Companies going bankrupt and starting up again
Discussion
Makes my blood boil.
Yet another symptom of the greedy, corrupt, immoral b
ds that flourish in the totally fked-up country we live in.
Do you:
Work hard?
Pay taxes?
Recognise and meet your responsibilities to staff, family, community, other businesses?
If so - I'm afraid you are terminally "old school" and will spend the rest of your life working your bks off to support everyone else.
Yet another symptom of the greedy, corrupt, immoral b
ds that flourish in the totally fked-up country we live in.Do you:
Work hard?
Pay taxes?
Recognise and meet your responsibilities to staff, family, community, other businesses?
If so - I'm afraid you are terminally "old school" and will spend the rest of your life working your b
ks off to support everyone else.Companies can't go "bankrupt".
They can, of course, go into liquidation.
Many companies go out of business because of exterior factors beyond the contyrol of the directors.
Obviously, the ones that go out of business because the directors have behaved fraudulently are beyond the pale. The problem is that proving deliberate fraud can be extremely difficult. Most cases brought by the Serious Fraud Office fail - because fraud implies criminal intent - and that is very hard to prove in court.
There are lesser charges of trading recklessly or trading negligently which require reduced levels of proof against the directors. But even these cases tend to fail.
Directors usually claim that they were trying to trade their way out of the situation and it is very hard to show that they weren't.
They can, of course, go into liquidation.
Many companies go out of business because of exterior factors beyond the contyrol of the directors.
Obviously, the ones that go out of business because the directors have behaved fraudulently are beyond the pale. The problem is that proving deliberate fraud can be extremely difficult. Most cases brought by the Serious Fraud Office fail - because fraud implies criminal intent - and that is very hard to prove in court.
There are lesser charges of trading recklessly or trading negligently which require reduced levels of proof against the directors. But even these cases tend to fail.
Directors usually claim that they were trying to trade their way out of the situation and it is very hard to show that they weren't.
Eric Mc said:
Companies can't go "bankrupt".
They can, of course, go into liquidation.
Many companies go out of business because of exterior factors beyond the contyrol of the directors.
Obviously, the ones that go out of business because the directors have behaved fraudulently are beyond the pale. The problem is that proving deliberate fraud can be extremely difficult. Most cases brought by the Serious Fraud Office fail - because fraud implies criminal intent - and that is very hard to prove in court.
There are lesser charges of trading recklessly or trading negligently which require reduced levels of proof against the directors. But even these cases tend to fail.
Directors usually claim that they were trying to trade their way out of the situation and it is very hard to show that they weren't.
But we have all seen clear examples of phoenix or pre-pack or whatever you want to call it. We have been shafted on several occasions by companies going into receivership ' administration / liquidation and the results are always the same:They can, of course, go into liquidation.
Many companies go out of business because of exterior factors beyond the contyrol of the directors.
Obviously, the ones that go out of business because the directors have behaved fraudulently are beyond the pale. The problem is that proving deliberate fraud can be extremely difficult. Most cases brought by the Serious Fraud Office fail - because fraud implies criminal intent - and that is very hard to prove in court.
There are lesser charges of trading recklessly or trading negligently which require reduced levels of proof against the directors. But even these cases tend to fail.
Directors usually claim that they were trying to trade their way out of the situation and it is very hard to show that they weren't.
1. The receivers spend 8 months to produce a report that says there's £X assets that have been realised in the business and preferential creditors have been paid - and funnily enough the receivers' bill comes to... £X. So nothing left for anyone else.
2. The b
ds that went bust pop up with a slightly different name, same staff, same premises, same customers but with the luxury of having abandoned all of their debt.What should happen, of course, is that hard working, prudent competitors who haven't burdened themselves with debt should be able to step in and take over the business. Then at least there'd be some sort of balancing / correction / justice - but of course that would never do.
I'm in SUCH a bad mood today!!!!!
And imagine the fights as each competing "takeover" company/supplier/customer argued over who had the most "right" to run the demised operation.
