13/11/2009 - Urge for 'phoenix firms' clampdown
A business guidance service claims a probe into the corporate insolvency market must look into the problem of phoenix companies resuming again under a new name - while their smaller creditors stay unpaid.
The investigation was launched amid concerns that the price of entering administration was too high when compared with fees paid by other countries.
The Forum of Private Business (FPBs), which has been called to provide submissions to the inquiry, believes the investigation must focus specifically on phoenix companies and directors who abuse the process.
Also scrutinised will be the steep costs charged by insolvency practitioners, the high cost of closing a business and UK creditors' general rates of recovery.
Matt Goodman, the FPBs Policy Representative, said: "When a business drops out of the market, banks and the Government take their cut. But what about the small business which has supplied that company and has never been paid?"
He added: "Or, if a competitor wipes the slate clean of debts and carries on trading, where does that leave those small businesses struggling with their own finances?"
A phoenix company is one where the assets of one limited company facing liquidation are moved to another business. Some or all of the directors often stay put, and the new business regularly operates in the same area as its predecessor.
Copyright © Press Association 2009
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