• Is phoenix activity illegal?

    Phoenix activity is illegal, because the new company usually acquires the old company’s assets for no market value in an illegitimate process. The directors are breaking their duties and also they will be likely to commit a crime (fraud and tax evasion).

    There is legal and academic debate currently about whether, phoenixes are legal if the new company acquires the old company’s assets for fair market value in an arm’s-length sale process. Currently, there is no law that specifically provides that asset transfers from an insolvent company to related parties is, of itself, illegal.

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