For those who are unaware of 'Phoenix' companies, let us explain. When a Receiver or Liquidator sells the assets of a failing company back to the people who ran the show when it failed, the resultant new company is referred to as a Phoenix - because it 'rises from the ashes' of the old one.
It must be emphasised that not ALL Phoenix companies are bad news. Rapid transfer of the assets and goodwill of a company can ensure continuity of business - and employment for the majority, if not all, of the staff. Also, it is claimed that it maximises the realisation of the assets, to the creditors' advantage (sic). However, it is fundamental to the 'rising' that all the creditors are left with are the liquidated assets and, for the moment anyway, most of those tend to go to Government agencies, such as the Inland Revenue and Customs & Excise.
In this respect, readers may already know that the government is well on the way to surrendering its preferential creditor status in liquidations. Hurrah for common sense!
What sticks in the throats of many creditors are those cases when a receiver is appointed after a company fails and then before the creditors are aware that they have a problem, the company has changed its name (to, for example FDG Realisations Ltd) and a new, shelf company has changed its name to 'Original Company Ltd' and, to all intents and purposes, continues to trade.
We'll use an old case study as an example, the failure of Convert A Ltd & M & TJ Ltd who used a firm of business advisers who are NOT insolvency practitioners to handle the companies insolvency..
This firm had called a meeting of creditors for 8th November. At almost no notice they switched the date to 29th October, obviously hoping that the majority of creditors would not be able to make the revised date.
In doing this they violated one of the principal rules of Insolvency, the requirement to give 14 days' notice of the meeting but, since they are not Insolvency Practitioners, they could not be disbarred, so who can blame them!
But they didn't see this coming, one creditor got together a group of creditors and appeared at the meeting with a representative of one of the most reputable firms of accountants and licensed insolvency practitioners in the country.
Two other major creditors had also seen the light and appeared with their own IP's in tow, so that Moore Stephens and Deloitte Touche representative witnessed the discomforting of the ungodly.
The upshot of all this activity, hopefully, will be that it is impossible for anything underhand or disadvantageous to the creditors to take place. The reason this tale has been told at length, is because a concerted effort by a number of creditors can snooker attempts to fudge the results of incompetence, or even outright dishonesty to the disadvantage of creditors who, rightly, feel that they have been well and truly had!
Further to that, if the identify of the firm or firms who are encouraging a less than open dissolution of a failing company is brought to light, we can 'shop' them to the DTI and the Insolvency Agency and thus curtail their activities.
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