Companies going into liqudation and restarting under a different name

B

Bronte

Registered User
Messages
15,131
Is there much evidence for a company going into liquidation and thereby not having to pay their creditors and then starting the company again with a different name. What is to prevent a company doing this and how would they run down the assets of the original company? Is there a law that disallows a director of a previously liquidated company from becomming a director for a certain amount of years ?
 
Bronte said:
Is there a law that disallows a director of a previously liquidated company from becomming a director for a certain amount of years ?
Click to expand...

Yes - not sure what the time period is though - 2 years maybe?
 
The so called "Phoenix Syndrome" where an almost idential company rises from the ashes of a previously insolvent company is constantly under scrutiny by the CRO and the ODCE. Directors can be restricted or disqualified where found guilty of breaches of company law. Unfortunately such matters can take time and cases do slip the net. Liquidators will be on the watch for transactions which might suggest asset stripping or moving business to a new company and can bring action against directors. The problem is some companies just cease trading without liquidating and some directors start off again. These unliquidated insolvent companies sometimes then sit unresolved as there is noone to pay for a liquidation.
 
I know of someone in a state agency, the person disolved a company. Then, launched another company, and wait for it trades under a different name to avoid it being investigated. Oh yes, was 5 years behind with accounts for the new company, but the state watchdog did nothing about it.
 
I didn't realise it had a name 'Phoenix syndrome'. Does the CRO (Companies Registration Office) actually do something about it or just monitor it happening? Would there be a list of such companies or directors for consumers?
 
It would be the Office of the Director of Corporate Enforcement who are responsible. You could [broken link removed] if you have a specific query.
 
This is quite common practice. Sometimes the phoenix arises as a sole trader for a few years. Sometimes the Phoenix is a wife or child of the original company. On a liquidation the liquidator has to do a report to the ODCE which sets out the directors behavior during and before the liquidation. Arising out of this report the ODCE then decides whether the director(s) should be restricted/prosecuted. Restrictions and prosecutions are very rare.
 
Simplyjoe when you say restrictions and prosecutions are rare do you mean one a year or one every 20 years? So I can get an idea of how easy it is to do this phoenix operation?

ODCE - Office of the Director or Corporate Enforcement, you learn something new ever day. This is I take it completely separate to the CRO Companies Registration Office. The CRO just registers companies? and the ODCE sees that they are operating legally, is that it? We do like our 'bodies' preferable lots of them.
 
The ODCE has a list of restrictions and prosecutions of directors and companies on it's website.
 
I seriously advise against using a Phoenix company. If you go back into a business that you know cannot work then you may be made personally liabile for all debts. The Phoenix worked in the old days but is not as easy anymore. Saying that both the ODCE and CRO are massively understaffed and cannot cope. Any prosecutions are usually on foot of the liquidators report or through some other whistleblowing process. The best the ODCE can do is to try and make examples of people.
 
If you liquidate there are also ways of buying back the assets from the liquidator which are totally above board....and even the same name can be used. However you wont be able to asset strip before you liquidate. if directors asset strip their compnaies they are likely to be resticted in that they will be barred from holdind direcrorships for 5 years and/or may be found to be guilty of reckless trading
 
You must log in or register to reply here.
Back
Top