debt aviodance Company style - very devious

[kalla]

I hear that many frown upon personal debt aviodance through the explotative use of loopholes in the CCA 1976/2000.

Well, there is an even bigger bunch of debt avioders - companies.

There is a form of Insolvency called 'Packaged Insolvency'. In the 1930s, no such thing you own what you own and pay or Bankruptcy and then stigmatism.

Now, you can aviod debt as a trading firm - jettison the parts of the firm in debt and then let those creditors fight it out in liquidating those assets. You change your company name,and pay nothing and keep trading and mess up again then do the same thing! Hey presto your company debt free and keep the staff.

Creditors have gone mental about this and debt ridden comapanies have have been advised by insolvency experts to do it for a fee. Many court action had to rule on disputes on debt around this legislation. Very sordid indeed.

[kallis3]

I imagine our IP's will have something to say on that Kalla!

[kalla]

The story broke on Newnight last night so don't shoot the messenger, we don't hear much about company insolvencies but this is happening more and more.

How does a firm keep trading soon after it was forced it into administration.What happens to the debt it must have been writen off! Creditors are left with nothing....thats bad! These creitors are not always banks and so did not plight their credit trade.I have sympathies for them. Imaging the debtors now turning up as someone else and wants to do business???

[kallis3]

I wasn't. Just don't think our IP's would be very happy to be lumped together with others who might advocate the practise.

We don't hear much about companies on here as the vast majority of us are private individuals with problems. The companies who do post on here because of financial difficulties are usually ethical and want to deal with their debts, not walk away from them.

Having said that, I know it does happen - I always read Tony Hetherington in the Mail on Sunday and there are always companies on there who have done this.

[MelanieGiles]

Sorry to be cynical, but what I think Kalla is describing is a liquidation process commonly referred to as "phoenixism" which has been around for as many years as I have been in the profession.

Now commonly referred to as "pre-packages", there is nothing wrong in selling assets of an insolvent company back to the current directors for them to continue trading through another vehicle, so long as this is at full market value and after a period of proper exposure to the marketplace at large.

Repeat offenders of historical corporate insolvency are reported to the relevant government authority and it is up to them to take action against them such as disqualification, financial restoration or fines.

Trading with any entity involves an element of risk, and suppliers of services will no doubt do their own credit checking when deciding to trade on with a new entity.

[kallis3]

I stand corrected Melanie! Got hold of the wrong end of the stick!

[David Mond]

Melanie is right although the point in question is where it is "pre-planned" and the old company gores into Administration and the assets and/or business are then sold to either new persons or the old guard. This has become known as pre-packaged administrations. Insolvency Practitioners have to be careful and give full transparency and be mindful of Statement of Insolvency Practice 16.