If you’re considering liquidating your insolvent company, have you thought about how to start over? With a Phoenix Company, you could potentially restart your old business, free of debt. However, there are strict rules and regulations to follow. And as this is a legal process, it can’t happen without the involvement of a licensed insolvency practitioner. We would always advise you to contact our liquidation specialists at Liquidation.co.uk.
At Liquidation.co.uk we recognise that the idea of closing your company might feel overwhelming, confusing and stressful. Our professional and friendly team are here to support you every step of the way and is here to help you create an action plan shaped around your individual circumstances.
What is a Phoenix Company?
Simply put, a phoenix company is when a company ‘starts over’ following an insolvency process, like administration or liquidation. It can involve the existing directors of the business or a third party buying the company’s assets and re-starting the business..
You might be wondering where the term ‘phoenix’ comes from. Well, it refers to a phoenix rising from the ashes. And, the result of a phoenix company is that the business can resume trading as a new company but with a completely clean slate.
However, as mentioned, there are strict rules surrounding the use of this process. You might be wanting to keep the same company name – something that we recognise is important to people in this situation – however, that’s where issues and problems might occur. To find out more about prohibited names and any exceptions to the rules, then get in touch with a professional known as an Insolvency Practitioner. It’s important that you are up-to-date with the required knowledge before you make any serious decisions.
Are Phoenix Companies legal?
The phoenix company process is legal, as long as all the necessary rules and regulations are followed correctly.
Directors who don’t follow the rules are deemed as acting unlawfully. And, if they are found to not be complying, it could result in them being disqualified as a company director, fined or even imprisoned. A director acting unlawfully could also find themselves personally liable for the debts of the phoenix company.
What are the Phoenix Company rules?
The legal guidelines outlining how a phoenix company should operate are governed by the Insolvency Act 1986. The main aim of this is to prevent company fraud. This means the assets of the old company are sold at a fair price and not undervalued – or in other words, directors simply going into insolvency to avoid paying their debts and then buying back their assets at a fraudulently low price will not be allowed.
This means that professional valuations of the assets need to be attained, and clear records are kept throughout the entire decision-making process, including valuation, marketing and sale of the old company.
Is your company facing liquidation or administration? Do you want to find out more about Phoenix Companies?
For more advice and support about the legal requirements of a phoenix company how one could be used, then contact Liquidation.co.uk. Our team of experts are here to help you.