Phoenix Company

A phoenix company is a new company formed to continue the business of a previous company that has entered insolvent liquidation, often with the same or similar directors, the same trading name, and using the same assets purchased from the liquidator at a reduced price. Section 216 of the Insolvency Act 1986 restricts the re-use of a company name that is the same as or similar to the name of a company that has gone into insolvent liquidation.

In practice

Under s.216, a person who was a director of a company at any time in the 12 months before it went into liquidation may not, for five years, be a director of or be involved in the management of a company using a prohibited name without the court's permission or compliance with the Insolvency Rules exceptions (such as acquiring the whole or substantially the whole of the business from the liquidator under arrangements approved by creditors). Breach of s.216 is a criminal offence and imposes personal liability for the new company's debts under s.217.