It’s an interesting maxim to stress the importance of perseverance in business and for most businesses that phoenix (yes it can be a verb as well as a noun), it’s the underlying motivator.
Like the mythical bird of ancient myth, reconstituting itself from its own ashes, a phoenix company is one that reforms itself using the same premises, staff, equipment but less the old companies debts and financial obligations.
The majority of companies in the UK that fail do so for legitimate and understandable reasons. In these cases, phoenixing allows them to hit reset on their venture and start on a level playing field with every chance of future success. There have been some effective examples of this happening.
So why does phoenixing in business have such a bad name and why have the Insolvency Service and the Financial Conduct Authority (FCA) launched a working group to tackle the practice?
The Financial Services Compensation Scheme, the Financial Ombudsman Service and Scotland’s Accountant in Bankruptcy are also onboard to pool their knowledge and resources and look to “stopping rogue firms rising from the ashes?”
It’s curious to read about statutory financial protection agencies setting out to combat a perfectly legal practice & even respected sources like Money Marketing failing to make the distinction.
In the interests of fairness we feel obliged to state the bleedin’ obvious (because nobody else appears to be), that something essentially beneficial and good for business will always be jumped on by some shady characters who will ruin it for every honest business wanting to use the practice legitimately. So it has been with phoenixing.
Some companies will deliberately run down their business in order to relaunch it debt free, while others will look to reduce the value of their assets to transfer them to the new company at their advantage. Additionally some phoenix companies will be created by people banned from being involved with a business through their previous bad and illegal behaviour.
Sadly this is the reality of trying to fly a phoenix. You might have the best of intentions but some people will still look at you askance because of the connotations and stereotypes that have been allowed to take hold.
This is why it’s so important then to consult a professional insolvency practitioner who can talk you through all the pros and cons phoenixing involves and whether there may be some alternatives before you take the step to throw a metaphorical match over your shoulder when you leave for the last time.
Rescue and recovery can be just as rewarding as a rebirth.