Phoenix

Promoting entrepreneurship, protecting business

A Phoenix company is a vessel created in order to promote entrepreneurship; used correctly, it provides continuity for suppliers and customers, legitimately allowing the profitable elements of a failing business to survive a bankruptcy, insolvency or winding up scenario.

Prior to a Phoenix provision, an entire company would cease to exist. Now, it allows the assets of a Limited company to be moved to another legal entity.

There are strict rules governing the Phoenix practice and the ramifications must be considered carefully. All assets removed from an insolvent company must be at a reasonable market value, leaving a true representation in the insolvent company. The use of a liquidator is paramount and our panel of specialist partners will ensure it is carried out in accordance with regulation.

Phoenix Company

For example, in most cases the directors can remain the same with the exception of those who have been disqualified or who have been made personally bankrupt. In accordance with the Insolvency Act 1986, companies may petition to have the same name or in most cases adopt a similar name and the Phoenix company could be permitted to operate in the same or similar spheres as its predecessor.

The Phoenix scheme has been criticised in the past for its openness to abuse; however, more recent regulation makes it far more difficult for directors to deliberately force companies into insolvency only to buy back the assets as a Phoenix company at less than market value, absolving them of the liabilities of the first company.

The practice of Phoenix companies is perfectly legitimate and assists honest individuals. Statistically, one in three new businesses fails in its first three years of life; Phoenix companies enables the sustainable elements of a business to survive, without having the burden of the elements of the original business that are inefficient.

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