And out of the ashes I will arise, like a Phoenix, born again, anew!

For those who may not know what a Phoenix is, it is a mythological bird that is immortal. The bird regenerates itself, and rise out of a fire or ashes to be reborn.

Interesting myth.

So what is a Phoenix company you may ask???

Over the years we have seen many companies, especially retails stores go bust. Recently it has been some energy companies that have entered into Administration and gone bust.

When a company enters into Administration, Administrators are appointed, usually Insolvency Practitioners, and their job is to value the company and sell off any assets to pay towards the company’s debts. This is called liquidation.

The Administrators try to get the best value, or highest amount they can when they sell the company’s assets. And in some instances, the failed company is sold back to the original owners or board that ran the company.

An example may be this:

Company A has too much debt that they cannot service, so they enter into Administration, essentially going bust. The Administrators find a buyer for the company, and sell the company to this buyer.

Company A had £100,000 in debts, and the Administrators sold the company for £50,000, which this money is then distributed to Company A’s creditors.

The buyers of Company A, now own Company A, but without the debt! The company is now debt free to the new buyers. And it may continue trading under a different name, Company AA.

But what if the old company Directors decide to buy their old company which is now in Administration??? Why not? If they make a fair offer and the Administrators accept it….sold!

Granted the old owners, who are the new owners, will operate under a different company or LTD/Limited Liability name…..but they now own the company they placed into Administration…again….and without the debt!

So you ask, is this legal?

Yes.

Are Phoenix Companies ethical?

That is debatable. However, in many instances when a company is rescued via becoming a Phoenix Company, jobs are saved. The new/old owners retain the work force that worked there prior.

So out of the ashes of a company going bust, will arise a new company.

Leave a Reply

Your email address will not be published. Required fields are marked *