Companies that phoenix!

[John Robson]

What do you think about companies that phoenix? I understand that companies sometimes go bust for reasons beyond their control especially in the current climate, but what are your views on companies that do this regularly? What about the suppliers who've lost money and what does this do to our industry's reputation? Should we have a collective response? Obviously there are two sides to the issue. Any thoughts are welcome.

[Andy Lenthall]

Like it Matt.
PSA Towers has been inundated with emails, mainly from freelancers, who have been left high and dry by a recent pre-pack administration. It is those and other self employed individuals that hold the key to the success of most of the companies in this sector. Most companies operate on a relatively low number of employed staff and use subcontractors to grow and shrink accordingly. Yes, there is a huge amount of blame to be laid at the door of those that don't run their businesses effectively by either losing control of their own finances or cutting their throats with their quotes but until self employed individuals start acting like businesses there will be people who can take advantage. It is awful to think that someone can 'phoenix' owing an individual many thousands of pound but it is also crazy as an individual to allow that kind of debt to mount. Who in this thread would can a freelancer who added interest to a bill over 30 days (it's a legal right)? I'd like to think that you'd pay, apologise and tighten up your purchase ledger.

The PSA council has had many many discussions about league tables for who pays freelancers best and worst. For us to start a scheme would be almost impossible; for companies to volunteer into such a scheme would certainly be easier.

Meanwhile, a little crystal ball gazing: A company, any company phoenixes. 'Larger' businesses trade through their loss (as it should only be a small proportion of their turnover if credit control is working). Meanwhile, sole traders have to pay the bills and haven't had any income for their last few jobs. New comapny offers slightly better rate and promises great terms to 'old' freelancers. When you're cold and hungry, any cash will do. What would you do?

And then in 3 year's time....

Please prove me wrong someone!

http://www.companyrescue.co.uk/company-rescue/guides/wrongful-tradi...

[Chris Simpson]

It is more than frustrating to work hard for a organiser, that suddenly 'goes down', leaving a trail of financial destruction behind, and then to suddenly reappear under a different name, and trading as if nothing has happened!.......you know who you are!

[Mike England]

Having studied Phoenix Trading as part of my LLM, any company should be immediately named and shamed and I know somebody in the insolvency service if you want to bring a particular wrongdoer to its attention. No doubt as the credit crunch bites harder you will see more and more of this, but effectively defaulting on creditors and then buying back your own company for 2p in the £ is an absolutely awful practice and I feel for any organisation who has lost out because of it.

However, be warned naming and shaming carries risks and there is always two sides to a story!

[John Mulhall]

I have read with interest the discussion on phoenixing.

We are experiencing something similar, but with a twist. A client of ours, a design house, rang to tell us that they would not be able to pay us as they were insolvent. A cheque was going through (not for the whole debt, just part), which subsequently bounced, although the director said that it would be honoured. Two weeks later after a bit of chasing we received CHAPS payment from their company bank account, which I assumed to have been frozen by a liquidator, which got me digging.

It transpired that the company has a petition to strike off by Companies House, as they have failed to comply with Company House rules - ie no Company Return or Accounts being submitted. It seems that if these documents are not submitted the company is struck off for non-trading. It also transpired, that one of the principals had been involved in a company that had been struck off for non compliance previously, although this is not publicly available information. After a conversation with their company secretary, in which he said that they were just walking away from the company, as it had no money, I was left baffled, as I understood that companies had to be formally wound up, to establish liabilities etc.

The scam appears to be that if Companies House strike a company off, there is no record of company default, and I guess that if the company appears to be non-trading, they don't pay PAYE, VAT or Corporation Tax, as if they did, they would appear on the radar, as it were.

We are looking at a number of actions to take, including a case of fraud against the directors as they set up a company two days before the telephone call to us with the same principals etc, obviously carrying out the same business, and we may be able to attach our debt to the new company as they are fundamentally the same.

If anyone has any thoughts or experience in this type of matter, we would welcome it, as this company seems to have carried out this way of trading for a while.

[Nick de Bois]

The Phoenix company will not go away so long as clients and suppliers continue to trade with them in their new lives ( presumably in the vain hope they might get some money back that they lost originally), and significantly so long as liquidators and administrators continue to allow Directors of failed companies to start up again. You don't have to look beyond summer of 2007 when a plc put a number of its companies into administration, with reported debts of £50 million, and before you knew it a new company was formed with a number of the old Directors on board that kept some of the 'quality' business. Now if companies of that size can get away with it, rest assured smaller businesses will be able to do it. The system is wrong in that administrators first responsibility is not to creditors, but to ensure they get their fee's. Change that, and we can make a start to put things right.

[Karin Taylor]

We have recently heard from several performers of an entertainment agency in the UK who has gone bust owing some performers over £4k then reformed under another name doing the same thing.. Although these are indeed difficult times its one thing to go bankrupt; but to owe performers such large sums then re-brand is nothing short of shocking
and immoral

[Roy Clark]

So why don't you name and shame them (the New Company), so other performers don,t fall into the same trap, the problem in these hard times is everybody is ducking and diving, blacklist them and the performers who still want to work for them can ask for there fee's upfront or not work for them, if they all did this maybe this new company would not survive, but, we all have our ex,s

[John Robson]

Yes, it's those guys you feel most sorry for. It is immoral although there are often extenuating circumstances, probably none more so than the current economic environment. I don't think that the goverment has any stomach for changing this, especially at the moment, because a trading company in whatever form employs people, pays PAYE and VAT (most of the time) and may even, one day, pay tax to the Inland Revenue.

This is about the government turning a blind eye to poor practise. And the other thing you'll find is that to attack a pheonix as being illegal, you'll need an insolvency practioner to help you, but they very quickly close ranks! The system looks unbreakable to me and completed loaded against the little people.

[Mike Bell]

Well not phoenixing - but this will make you wonder - http://www.eventmagazine.co.uk/news/919942/Former-PSLL-managing-dir...