ABSTRACT
Phoenix activity is a product of the two most basic and well accepted characteristics of corporate law – the limited liability of shareholders and the separate legal entity of the company. These place a ‘corporate veil’ between the company and its investors. A phoenix company, however named, is one that arises from the ashes of its former self, taking advantage of these corporate characteristics, which have remained largely intact since Salomon’s case.2 The term phoenix activity is generally pejorative and describes debt-laden ‘Oldco’ entering into liquidation where its controllers continue the business debt-free through ‘Newco’. Externally, the conduct might appear to be a legitimate business rescue. Where the use of successor companies breaches directors’ duties because of an improper motivation, it is described as illegal phoenix activity. Corporate law rarely provides an official definition nor a specific offence capturing phoenix activity.
