A phoenix company describes a business that is formed when the assets of an insolvent company are purchased out of a formal insolvency process, often by the existing company directors. After the insolvent company is closed, a new business begins to operate in the same way as before using the purchased assets.
The word ‘phoenix’ is given to these companies as in Greek mythology a phoenix bird cyclically regenerates and obtains new life by rising from the ashes of its predecessor.
When such a scenario occurs, creditors and observers frequently ask if this practice is legal, and it’s easy to see why. Often creditors, such as local authorities and water authorities, are obliged to accept such business rates customers without sanction and without question.
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