The quick answer
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 buy the assets and start trading again in the same business.
It may upset creditors of the old business but is legal if done properly. It is an effective tool to help a company that had a one off hit and needs to start again.
In more detail
Nothing upsets creditors quite like a ‘phoenix’ as they think it is unfair that a business seems to have shed its liabilities and can carry on (without them).
In most cases, a phoenix is legal provided it means certain criteria such as;
- The assets have been valued and sold at market value.
- The new company does not use the same or similar name without going through a careful legal procedure to comply with section 216 of the Insolvency Act.
- The sale of any assets has been overseen by a Licensed Insolvency Practitioner acting at the liquidator and not sold in advance.
Some suppliers will not deal with a phoenix company and may impose much stricter trading terms. HM Revenue and Customs may well request a bond or deposit against future PAYE or VAT liabilities.
If you want to start again the best thing you can do is take professional advice early on from a suitably qualified insolvency practitioner.