In short
A phoenix company describes a new company that has risen again from a previously failed company. Quite often the old company will have gone into liquidation and the directors will buy back the assets and start trading again in the same business. It may upset creditors of the old business but it is legal if done properly. It is an effective tool to help a company that perhaps had a one off hit and needs to start again.
In more detail
Nothing upsets creditors quite like a phoenix company as they think it is unfair that a business seems to have shed its liabilities and can carry on without them. In more cases a phoenix is legal provided it meets certain criteria, such as:
- The assets have been valued and sold at market value.
- The new company does not use the same or a similar name without going through a careful legal procedure to company with section 216 of The Insolvency Act.
- The sale of any assets has been overseen by a Licensed Insolvency Practitioner acting as liquidation and not sold in advance.
Some suppliers will not deal with a phoenix company and may impose stricter trading terms. HM Revenue & Customs (HMRC) may well request a bond or deposit against future PAYE or VAT liabilities.