To wonder how a company can do this?! (Someone business minded would know!)

[BlueNeighbourhood]

I work in an industry whereby it's my job to know about other companies in the local area and what they are doing and offering and staffing levels.

I came across a certain company a while ago as I went to school with the girlfriend of the owner of the business. It turns out the owner was interviewed by my present company who had a less than favourable review of him and that he's arrogant, condescending and not a good people person. Anyway, these two have a company they set up, lets call it Computer Farm.

After about a year they filed for liquidation, I read the report and they owed around £600k to their creditors mainly which were Revenue & Customs and their building that they rent/bought. They had quite a few employees, all salespeople and a couple of marketing.

After a couple of months of being in liquidation, today I'm astonished to come online and find out they've changed the company name to Desk Farm and are trading again in the same building, same staff, same everything.

How does someone get away with this? Obviously said person can't have much business sense if they managed to rack up £600k of debt in the space of a year and go into voluntary liquidation, but how are they allowed to set up again the same company in the same building with a different name? Surely they'll just end up owing all this money again?

Someone please explain as it's like a cowboy getting away with it!

It's not so much that they have no business sense, more that they know exactly how to (probably) milk Computer Farm dry through dividends or other unchaseable financial extractions from the company to the Directors; while racking up debt to places like HMRC to pay the running costs. Then they use legally permitted options to wind it up as insolvent and therefore unable to continue trading.

They'll do it as many times as they can - have a look for Phoenix companies if you want to learn more about how they don't get done.

Was going to say it's a fairly standard Phoenix arrangement and legal sadly!

Yup pretty standard and highly annoying/immoral!

The Government have been looking at this problem for a few years
www.gov.uk/government/publications/phoenix-companies-and-the-role-of-the-insolvency-service/phoenix-companies-and-the-role-of-the-insolvency-service

The main reason I don't get it is that surely your landlord and suppliers wouldn't touch you with a barge pole again.

Honestly, we have a limited company and I still can't get my head round how this is done. Clearly we need a dodgier accountant ;)

Loads of companies do this sadly.

We are currently suing a supplier for a debt action who has a 15 year history of racking u debt, winding up and restarting with the same staff etc. Clearly we did not know this before entering into business with them, but we'll double-check everyone next time!

Hopefully they get caught up with eventually- we have the fraud squad working with us on ours.

On a very small scale, my plumber did this (I think its similar) - he set up company A, and then later company AB. He ran both for a while, then when company A was insolvent/being sued by customers, he dissolved it, and then kept running company AB. The only difference was it was AB, not A - literally he changed one word in the name as you have illustrated above, and then carried on regardless. Because of this, our court case was thrown out.

I wil have a look at Chaz's link, interesting as I really feel this needs addressing.

I have never heard of phoenix companies. This is my lesson of the day from Mumsnet!

They probably did this all legally, and on the contrary - it takes a lot of business sense to do this properly. They probably don’t have the best of reputations in their supplier chain - you might want to ask around and get feedback/comments.

Yup, phoenix.
I remember it being a problem with letting agents 15ish years ago. While some of them went under due to incompetence, with others it was surely deliberate: minimum overheads, collect money from landlords, collect money from tenants, don't carry out any work, bugger off with the loot. Rinse & repeat.

SEW At least your company has the option of choosing who it does business with. I work in a public sector org, and we have to serve all comers. The most we can do is require a company to clear their debts before they get any further work from uswhich won't work with phoenixes. Our finance section does flag up uncreditworthy companies, from whom we then require advance paymentbut again, I'm not sure that would weed out those with no prior (poor) history in that company name.

We bought our house off a chap who has done this several times and used the house as his registered office. We have seen off several sets of bailiffs and still he trades in the same business under yet another permutation of the same name. It shouldn't be allowed but it's why some people chose to trade as limited companies.

Happens all the time. We see it a lot in our industry. Close as Jane's A. Open as Jane's B.

