A phoenix company is where the assets of one Limited Company are moved to another legal entity. Often some or all of the directors remain the same and in some cases, the new company has the same or a similar name to the failed business. The phoenix company will operate in the same sphere as its predecessor.

It is perfectly legal to form a new company from the remnants of a failed company. A director of a failed company can become a director of a new company unless he or she:

• is subject to a disqualification order or undertaking, or
• is personally adjudged bankrupt, or
• is subject to a bankruptcy restrictions order or undertaking.

Not all legitimate businesses succeed at the first attempt, according to the Small Business Service, one in three businesses close within three years. Business can fail for any number of reasons and there are occasions when honest individuals find they can no longer trade out of their difficulties.

In these cases, the phoenix company arrangement allows a business to start again and for the profitable elements of the failed business to survive, offering some continuity for both suppliers and employees.

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