New taskforce targets phoenix company directors

The Insolvency Service is stepping up its fight against directors who deliberately close companies to escape their debts and then carry on trading through a new business, a practice known as abusive phoenixism.

A new Abusive Phoenixism Taskforce, backed by 25 million pounds of funding over five years, will see a team of about 50 people investigate suspicious company failures and target directors who dissolve businesses to avoid paying what they owe.

What is phoenixism?

Abusive phoenixism happens when directors deliberately put a company into liquidation to avoid paying creditors, suppliers, employees or tax, then move the business or its assets into a new company and continue trading, often under a similar name. The new company rises from the ashes of the old, which is where the name comes from.

The practice leaves suppliers unpaid, workers out of pocket and the public purse short. Abusive phoenixism accounted for about 22 per cent of 3.8 billion pounds of tax losses in 2022 to 2023, or around 800 million pounds.

Results so far

In 2025 to 2026, the Insolvency Service completed 148 civil investigations into companies where it identified abusive phoenixism, and was carrying out civil or criminal investigations into a further 64. As a result of its work, 18 companies were shut down for trading against the public interest, 87 directors were disqualified and five directors were convicted of criminal offences.

The service has also said it is using artificial intelligence to help gather evidence in its investigations.

Why it matters to small businesses

Small firms are often the biggest losers when a phoenix company leaves bills unpaid. Business groups have long called for tougher action, arguing that honest companies are undercut by rivals who walk away from their debts.

What directors should know

Legitimate business rescues remain lawful. Rules on reusing a failed company's name are strict, however, and directors who abuse the insolvency system can be disqualified for up to 15 years and, in the most serious cases, prosecuted.