“Like a Phoenix Rising from the Ashes”
Companies can fail for a variety of reasons and there are times when honest and hard-working individuals find they can no longer trade out of their difficulties.
However, creditors are understandably disgruntled when one company falls into liquidation and the second company seemingly starts up overnight with the same directors but importantly with no obligation to pay for the failed company’s losses.
The latter is a Phoenix company.
Fraud occurs when directors abuse the Phoenix company arrangement by transferring the assets of a failed company below their market value before insolvency.
By doing this, the fraudulent directors reduce the funds available to creditors when the original company becomes insolvent. As a result, creditors are wrongly left out of pocket for the goods or services they supplied.
However, directors and shadow directors can often find themselves caught in a complex spider web of insolvency legislation, devised to stop serial offenders from leaving creditors out of pocket.
Basically, section 216 of the Insolvency Act 1986 provides that a director or shadow director of a company in liquidation is prohibited for a period of five years from having any involvement in another business, which uses the same or similar name to the company in liquidation.
The restriction applies not only to the registered name of the company, but also to any trade name used.
Anyone who breaches these restrictions is exposed to both criminal liability (meaning imprisonment and/or a fine) and also personal liability for the debts of the Phoenix Company.
Whether you are facing civil liability for breach of section 216 or you wish to bring a claim against the directors of the Phoenix Company itself, please contact us for a free hour’s consultation.
Insolvency Practioners
We are able to combine relationships with Insolvency Practioners together with our knowledge of insolvency law which enables us to advise on personal claims against former directors.
Such claims involve making recoveries from former company officers and third parties via the following causes of action:
- Antecedent transactions such as preference payments or transactions at an undervalue
- Fraudulent trading
- Wrongful trading
- Misfeasance or alleged breaches of fiduciary duties
- Illegal dividend payments
- Overdrawn loan accounts
As we regularly work with officeholders under the Insolvency Act 1986, we are able to use our skill sets and technical know-how to trace and track missing assets that have been misappropriated.
Not only are we able to work with national and international forensic accountants with whom we have developed sound and solid working relationships, but we are also able to take action to freeze and recover money which has been misappropriated.
As part of the latter, we often undertake emergency interlocutory work which involves:
- Injunctive relief or Mareva orders
- Civil search and seizure orders
- Passport Orders
- Third-party disclosure orders
If you wish to take advantage of a free consultation, please contact us today in complete confidence.
For more information, click here to submit an enquiry and one of our lawyers will contact you within 48 hours.