Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly. Therefore when you liquidate a failed business, providing you have acted responsibly there is nothing to prevent from starting a new business.
What is “Phoenixing”?
This is the practice whereby the directors buy back the assets of an insolvent company from its liquidator. This is a common practice where for instance, the directors have the option of putting limited resources into an already insolvent company. In doing this they may merely reduce the deficiency to the company’s creditors. Alternatively they could use the same funds to set up a new company and acquire the assets of the old company. The new company is solvent from day one. This is known as Pheonixing. There are strict procedures to be followed on valuation and disclosure of such a deal to the creditors. The liquidator will ensure that the best price is obtained for the assets.
It is therefore possible to liquidate a company and start the same business again, but only under strict rules and conditions. However, you need to take proper advice.
Not all new businesses succeed and statistics suggest one in three businesses close within three years. Business can fail for a number of reasons and there are occasions when honest hard working individuals find they can no longer trade out of their difficulties.
In these cases, the phoenix company arrangement allows a business to start again and for the profitable elements of the failed business to survive, offering some continuity for both suppliers and employees.