A phoenix company is formed from the remnants
of a failed company.
Example: a company may have to go into liquidation,
for various reasons - usually serious losses, an insolvent sitation,
and/or starvation of cash. The owner of the phoenix company may
buy the assets of the failed company from the Receiver or Liquidator,
at market price, and start trading in the same line of business
immediately.
This is a phoenix company.
Why do phoenix companies sometimes have a bad reputation?
Some directors of companies have deliberately
run companies into the ground, and then bought the assets at a knockdown
price, from a "tame" liquidator, leaving the creditors with nothing.
However, the Insolvency Act 1986 tightened up
on who can be a Liquidator or Receiver, and also introduced a reporting
regime on directors.
The Liquidator who does not fulfil his duties
now risks his livelihood. The "serial director", in extreme cases,
risks his liberty.
So where do phoenix companies fit in?
If you have a company that is struggling, and
unable to trade out of its difficulties, then as a director you
have a duty to consider the creditors of the company in priority
to the shareholders, which may involve liquidating the company.
If the company has to go into liquidation, what
are you personally going to do?
Your skills are probably in the business area
in which the company is currently engaged, and there is normally
no legal reason why you cannot purchase the company assets and trade
in that line of business in the future.
Sounds straightforward ... why do I need specialist help?
You need to ensure that you take the appropriate
action at the right time. The phoenix process requires the highest
level of professional skill. If you delay, or act solely to protect
your own interests, you may become personally liable to the company's
creditors.
To get it right, you need specialist advice.
Also, you may well need help finding a lender
who will deal with a start-up company, especially where a phoenix
is involved.
We have access to specialist lenders who will assist in providing
capital and working capital finance.
Click herefor examples of phoenix companies where our
people were involved.
