Business Phoenix - A New Start
A Phoenix company is a new commercial entity which has emerged from the collapse of another through insolvency. The term is used to describe the practice where the original directors or owners of a limited company which is subject to an insolvency carry on the same business or trade as before either in a new limited company or as sole traders.
You have built a business, worked hard and it has a value which it has built up over many years, the insolvency of your current or old company is often linked to a specific event that has caused the business to fail, if you believe that you are best placed to protect jobs and take the business forward then we need to talk about a Business Phoenix.
4R Business Recovery are in the business of advising and helping entrepreneurs throughout the UK. In short we are in the business of second chances and we have experience in dealing with creditors and other interested parties, and can make the process run more smoothly. Preserving relationships is really important for the future success of the company, so give us a call or contact us through the website to find out how we can help.
For a free consultation and advice, phone 0800 0385 140, or use our online contact form.
What is a Business Pheonix?
Is a Business Phoenix legal?
The vast majority of Pheonix Company Start Up's involve the new company “purchasing” from the appointed liquidator or even the Official Receiver the assets, good will, and intellectual property rights such as trade marks, patents, web page, etc of the old company.
The offer made by former shareholders and directors for the assets and stock and IP rights for the insolvent company often gives the best return for creditors of the failed company as the incumbents have the best understanding of the value on the old company moreover understand why it failed.
What are the benefits of a Business Phoenix?
‘Doing a phoenix’ is often misunderstood, but it’s perfectly legal and relatively simple and cheap thanks to pre-pack administration
and creditor’s voluntary liquidation
Both the Attorney General and HMRC acknowledge "It is perfectly legal to form a new company from the remains of a failed company”
However, it’s important to stick to the rules laid out in the Insolvency Act 1986, Enterprise Act 2002 and Statement of Insolvency Practice 16.
For a phoenix to be legal, the IP must:
Advertise the assets of the business and pay a fair price for them
The assets must be independently valued by a professional body
Conform to Section 216 rules concerning the use of prohibited company names (although in certain cases this may not be necessary)
There will likely be an investigation into the conduct of the directors, so seeking advice on how to continue is essential. The insolvency practitioner will have to disclose certain information to creditors once the sale is complete.
So why do Pheonix Companies have so much bad press?
Pheonix Companies are subject to negative connotations is that rogue directors get accused of transferring assets below value, to the detriment of creditors of the old company.
Lets be clear there are some directors who do use the legal framework to defraud their creditors and HMRC but what is disappointing is often that directors could have achieved an identical outcome by working legally within the insolvency legislation
The new company can acquire assets and goodwill from the old one
The old company’s business debts are written off
It’s transparent to creditors
It often achieves a better return for secured and un-secured creditors than liquidation
The new company is debt free and trades from a position of strength
If you want to find out more about a business phoenix and want to see how it could help you get in touch with our friendly and trusted experts today on 0800 0385 140.