Company Law – Phoenix Companies – What steps can you take?
A phoenix company is a new company that rises out of the ashes of a failed company and effectively continues trading with the good assets but not the bad debts. The new company or business almost always DOES NOT take on the debts of the old company. It is often a scam or a dishonest device to avoid creditors.
The Companies Act 1993 describes a phoenix company as being a company that at any time before or within five years after, the commencement of the liquidation of a failed company, is known by a name that is also a pre-liquidation name of the failed company, or is a similar name.
When phoenix company arrangements are created where a new company is set up that has a similar name, similar management structure and similar assets to a failed company, the object is usually part of a scheme either to defeat creditors of the failed company or to mislead the public into believing they are dealing with the same company as previously, possibly as part of an attempt to mislead creditors of the previous company.
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