4R Business Recovery Phoenix Guide

Transcription

1 4R Business Recovery Phoenix Guide 4R Business Recovery Helping You Turnaround Your Business

2 A Few Words From Kevin Here at 4R Business Recovery, we understand that no two businesses are the same. Every day we help companies of all sizes turn things around against seemingly impossible odds. Regardless of your situation, we re here to help. This guide has been put together to help you understand what a Phoenix is and what it could mean to you. If you have any questions about what you see here, and would like to speak to one of our expert advisors, call or [email protected] Alternatively, if you would like to contact me at [email protected] I will be happy to answer any of your questions directly. I hope you find the guide useful. Our initial consultations are free and importantly totally confidential. We will work with you to devise an action plan that suits your circumstances. Kindest regards, Kevin Pritchard Managing Director 4R Business Recovery Ltd Key Points to Remember Liquidation or a Pre-Pack Liquidation is used to close down the old company Purchasing the business means that you and your co directors, the people who know it best are still in charge to take it forwards in a better position The new phoenix company is completely debt free Your staff and their jobs are protected There are regulations to comply with, so seek expert advice What is a Phoenix Company? An Introduction to Phoenix Companies Your company has failed and you are on the edge of going under due to debt so a successor or phoenix company is one that s set up to take over from a failed or insolvent business. The old company is sold to the original directors or shareholders. Assets, goodwill, and intellectual property rights, premises and staff become part of the new business. You are able to continue trading without debt, offering a second chance at success. However there are legal implications and regulations that will need to be followed so it is paramount to get an expert on board before it is too late. A phoenix company is a term that describes the process by which an insolvent company is liquidated and closed and the assets sold to a new or phoenix company that is controlled by connected parties such as the original directors or shareholders. Typically the assets are pre packed and the business or its assets are sold as part of a formal insolvency process such as Liquidation or a Pre Pack Liquidation. A phoenix company is a powerful way to rescue the value within a failing business. Essentially, the old company is closed, and the business or assets are independently valued and bought by the original directors or shareholders. As all the debts are written off and unsecured creditors face a potential loss [although not always] doing a phoenix does carry with it negative connotations with directors seen to be walking away from the old company burdened with debts and starting afresh debt free. However, 4R believe that a pre packed liquidation or phoenix is a important tool in preserving value for both creditors and shareholders as the original directors and shareholders understand the business model and this allows them a second chance to both create wealth, retain jobs and boost the economy. Why Create One? Creating a phoenix company is a good way to save an insolvent but viable business. You probably have debts that you can t pay but you are also questioning yourself as to where it all went wrong. Subject to certain rules and regulations, you have the ability to purchase the goodwill, intellectual property rights and assets of the old business. In reality there s very little change. This means that your employees can keep their jobs and customers and suppliers can be transferred over to the new company giving your business a new lease of life. Although debts are written off, setting up a phoenix company shouldn t be seen as a quick fix. Restructuring and other changes may be necessary to ensure that the new company does not see the same problems that the old company has faced.

3 What are the Rules? The process of setting up a phoenix company is often viewed negatively by creditors. That s because unscrupulous directors have used the procedure to dump their debts and start again and sometimes more than once. You must be seen to be acting in the interest of creditors at all times. It s important to follow the regulations laid out in the Insolvency Act 1986, Enterprise Act 2002 and specifically ensure compliance with Section 216 and the Statement of Insolvency Practice 16. The original business has to have no real prospect of continuing in its current form, and would normally be subject to a formal insolvency process. The assets have to be independently valued by a chartered surveyor [4R can organise this for you] and purchased for the best possible price ensuring the creditors interests are not compromised. The trading name of the new company is not the same or similar to that of the old liquidated company. When a business is transferred from one company to another whether it is in insolvent or not then TUPE regulations apply. This is a very complex issue which can significantly change the restructuring strategy and route taken and we strongly advise directors to seek further advice on the TUPE implications. There are certain rules that surround reusing the company name, and the sale of the company must be fair and transparent. If these rules are not followed correctly it could result in an investigation into the conduct of the directors. This is why it is important for you to seek expert help so that you have peace of mind throughout the whole process.

4 When Can I Use the Same Company Name? Liquidation or Pre-Pack Administration? The new company can t use a name that s been used by the old one within the last year. Similar names which imply a connection between the two companies are also banned. These are known as prohibited names. However, Section 216 provides for three exceptions: You can notify creditors of the intention to retain the name and publish a notice in the London Gazette in certain cases. Call us for advice You can ask the court for an exception to be made. If the company has been trading under the name for 12 months already, it can continue to use the same name. This may apply if you have a number of companies with similar names, such as Fox Fashion and Fox Clothing. If one is liquidated, the others aren t required to change name. There are two insolvency procedures that can be used to create a phoenix company: creditors voluntary liquidation and pre-pack administration. Pre-Pack Administration is most common (click the link to find out more). This involves an insolvency practitioner planning the sale of the company before it goes into administration. It can then go into administration and be sold quickly in some cases, on the same day. Creditor s Voluntary Liquidation involves winding up the business and selling off its assets. There is nothing set out in the rules to stop the current directors buying these so that everything gets transferred over correctly.

5 Should I Get Advice? Definitely. Although phoenix companies are legal, it s essential to follow the regulations to the letter. If you don t, you could be liable for the new company s debts, fined or even imprisoned. Done properly, a business phoenix can completely turn a company around. Here at 4R Business Recovery we know the process very well and may even be able to advise you of an even better way of dealing with the troubles (for example a Company Voluntary Arrangement may offer a better solution for your business) that you and your business are facing. If your business is under threat, contact 4R Business Recovery for an initial consultation completely FREE of charge. We will advise you on what is best for your business. We are here to put your mind at rest and enable you to go forward in a positive frame of mind. Simply call us today on to speak with one of our expert advisors, or contact us through a simple form online via our website. Head Office The Old Vicarage Market Street Castle Donnington Derbyshire DE74 2JB t f e [email protected] w