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Clipping the wings of phoenix companies

Accounting, Businesses, Law l

Companies can fail for several reasons and, for the most part, these aren’t the result of wrongdoing by the directors. For this reason, it’s perfectly legal to start a new company after an old one has become insolvent.

However, there are a number of rules that surround carrying on a similar business through a new company after the original company has gone into insolvency.

Known as ‘phoenixing’, this practice transfers the business, but not the debts, of the insolvent company to a new company.

But what is the problem with phoenixing, and what does the law say about it?

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