Phoenix company finance: funding a legal restart

The line is conduct, not the word phoenix. A legal restart: the old company goes through a proper insolvency process, its assets are sold by the liquidator or administrator at independently evidenced market value, creditors are treated in accordance with the statutory order, the new company respects the section 216 name rules, and its directors are not disqualified. Illegal phoenixing: assets moved out at undervalue before or during insolvency, a prohibited name reused, creditors of the old company evaded while the same business carries on. The first is a fresh start the law permits. The second attracts criminal liability, personal liability for the new company's debts, and director disqualification. Nothing on this page is a way around those rules; the rules are the route.

Three tests, applied every time. Assets are bought only after the insolvency office holder is appointed, at a price supported by independent valuation; a purchase at undervalue can be unwound and is treated as director misconduct. The name is either genuinely different or used under one of the three statutory exceptions. And the old company's creditors are not worsened by anything done in the run-up: no preferences, no assets quietly moved. If any of these is in doubt, the answer is professional advice before acting, not after.

The core problem for any new company is that lenders underwrite history, and a NewCo has none. Invoice finance sidesteps this because the primary underwriting question is whether the customers you invoice will pay, not how long you have traded. A new company invoicing established, creditworthy businesses can typically access a facility from early in its life, with advances commonly between 70 and 95 percent of invoice value and optional protection against customer non-payment. Asset finance works similarly through the asset: the equipment or vehicle secures the borrowing. This is why asset-based products, not unsecured loans, are the realistic engine of restart funding.

Expect the old company's insolvency to come up, and answer it straight. Lenders fund restarts routinely; what they price is honesty and conduct. They will want the insolvency to be concluded or clearly in hand with an office holder, the asset purchase and name position clean, a realistic plan for the new company, and disclosure of any personal guarantee you still carry from the old company's borrowing. A guarantee survives the old company's liquidation and belongs in the conversation from the start.

First, a Licensed Insolvency Practitioner deals with the old company and advises you on the process, the asset purchase and your personal position. Then, if you are restarting, funding is a separate step with a lender or broker of your choosing. For orientation, the market for a company with no trading history offers routes such as invoice finance and business loans aimed specifically at newly-started companies. If the old company has not yet been dealt with, start with the IP: finance for the next company is a question for after, and no lender or broker should be asked to fund your way out of an unresolved insolvency.

LTD Turnaround is an independent information service. We do not provide legal, insolvency or financial advice. Insolvency questions are reviewed by our own editorial desk, which will point you to a Licensed Insolvency Practitioner where that is the right route. We do not lend, arrange finance or refer anyone to a lender or broker, and no lender, broker or practitioner pays us anything.

Reusing a company name, buying assets from a company you were a director of, or taking on new borrowing while the company is insolvent can carry criminal and personal liability risk. Before acting, take advice from a Licensed Insolvency Practitioner and, where a company name or disqualification question is involved, a solicitor.