Phoenix company

A phoenix company is a commercial entity which has emerged from the collapse of another through insolvency. Unlike "bottom of the harbour" and similar schemes that strictly focus on asset stripping, the new company is set up to trade in the same or similar trading activities as the former, and is able to present the appearance of "business as usual" to its customers. It has been described as "one that that arises amidst or from the disarray and demise of its predecessor."

A study by the Australian Securities and Investments Commission has identified three groups of operators that practice phoenix activity:

Such activity can also be characterized as either "basic" (involving replacement of one entity by another) or "sophisticated" (which has regard for the intricacies of corporate groups, where management and directors may misuse the concept of the corporate veil).

Certain sectors see more frequent phoenix activity than others. In the events industry, public relations and marketing agencies are known to "phoenix" regularly.

Phoenix activity is generally observed to occur through the following scenarios:

The primary identifiers of phoenix activity have been described as "a deliberate and often cyclical misuse of the corporate form accompanied by a fraudulent scheme to evade creditors". Several common characteristics have been identified as indicating harmful phoenix activity:

Company law in the UK has been formed to enable such activity in order to protect and promote entrepreneurship, by reducing risk and improving the chances of continued trading and business development. The National Fraud Authority has observed that:

It is perfectly legal to form a new company from the remains of a failed company. Any director of a failed company can become a director of a new company unless he or she is:

...
Wikipedia