Bust companies revived in ‘phoenix’ deals more likely to fail again, study finds
Source: The Guardian ·
Exclusive: research for the Guardian shows ‘pre-pack’ deals with former management also pay far less to creditorsThe boss whose twice-bust business appears to be backInsolvent businesses reacquired by their previous management in “pre-pack” administrations are much more likely to fail again and tend to repay far less to creditors, research for the Guardian suggests.The study is the latest to…
From the source
Insolvent businesses reacquired by their previous management in “pre-pack” administrations are much more likely to fail again and tend to repay far less to creditors, research for the Guardian suggests. The study is the latest to raise questions about the practice of “phoenixism” – accounting’s controversial art of liquidating companies to allow directors to return with a new entity, free of debts. The process tends to involve pre-pack administrations, where a supposed corporate rescue is agreed before commencing insolvency proceedings. These orchestrated deals often leave unsecured creditors nursing large losses. HM Revenue and Customs estimates that phoenixisms cost taxpayers hundreds of millions of pounds a year. Cases have included owners extracting millions of pounds in dividends and loans from businesses they subsequently arrange to buy back from administrators. The study was commissioned by the Guardian from Turnstone Intelligence, which used AI agents to read official…