Is this legal?

Is this legal?

Didn't find your answer?

Hi – I would like a bit of advice and not sure if someone on the forum could help.

A company who owes us money went into liquidation in  January 2010, they had already registered a new company the month previous, the same afternoon they went into liquidation the new company then started trading running the magazines (they are a publishing compnay) of the previous company...they apparently purchased them from the first company.

The Managing Director then personally went bankrupt so he stood down (on paper) as director and became the publisher.

Two years down the line and the new company has now went into voluntary liquidation – and low and behold a new company was registered last month and that now owns the titles.

The director that stood down is no longer publisher, he is a sales and development consultant in the new company (this is the 3rd compnay), his ex wife is  director.

They have informed all of their clients hat this is a management buyout, obviously they didn’t mention the voluntary liquidation.

Is this all legal? If so, what a loophole. How can you have a MBO of a company that has now gone into liquidation?

My thoughts are this was all done before the liquidators came in. All they have done (for the second time in 2 years) is leave a trail of debt behind and then  change name keep the magazines and trade as normal.  

There are only about eight staff and the original owner has now simply got his ex wife to front this business. I really would appreciate any advice.  

Replies (6)

Please login or register to join the discussion.

avatar
By neileg
14th Jan 2013 16:34

It's usually refered to as a pre-pack liquidation

The practice is quite common. It's legal but many people frown on it. It is often a better deal for employees and creditors than a break up.

Thanks (0)
avatar
By Dom
14th Jan 2013 17:04

Thank you for your comment. I realise it can be a good thing but to use it as a means to avoid paying bills shouldn't be allowed and doing it twice in 2 years in my opinion is wrong. 

Thanks (0)
avatar
By P.J.and Co
14th Jan 2013 18:03

It depends what you can prove

Morally it is wrong.

Legally, I think it could be wrong.

If you can prove that they obtained goods, services, or credit with the intention of going into liquidation to avoid payment, then they are guilty of fraudulent trading and deception. The question is, can you prove their intention?  Personally I would say their track record suggests you might be able to.

 

Thanks (0)
avatar
By Richard Willis
14th Jan 2013 19:07

Commonly known as

'phoenix companies'!

Thanks (0)
avatar
By Tosie
14th Jan 2013 21:01

sadly...................

Sadly it is done all the time and the government should change the law quickly.Most ISP go along with it because it is legal and their role is to advise clients of the law and not act as moral judges.

 

Thanks (0)
avatar
By User deleted
15th Jan 2013 09:46

Running out of directors

At least the director and ex-wife should find it harder to form new comapnies in the future, if the legislation regarding disqualification of directors has any teeth. Of course, there could be a raft of other family members in the wings waiting to take over the reins.

Thanks (0)