When is a phoenix not a phoenix?

[carl24bpool]

Okay guys I have posted a thread in Accounts area basically detailing the fact my major debtor has gone into administration leaving me unable to pay my major creditor. No funds and no assets and not taking on more work as my company is essentially insolvent. The current company is in my partners name as director but she doesn't really do much and I run things

So my only out is to wait for a winding up order.

Meanwhile I want to setup a new company with me as director at the same registered address (our house)

I will rename the company by changin the last part of the name. So for example the original name was

super company manufacturing

new company would be

super company fabrication

So new director (although I could be seen as old director) and new name.

Is this stil considered a phoenix company.

I suppoes what I need to know is what constitutes as phoenixing and what doesn't.

If I start another cmpany doing the same thing at teh same address is that enough to be considered a phoenix company?

 

[Paul_Rosser]

I think it depends if you are planning on transfering any assets from the old company to the new one, including stock, customers etc.

If you are then it's usually called a pre-pack administration and the new company would be a Phoenix.

However I'm by no means an expert on such things so I would wait until one of the accountants on here gives their view.

 

[The Resolver]

First issue is the name. It sounds as if it could be too similar and so could confuse the public and creditors into thinking its oldco. In that case directors of old co (and this will be not just your partner but yourself since you say you ran oldco and thus are at risk of being considered a 'shadow director' and therefore at risk of being held to have same liabilities in law as a director) will be committing an offence if you do not come within one of the exemptions. There are only two available being either newco buys the assets and name from a liquidator/receiver/administrator of oldco (dependent on what form of insolvency solution oldco follows) and a formal notice is filed in the London Gazette, or you obtain a court order authorising the use of the new name (you must apply quickly within 7 days of the liquidation).

You have to be careful you fully buy the appropriate assets with attention given to IPR (Intellectual Property Rights) ie web domain name, website itself (the code), software, designs and images, marketing material as well as goodwill (customer/./supplier contacts) etc etc. You negotiate a fair price. IPR can sell for very little as usually there is no real market but best to ensure it properly and legally transfers in a way that is protected from challenge by a disgruntled creditor.

You need to be careful who you select as an Insolvency Practitioner to be the liquidator. Basically you agree a fixed price and he agrees to the sale a to newco and to support that to creditors in his report as a better outcome than just selling off the assets separately. Obviously these arrangements, whilst perfectly lawful, can still be open to challenge (eg over the value being paid). Your main concern is to ensure no creditor challenge. HMRC will usually be OK so long as its done properly and you use an IP not under question by HMRC previously. But you say you have one big creditor. Best to explain things to them if you have a good relationship with them. You will need their support - to vote in favour at the creditors meeting. BTW do not, as you suggest, do nothing and 'wait for a winding up order' - you need to control everything form here on to lead to a creditors voluntary liquidation not a compulsory liquidation where you will have no control) .

As to choice of IP there are big accountancy and insolvency specialist firms who charge high and individuals with lower accountancy qualification who offer low fees. In each case, but especially the latter, there are trustworthy and highly experienced individuals and others less so. I assume the business and finances are fairly straight forward so the work to be done should not be much. The more work you can do the lower the fee you can negotiate. So if you can ensure the books are up to date and simple to follow and you have a full and complete list of creditors and debtors with balances making his Report work much less time consuming, you can negotiate a lower fee.Its all about negotiating. Do not accept the first quote - get at least three and even then offer and negotiate a lower fee. They are often very commercial.

One thing you have to be careful about is whether you have a competitor who may fancy bidding for the business. Even though you pre-arrange a purchase as I set out above, the liquidator cannot ignore a higher offer.If you have a direct competitor then the business is worth more to them (because buying it kills off a competitor and may enable them to increase their prices eg if a two horse market) than to you. If one of the assets is key equipment that enables you to make the product then be careful when discussing with your major creditor since they may wish to compete for the equipment.

You need a thought out strategy not just to decide to 'launch a phoenix'. I have worked with a number of IPs and can introduce you to some to quote fees. Also happy to help with strategy but would need more detail of your business. PM if want to talk in private.

 

[carl24bpool]

Firstly thanks for taking the timee to write such a detailed reply.

Our company is a small, virtually one man band which is me. I sell, design, buy and install our products.

As far as assets go we only have a website and a few tools. The laptop is my personal computer and there is nothing else except for a list of clients.

To be honest we don't have any regular clients as such since all our work is tendered for and given based on price, not normally on the fact we have done work before for them.

I have heard many stories about companies just changing a small part of the name and getting away with it. How can this be the case if you say that this can be misleading? How do they get away with it?