Wouldn't work, I'm afarid.
And, as I said, lots of businesses fail for legitimate reasons. Trying to ascertain if the directors have actually done anything wrong is not easy.
Wouldn't work, I'm afarid.
And, as I said, lots of businesses fail for legitimate reasons. Trying to ascertain if the directors have actually done anything wrong is not easy.
It happens a lot, there's a chef just done it. Had something like £3m of debt, he made a deal with some new investors, that they'd buy the company off of the administrators and he'd run it. So they put it in to liquidation, and he's back doing the same as before but all his suppliers etc. have been screwed.
http://www.timesonline.co.uk/tol/life_and_style/fo...
http://www.timesonline.co.uk/tol/life_and_style/fo...
Until the law changes and is enforceable, this will keep happening. The only solution is obtaining a Directors guarantee for the debts, but that is not fool proof and hard to obtain in most cases.
Surely for a second or third offence the "directors" should be banned from ever running a company again or even being a shareholder (common way to get around not being a director)but I guess thats not going to be practical.
Surely for a second or third offence the "directors" should be banned from ever running a company again or even being a shareholder (common way to get around not being a director)but I guess thats not going to be practical.
Eric Mc said:
And imagine the fights as each competing "takeover" company/supplier/customer argued over who had the most "right" to run the demised operation.
Wouldn't work, I'm afarid.
And, as I said, lots of businesses fail for legitimate reasons. Trying to ascertain if the directors have actually done anything wrong is not easy.
The way it should work, is that the administrator could sell the assets / business as a going concern to the best bidder - in terms of (a) price offered and (b) likelihood of preserving jobs etc...Wouldn't work, I'm afarid.
And, as I said, lots of businesses fail for legitimate reasons. Trying to ascertain if the directors have actually done anything wrong is not easy.
ShadownINja said:
I've noticed a quite a few threads about this. It appears to be something that's done with impunity so:
1) What exactly do they do? Just close the limited company and start another?
2) How can we work out if a person has done this and left a lot of creditors demanding their blood?
A very brief explanation:1) What exactly do they do? Just close the limited company and start another?
2) How can we work out if a person has done this and left a lot of creditors demanding their blood?
Essentially this all stems from the concept of limited liability - if a limited liability company fails then the shareholders do not have any further liability towards creditors. The directors may have personal liability if they have been wrongfully trading (i.e. knew that the Company was insolvent and didn't take steps to improve the situation).
It is a fundamental part of the concept of limited liability that the shareholders can walk away from an insolvent company. They are free at any time to set up another company and compete with the original company (but it remains important to distinguish the assets of the original company, and the shareholders personally - for example they would not be able to use the intellectual property of the company, or its goodwill).
Where a company goes into administration, the running of the company is handed over to professional administrators who try to make as much money for creditors as they can out of the assets of the Company. Administrators can be appointed by either the directors, or by a creditor.
A pre-pack deal is one where the proposed administrator negotiates a deal for the sale of assets prior to him actually being appointed - usually this is in onjunction with the senior secured creditor. Sometimes, but not always, the assets are sold to a new company set up by directors/shareholders of the old company - this is often because they are the people who know the business best, and so are prepared to pay the administrators more for the business than a third party would.
There are rules which prevent the new company being set up by the same people and with the same name, and court permission is required. However, as most people know, there is nothing to prevent similar names being used.
Pre-packs are being portrayed by the media as cons - this is not really the case. Essentially they are just exercises to obtain maximum benefit to the creditors. It is the danger of phoenix companies that is of concern, and this is the reason why there are quite lengthy rules and court procedures regarding them. As usual, the media are confusing themselves with the details.
So how do you know if a pre-pack has taken place? It depends who you are. If you are a creditor, then the Company will let you know it went into administration, and usually tells you that the business has been transferred to the new company. Since 1 Jan 09 the Administrators are under a greater duty to provide creditors with information than previously, including details of their involvement prior to being appointed, and any valuations obtained. Depending on the terms of the transfer, the assets of the company may have been transferred subject to the liabilities, and so you can chase newco for payment. The administrators will be able to let you know.
