The Phoenix Effect: Why Closing a Business Isn’t the End - and How to Do It the Right Way

At Certus IP Solutions, we often meet directors who feel that closing their company means the end of the road.
But in reality, that moment can be the start of something new.

Sometimes a restructure allows the existing business to continue.
In other cases, a new company is formed, often referred to as a “phoenix”.
Handled properly and transparently, this process can protect jobs, preserve value, and support the wider economy.

It’s not about avoiding responsibility, it’s about creating a fair and lawful way forward.

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What Is a Phoenix Company?

A phoenix company is one that rises from the “ashes”of an insolvent business, often with the same directors, workforce, or assets, but operating under a new structure.

When carried out correctly, this can allow:

• A viable business model to continue under proper oversight
• Employment and customer relationships to be maintained
• The purchase of assets at fair market value (avoiding waste and “fire sales”)

Importantly, every step must comply with insolvency law and regulatory standards.
Any transaction between the old and new company must be properly valued, transparent, and independently reviewed to ensure creditors are treated fairly.

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Why Phoenix Activity Has a Bad Reputation

Unfortunately, the term “phoenix” is sometimes linked to directors who strip assets, leave debts behind, or act dishonestly.
That’s what’s known as abusive phoenixism, and it’s rightly condemned.

At Certus, our role is to ensure the process is lawful, fair and ethical.
A legitimate phoenix arrangement must be structured so that:

• Creditors of the old company are not disadvantaged
• Assets are sold for fair value (usually following independent valuation)
• Directors’ conduct is reviewed and reported in accordance with insolvency law

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When Done Properly, It Benefits Everyone

While there’s no official statistic stating how many liquidations result in phoenix companies, government guidance describes them asa “surprisingly common outcome” of corporate insolvency.

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In the year to July 2025, around 1 in 190 UK companies entered insolvency.
It’s clear that business restarts play a significant role in keeping people employed and maintaining economic stability.

When directors work with a licensed Insolvency Practitioner, the process can be managed correctly from the outset, ensuring all legal duties are met, creditor interests are protected, and any new company starts on a sound footing.

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Our Perspective

At Certus IP Solutions, we’ve seen first-hand that closing a company doesn’t have to mean the end.
With proper advice, transparent handling of assets, and fair treatment of creditors, it can be a genuine opportunity for recovery, both for the Directors involved and for the wider business community.

A well-managed phoenix is not a way out, it’s a way forward that supports jobs, preserves skills, and keeps value within the economy.

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Need Guidance?

If you’re a director exploring your options, we can help you understand what’s possible, and what’s not, before taking the next step.

Our role is to ensure any solution is legally compliant, commercially realistic, and fair to everyone involved.
To discuss your situation confidentially, get in touch with the Certus IP team.