What is a Phoenix Company

What a Phoenix Company is and how to do it properly

A Phoenix Company is essentially when a company in, or approaching insolvency is saved and literally ‘rises from the ashes’ in the form of another company.

Business insolvency is a very distressing and troubling time for business owners, employees, customers and suppliers. The process of creating a Phoenix company can save jobs at the business in trouble, and also provide some consolation to creditors which would normally be hugely affected by a normal insolvency process.

During the Phoenix process, once a buyer has been identified, a licensed insolvency practice would be appointed to determine the best and legal process to follow.

Due to the nature of Phoenix companies, there are strict regulations to follow, and fraud is unfortunately too tempting for some.

Phoenix company fraud

This occurs when he directors of the struggling business transfer the assets to the NEWCO at below market rates, before it becomes insolvent, The old debts and responsibilities to creditors are disregarded and often written off. This process is of course illegal and there are significant penalties including director disqualification, personal liability for the company debt or prison sentences.

Performed with legitimate interest, and taking into account your responsibilities seriously, Phoenix companies can be a valuable way to rescue a company that still has potential to flourish. If your company is in trouble and you would like to explore the best way to rescue it, contact a licenced insolvency practice for further advice on how to do it fairly and legally.