Bust companies revived in ‘phoenix’ deals more likely to fail again, study finds

New research reveals that "pre-pack" administrations—where insolvent companies are reacquired by former management—often result in repeated failures and significantly lower repayments to creditors. The findings add to growing scrutiny of "phoenixism," a contentious practice allowing directors to restart businesses while shedding prior debts. Critics argue the process undermines fair debt recovery and raises concerns about corporate accountability. The study underscores broader debates over transparency and fairness in corporate restructuring.

Exclusive: research for the Guardian shows ‘pre-pack’ deals with former management also pay far less to creditorsThe boss whose twice-bust business appears to be backInsolvent 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. Continue reading...