I can completely change the name if it avoids a potential risk but I wanted to keep my web domain which is the intials of my cmpany name and can be used again if the name change sticks to the same initials.

 

[Deleted member 168452]

In a similar line of questioning.

It's really puzzling me and annoying me how these "Directors" have got away with what they are doing:

They set up there company xxx retail. ended up racking up massive debts in the company name, befriended a kid who was "a few slices short of a loaf" so to speak and put him on as a director of this company, stepped down and changed it's registered address.

They then opened up abc company, both of them are directors, same registered address as xxx retail was before it got "ditched" and operating out of the same premises, continuing the exact same business, while getting away with the thousands of pounds that they have "written off" as none of their creditors want to waste money chasing xxx retail as it isn't trading and has a "dummy director"

I just can't understand how this can be legal?

 

[alice_p]

I think the process as a whole is called pre-pack administration, where someone (you, in this case) buys the old companies assets and legally transfers them to the new company. And then this would be the phoenix company.

It's usually all a fairly rapid process and the business carries on 'seamlessly'

Are you asking if it would still be a phoenix if you liquidated the old company and started a new one? I think, technically, yes.

You'd need to get an IP on board who will know the ins and outs anyway.

http://www.clarkebell.com/what-phoenix-company << might be a little clearer? Hope this has helped.

 

[carl24bpool]

The problem is that I can;t afford an IP as I literally have no funds. Personal or business.

I am just going to setup a totally new company with a totally new name. Same address (my house) but neww web sote, logos etc.

The only other thing I will reuse is some photos and marketing materials which I will buy from the company in order to pay creditors. Only really a few photos so not much and the money I buy them with I'll pay myself back as salary owed anyway.

 

[arcon5]

Why not buy new tools and machinery (if only worth £400) and start trading under NewCompany. Any funds paid to oldCo you can leave in the company account so if any creditor does appoint an IP you don't have to try justify any transfer of assets or funds, yet state you had to seize trading due to insolvency as per your obligations as a director. Send a notice the company has seized trading to all creditors, welcoming them to appoint one.

If you want to continue with suppliers who you owe money to, there are ways around that. Like them charging NewCo '£x signup fee' x = oldCo debt. Technically still being owed money by oldCo but not really loosing out in real terms,

 

[Alan R Price]

Just to clarify the position, a phoenix company is any company that arises out of the insolvency or cessation of another company (as in the phoenix rising from the ashes). "Newco" effectively takes over the business of "Oldco" and there is no significant difference. A pre-packaged administration ("pre-pack") may involve a phoenixation of all or part of Oldco's business but many pheonixations arise via liquidation or even some form of informal winding up such as striking off.

If Oldco goes into liquidation and its directors want to be directors of Newco, which uses a name that is so similar as to suggest a connection with Oldco, they have to go through a formal process set out, principally, in section 216 of the Insolvency Act 1986. Failure to do so would be a criminal offence: this includes setting up as a sole trader with a similar name to Oldco. The restriction lasts for five years.

A director is somebody formally appointed as such by filing the necessary paperwork at Companies House ("de jure director"); somebody who is held out as a director although not formally appointed, for example he has it on his business card or signs correspondence as such ("de facto director"); or somebody on whose instructions or directions the directors were accustomed to act ("shadow director"). In the case above, OP is clearly a shadow director.

All three types of director are equally exposed to having their conduct examined of their company goes into liquidation or administration, or if they has been guilty of some sort of misconduct in running its operations.

 

[carl24bpool]

Thanks for the info Alan.

To save any risk I have decided to set up a new company and use a totally different name and totally different web site and a totally different logo.

I am even targeting a slightly different market on my web site so thsi will be a fresh company.

I don;t want to rip anyone off or screw anyone. I have been left in a big debt by a client going into administration and now I have nowhere else to go as they are not willing to agree repayment terms.

 

[Alan R Price]

Good luck, Carl. Thanks for acknowledging my input.

As an aside, I always recommend small business owners should obtain some business coaching or mentoring; or at least read some books on how to organise and structure their businesses. After all, most of us don't get any real training in how to run a business - we learn how to produce and deliver our goods or services but none of the stuff that goes on top of that - marketing, systems and processes, controls, budgeting, forecasting, structure, training etc. I've been working with a coach for eight years and it has helped me focus on and achieve all the things that need to be done in my business in addition to giving advice to clients - which is our core activity.

Have a look at "The E-Myth Revisited" by Michael Gerber as a start. It's a bit "American" but the messages it contains are fantastic!