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PHOENIXING and PRE-PACKING
You may have previously heard the term PHOENIXING and PRE-PACKING – these are common terms for an insolvency procedure professionally known as PRE-PACK ADMINISTRATION.
In a nutshell, this is a process where the directors of an insolvent company start a new business; they then buy the assets of the old failed business. Instead of putting additional resources into an already insolvent company the directors are able to use the same funds to set up a new company to obtain the old assets.
Once the viable parts of the failed business have been transferred the new company can commence trading successfully without the failed business’s debts and any other liabilities. The old business is then normally liquidated along with the outstanding debts.
One of the benefits of PHOENIXING is that it offers stability for employees and suppliers.
PHOENIXING is normally considered when the directors believe that the company would be tenable if it could free itself from old debts and liabilities i.e. the main business is profitable on a month by month basis. This can be a very useful, legal process to allow this to be done.
If you would like to discuss PHOENIXING / PRE-PACKING / PRE-PACK ADMINISTRATION then please do not hesitate to contact us for an informal chat.
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