The Forum of Private Business (FPB) has hit out at so called ‘phoenix companies’, companies that fail owing huge debts only for the directors to purchase the company assets for a fraction of their true value and start trading in a different name.
This is of course all perfectly legal in the UK and is not only a huge benefit to the company directors of such underhand businesses, but is also incredibly lucrative to liquidation and administration advisers, who will leave little for creditors to pick over.
The FPB give their description of ‘phoenix companies’ as;
“A phoenix company exists where the assets of one limited company facing liquidation are moved to another business. Often, some or all of the directors remain and the new business frequently operates in the same area as its predecessor.”
Most business owners will have experience of ’serial’ phoenix company operators in their own locality and will be very wary of dealing with them, particularly on credit terms.
The problem is that when these companies go bust they normally owe a substantial amount of money which creditors have absolutely no chance of getting. This has a knock on effect down the chain of supply, with everyone suffering except the crooked directors.
MP for Portsmouth South, Mike Hancock said:
“The Better Payment Practice Campaign found that a quarter of companies have fallen foul of ‘phoenix companies.’ Obviously, smaller businesses in particular need to get all the money that is owed to them and even one default can make the difference between an otherwise well-run company going bust or continuing in business.”
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