Insolvent businesses reacquired by their previous management in “pre-pack” administrations are much more likely to fail again and tend to repay far less to creditors, research for the Guardian suggests.
The study is the latest to raise questions about the practice of “phoenixism” – accounting’s controversial art of liquidating companies to allow directors to return with a new entity, free of debts.
The process tends to involve pre-pack administrations, where a supposed corporate rescue is agreed before commencing insolvency proceedings. These orchestrated deals often leave unsecured creditors nursing large losses. HM Revenue and Customs estimates that phoenixisms cost taxpayers hundreds of millions of pounds a year.
Cases have…