All businesses encounter health problems but leaving them unchecked is a risky business. The sooner you seek advice the sooner the situation can be improved. In the past 12 months our business advisors have rescued more than 140 businesses, saving hundreds of jobs and livelihoods by offering help to businesses at risk. By getting the right business advice at the right time, the majority of companies can work through problems which at first may seem insurmountable.
At the Debt Advisory Service we see formal insolvency as the option of last resort. The first priority is to focus on recovery and we believe that this approach is in tune with the spirit of the times and responsive to market demands. In some cases it is not always possible to save the company and insolvency is inevitable. Setting up a phoenix company is a possible option to save viable core business and jobs and this is also an option that we would consider.
What is a phoenix company?
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.
Are phoenix companies legal?
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.
Why set up a phoenix company?
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.
There is free debt help and advice available through a variety of debt charities. For more information, we recommend you visit https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator. Alternatively if you are a business owner, self-employed or in a partnership, we recommend you visit https://www.businessdebtline.org/.