It is also worth considering why companies go into administration - not always through the fault of the directors/shareholders. Quite often it can be caused by a substantial bad debt, or a supplier/customer going under. this does not always meant the underlying business is at fault. Of course this is little comfort to an unsecured creditor, but is the price we pay for limited liability. And of course there is always the fact that you do not have to do business with the new company - or can do so on new terms (especially in respect of any credit offered).
Unfortunately there is nothing anyone can do in the current climate about companies folding - it's going to happen more and more. The best protection is to ensure that you have good systems where you give credit, good terms and conditions, and maintain good relationships with customers and suppliers so that you are kept informed as to the state of their businesses. Prevention is better than cure and all that.
Thanks for the replies. Until the law is changed, is there any way of finding out if a business has been "phoenixed"? I certainly wouldn't want their business unless I got cold hard cash in a briefcase.
A see an idea for a name and shame website. Dunno how legal it is even if it is just saying, "Fred Bloggs, director of Acme C Buildings Limited, formerly director of Acme B Buildings Limited" with a reason why they went pop and how much was owed to creditors. Let others read between the lines.
A see an idea for a name and shame website. Dunno how legal it is even if it is just saying, "Fred Bloggs, director of Acme C Buildings Limited, formerly director of Acme B Buildings Limited" with a reason why they went pop and how much was owed to creditors. Let others read between the lines.
ShadownINja said:
Thanks for the replies. Until the law is changed, is there any way of finding out if a business has been "phoenixed"? I certainly wouldn't want their business unless I got cold hard cash in a briefcase.
A see an idea for a name and shame website. Dunno how legal it is even if it is just saying, "Fred Bloggs, director of Acme C Buildings Limited, formerly director of Acme B Buildings Limited" with a reason why they went pop and how much was owed to creditors. Let others read between the lines.
If you were a creditor of the old business, you would have received notice of the change.A see an idea for a name and shame website. Dunno how legal it is even if it is just saying, "Fred Bloggs, director of Acme C Buildings Limited, formerly director of Acme B Buildings Limited" with a reason why they went pop and how much was owed to creditors. Let others read between the lines.
Otherwise, there is no way of knowing.
But don't fall into the trap of thinking that all businesses bought out of administration are any riskier than others. There is a risk attached to any business.Just make sure your credit approval systems are good, and that all contracts are watertight.
Howell811 said:
Would have paid my house off if I had the money from the people who have done this to me !
Yeah, well I had a customer go bust on me - twice! Which is a little humiliating. After they went bust owing us money the first time, we figured that as long as we were never exposed again, we would agree to do business with the new company - that way at least we'd stand a chance of getting something back off them. Which we did, but not anything like the amount the first company owed us.And then they went bust again.
therealpigdog said:
ShadownINja said:
Thanks for the replies. Until the law is changed, is there any way of finding out if a business has been "phoenixed"? I certainly wouldn't want their business unless I got cold hard cash in a briefcase.
A see an idea for a name and shame website. Dunno how legal it is even if it is just saying, "Fred Bloggs, director of Acme C Buildings Limited, formerly director of Acme B Buildings Limited" with a reason why they went pop and how much was owed to creditors. Let others read between the lines.
If you were a creditor of the old business, you would have received notice of the change.A see an idea for a name and shame website. Dunno how legal it is even if it is just saying, "Fred Bloggs, director of Acme C Buildings Limited, formerly director of Acme B Buildings Limited" with a reason why they went pop and how much was owed to creditors. Let others read between the lines.
Otherwise, there is no way of knowing.
But don't fall into the trap of thinking that all businesses bought out of administration are any riskier than others. There is a risk attached to any business.Just make sure your credit approval systems are good, and that all contracts are watertight.
Gassing Station | Business | Top of Page | What's New | My Stuff