Are you seriously surprised?

Yup, phoenix companies. As in they rise from the ashes of a former company. Some big companies do this too - like when Rangers FC went bankrupt in Glasgow, a new company was formed with the same building, same team and lots of the same management.

AFAIK unless a director is struck off and banned from acting as a director again, there is not much which can be done. And in those circumstances, the dodgy company director will just put everything in the name of a relative.

This does happen all the time, however HMRC will most likely catch up with them at some point if this is a sole trade. If its a limited company they may well be banned from being a director which is easy to find out on companies house and if thats the case they could be caught up with through this. But its all about the right people making complaints and bringing it to the authorities attention and unfortunatly thats a rubbish system.

HMRC are increasingly picking up on this I've had two clients this year stung with a request for an upfront payment for PAYE and VAT in the new company. (One reasonably, one not)

If the directors deliberately ran the company whilst insolvent and you lost money you can try to sue them personally - this is also becoming more common.

HMRC havn't a clue - they often cause phoenix situations by seemingly preferring to receive nothing rather than arranging a payment plan (sounds crazy, but I've seen it enough times to know it's what happens).

HMRC often don't object to a company being struck off when it owes them money.

They really aren't fit for purpose and need some massive reform as the left hand really doesn't know what the right hand is doing.

Yes to what Kazzy said.

The company that owned Rileys snooker clubs did this over and over. At least 3 times, leaving behinds millions in debt, then starting up again the next day with a slightly different name, and hundreds of people without a job as they closed clubs with no notice.

DH got to work one day to be told that his club was closed and he was out of a job and that they wouldnt be paying him or his staff their wages, redundancy etc. This was 6 weeks before Xmas. Perfectly legal

news.sky.com/story/sports-bar-owner-rileys-to-score-with-sale-10397561

This implies that the new owners of the chain took over from a different company but Maurice Kelly was the CEO of that original company, shedding the debt that his company built up and then starting again. The 2012 aquisition was when DH lost his job, the 2014 fuck up was when they did it again, closing clubs with no notice, severance pay etc.

He has held 29 directorships, all but 2 of which have been dissolved, connected wih he Rileys clubs. What helped me sleep in those dark days was the thought that he would get his comeuppance one day. 5 years later, and no sign of it happening yet :(

This happened to a company I worked for.

I know a company who did this. Twats owed us and HMRC money bust the company and get ho start all over again with a new name. Totally immoral.

My first boss used to do this fairly regularly, he himself was also bankrupt and yet still running the company usually with a non-director title

I saw this on a show about bailiffs/sheriffs. Used car dealer selling cars which hadn't passed their MOT. Court ordered them to refund several customers. When the sheriffs went to collect payment, the company had rebranded slightly and the new director was the old director's son I think, so the sheriffs couldn't make them pay.

Kazzy Thats because they always get whats left before anyone else so to them a 10% return on the money owed is a good return, HMRC will go after individuals quicker than companies because there are assets there to take, house, car, goods etc...

Banks bring down companies. Although they are justs as corupt most of the time.

the company had rebranded slightly and the new director was the old director's son I think, so the sheriffs couldn't make them pay.

Yes but closing the old company and starting a new one has to be done properly - and people who are experts at the phoenix company game know that. You can't close on a Friday as Sally's Cakes and open on a Monday as Jane's Cakes - changes have to be registered with Companies House, you need new bank accounts, new liability insrurance etc etc.

Kazzy Thats because they always get whats left before anyone else

No they don't, they're not a preferential creditor anymore - changed a few years back. They get the same share as everyone else IF there is any money left, but usually there isn't, so get nothing. Worse still, they may not even know monies are due to them if returns haven't been made, and make no attempt to find out how much is due or push for returns to be submitted. HMRC should be first in the queue to push for prosecution and banning of the directors from doing it again, but just don't. At the end of the day, they just can't be bothered - it's in their "too hard" tray so just ignore it and attack easier targets instead.