We are sharing the below information with Schemes for the purpose of signposting assessors to information to help them protect themselves against phoenix company fraud.
Phoenixing, or phoenixism, are terms used to describe the practice of carrying on the same business or trade successively through a series of companies where each becomes insolvent (can’t pay their debts) in turn. Each time this happens, the insolvent company’s business, but not its debts, is transferred to a new, similar ‘phoenix’ company. The insolvent company then ceases to trade and might enter into formal insolvency proceedings (liquidation, administration or administrative receivership) or be dissolved.
Action Fraud provides advice on phoenix companies and protecting against phoenix company fraud. See: https://www.actionfraud.police.uk/a-z-of-fraud/phoenix-company-fraud
Protect yourself against phoenix company fraud
Most phoenix companies are perfectly legitimate businesses. But, as with any new customer, you should vet them carefully first. In particular, follow up trade references and check the directors’ credentials.
Find out why the previous company failed and ensure the directors aren’t serial abusers of the phoenix company arrangement. You can find information on company directors from Companies House
or by getting hold of a status report from a credit ratings agency. Only extend trade credit if you are confident that you will be paid on time.
If you suspect that an individual is acting in breach of a disqualification or bankruptcy order, you should report them to the Insolvency Service. It’s a criminal offence to contravene a disqualification order or undertaking, a bankruptcy order, a bankruptcy restrictions order or undertaking. It’s also a criminal offence for another person to assist a disqualified person to act in this way.
Anyone who contravenes the order or undertaking could become personally liable for any debts a company incurs while the order or undertaking is contravened. Anybody who carries out that person’s instructions may also be personally liable.
To find out if a director is disqualified, you can search the disqualified directors register at Companies House
Further information on phoenix companies from the Insolvency Service can be found Gov.uk: https://www.gov.uk/government/publications/phoenix-companies-and-the-role-of-the-insolvency-service/phoenix-companies-and-the-role-of-the-insolvency-service
The arrangements that are in place and the information which is published, as detailed above, means that we do not regard the issue of phoenix companies as requiring an amendment to the Energy Performance of Buildings Regulations or to guidance that DLUHC publishes.