THE PHOENIX

For those (and there must be a few) who are unaware of Phoenix companies, let me explain that when a Receiver or Liquidator sells the assets of a failing company back to the people who were in charge when it failed, the resultant new company is called a Phoenix - because it ‘rises from the ashes’ of the old one.

Not all Phoenix companies are bad news.  Rapid transfer of the assets and goodwill of a company can ensure continuity of business - and employment for the majority, if not all, of the staff.  Also, it is claimed that it maximises the realisation of the assets, to the creditors’ advantage (sic).  However it is fundamental to the ‘rising’ that all creditors are left with are the liquidated assets and, for the moment anyway, most of those tend to go to Government agencies, such as the Inland Revenue and Customs & Excise.

In this respect, readers may already know that the government is well on the way to surrendering its preferential creditor status in liquidations.  Hurrah for common sense!

What sticks in the throats of many creditors are those cases when a company fails and a receiver is appointed and, almost before the creditors are aware that they have a problem, the company has changed its name (to, for example FDG Realisations Ltd) and a new, shelf company has changed its name to ‘Original Company Ltd’ and, to all intents and purposes, continued trading.

Most recently the failure of Converta Ltd & M & TJ Ltd caused a nasty smell and, hopefully, a bloody nose for a certain firm of business advisers who are NOT insolvency practitioners.

This firm had called a meeting of creditors for 8th November.  At almost no notice they switched the date to 29th October, obviously hoping that the majority of creditors would not be able to make the revised date.

In doing this they violated one of the principal rules of Insolvency, the requirement to give 14 days’ notice of the meeting but, since they are not Insolvency Practitioners, they could not be disbarred, so what the hey!

Boy, did they get a shock!  One creditor, Ken Budgen of Wilmot Budgen (long may his star shine!) got together a group of creditors who are members of ICSM and appeared at the meeting with a representative of Grant Thornton, one of the most reputable firms of accountants and licensed insolvency practitioners in the country.

Two other major creditors had also seen the light and appeared with their own IP’s in tow, so that Moore Stephens Booth White and Deloitte Touche representative witnessed the discomforting of the ungodly.

However, even this august gathering was upstaged by Levy Gee, who, two (working!) days earlier, had been instructed by the failing companies’ bankers and appointed receivers of their assets, some of which, it is rumoured, had been disposed of already.

The upshot of all this activity, hopefully, will be that it is impossible for anything underhand or disadvantageous to the creditors to take place.  The reason I have told this tale at length, apart from its topicality, is that concerted effort by a number of creditors can snooker attempts to fudge the results of incompetence or even outright dishonesty to the disadvantage of creditors who, rightly, feel that they have been well and truly had!

Further to that, if we can identify the firm or firms who are encouraging a less than open dissolution of a failing company, we can ‘shop’ them to the DTI and the Insolvency Agency and thus curtail their activities.

This is a rallying call!
ICSM is willing to put our resources at the disposal of our members and members of the BPIF to create more outcomes similar to the above example.

Here’s how it works.
If you are an ICSM member and we know of an impending closure, you will get an e-mail (or fax if you don’t have e-mail) asking you if you have dealings with ‘company X’.  If you do, contact Andy Allies.

If you are not yet an ICSM member, watch the ‘coming soon’ column for potential problems!

We will need the balance that company X owes you, so a faxed copy statement at this point will be helpful.  We will also want a conditional authority to act as your proxy should a meeting of creditors or an actual liquidation occur.  We will provide any members who want it with such a document, to be invoked as and when you wish.

Armed with this information and authority, our representative (from a licensed firm of Insolvency Practitioners) will attend any such meeting and endeavour to swing control of any subsequent acts of insolvency our way.  Even if he fails he will be able to ensure that affairs are conducted in accordance with the law and will be able to initiate action against any less than ethical practices which obtain at or as a result of that meeting.

If you are NOT a member of ICSM or BPIF - a) you are strongly recommended to join! - and b) you can lodge your information via Printing World, who have honorary membership of ICSM and will provide an umbrella membership for your information.