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Company Liquidations

Volume 462: debated on Wednesday 11 July 2007

To ask the Secretary of State for Business, Enterprise and Regulatory Reform how many directors of phoenix companies were disqualified in each year from 2005; and how many of these disqualifications involved directors not undertaking to act as a director voluntarily. (146311)

[holding answer 28 June 2007]: No separate statistics are maintained by the Insolvency Service for disqualification action taken against directors of companies, which might fall within the description of “phoenix” companies. Many successor companies to failed companies are formed as a result of legitimate arrangements between the directors and the office holder whereby assets are transferred at proper values. The conduct of the directors is only likely to be called into question where assets have been transferred from the insolvent company to the new company at an undervalue, where the directors have caused the successor company to trade under a name which is for them prohibited by virtue of section 216 Insolvency Act 1986 or where the successor company has failed for the same reasons as its predecessor. Although statistics are not kept to identify the numbers of disqualification orders or disqualification undertakings where the matters of unfitness include one or more of the elements referred to above the Insolvency Service records show that one or more of those matters of unfitness were alleged in seven cases for which disqualification proceedings were authorised in the year to 31 March 2006 and in 18 cases in the year to 31 March 2007.

To ask the Secretary of State for Business, Enterprise and Regulatory Reform how many calls have been received on phoenix companies by the enforcement hotline in each year since 2005; and how many of these calls were referred for investigation. (146312)

[holding answer 28 June 2007]: No separate statistics are maintained by the hotline team for “phoenix” complaints. It is likely that complaints to the hotline regarding so called “phoenix companies” will be recorded as a complaint under section 216 of the Insolvency Act 1986 (reuse of a prohibited name after a certain type of insolvency). It is possible that section 216 may also apply to new businesses run by directors, which are not successor companies to the insolvent company and which cannot therefore be regarded as “phoenix companies”. The number of complaints received by the hotline which specifically relate to section 216 is seven for the period from August 2005 to March 2006, eight for the year to March 2007 and five so far for the current year. Of those one has been referred to Legal Services Division for possible prosecution action.

To ask the Secretary of State for Business, Enterprise and Regulatory Reform how many directors of companies have been prosecuted for offences relating to phoenix operations. (146313)

[holding answer 28 June 2007]: There is no precise legal definition of a “phoenix” company but it is normally thought of as one formed by the directors of a failed company to take over the business and some or all of the assets of the failed company but without any of its liabilities. The only criminal offence specially related to Phoenix operations is where the directors have caused the successor company to trade under a name which is for them prohibited by virtue of section 216 Insolvency Act 1986.

Statistics for convictions under section 216 of the Insolvency Act 1986 have only been published since the year 2005-06. The convictions are:

Number

2005-06

19

2006-07

21