Woman wearing an apron opening up a shop
May 2022 | Credit Decisions | Fraud
By Posted by Grant MacDonald

A phoenix business is a company established after the insolvency or dissolution of an unsuccessful business to continue the same or similar work

The business and assets are transferred, but not the debts. Often, a phoenix company is set up when the same directors buy the insolvent company’s business and assets when it goes into administration or liquidation, so they can start afresh debt-free.

Phoenixing

Phoenixing or phoenixism is the practice of setting up businesses multiple times to avoid paying debts.

Each time the company becomes insolvent, its business and assets are transferred to a new, similar company, so the same directors can carry on trading. Its debts aren’t transferred however – they stay with the insolvent company.

Phoenix business building image

Phoenix businesses do not always indicate fraudulent activity, although there can be cause for suspicion. For example, transferring assets, potentially below market value, is an indicator of fraud and could leave creditors, including employees and suppliers unpaid.

Read our infographic to spot the potential signs and protect yourself from financial crime