2: Discuss the applicable law to solve and quote relevant cases and the sections of the Corporations Act 2001 (Cth) where applicable.
- Step3: Apply the law to the facts to resolve the problem.
- Step 4: Come to a conclusion
When writing your answers for Test 2, you cannot copy word for word from another source. You can paraphrase or summarise ideas or data obtained from another source, so long as you reference the source of your information using the AGLC footnote referencing style. More information can be found on this style from blackboard or the A Bibliography is NOT required under the AGLC footnote referencing system.
Please note that plagiarism occurs when work of another person is presented as one’s own, without appropriate acknowledgement or referencing. Plagiarism is a serious offence. This unit is ascribed to Turnitin, an electronic plagiarism detection service. Students should be aware that their work will be required to be submitted to this service to check for unacknowledged use of others’ work. Please read Test 2 submission process carefully to determine how to submit your test through Turnitin.
The research for legal principles and cases can be restricted to that referred in the prescribed text book, lectures and case studies. You will not be awarded marks for referring to cases or legislation outside these sources.
You should not exceed the word limit stated in the questions. The marks for each part should give an indication of the words that should be allocated for that part.
Marks will be deducted for exceeding the word limit.
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