Study finds revived companies in 'phoenix' deals prone to failure
Research suggests insolvent businesses reacquired by former management are more likely to collapse again and repay less to creditors.
At a glance
- Insolvent businesses reacquired by former management in pre-pack administrations are more likely to fail again
- These deals typically result in lower repayments to creditors
- The practice raises questions about 'phoenixism' in accounting
Research conducted for the Guardian indicates that insolvent companies reacquired by their previous management through pre-pack administrations face a significantly higher risk of failing again. These deals also tend to result in lower repayments to creditors.
The findings add to ongoing scrutiny of "phoenixism", a practice in which companies are liquidated to allow directors to establish new entities without existing debts.
Why it matters
The research highlights concerns about a practice that allows company directors to restart operations without addressing creditor losses, potentially affecting stakeholders and the broader business environment.
Original reporting
- The Guardian — WorldBust companies revived in ‘phoenix’ deals more likely to fail again, study finds
- The Guardian — BusinessBust companies revived in ‘phoenix’ deals more likely to fail again, study finds
This brief was written with AI assistance from the reports listed above and checked against our editorial policy. Spotted an error? Request a correction.
