ABI wants tighter controls on “phoenix” companies

The ABI has called for a shake-up in the way companies are managed when they are placed into administration to stop trade credit insurers being left out of pocket.

Currently under a system known as “pre-pack” administrations, companies are allowed to dump unsecured creditors, often leaving trade credit insurers to pick up the pieces.

MPs and trade credit insurers say it encourages “phoenix companies”, insolvent firms that rise in a new form leaving unsecured creditors in the cold.

The ABI has written to the Insolvency Service, proposing enhancements to its Statement of Insolvency Practice (SIP 16). It wants stronger compliance on pre-packs, a ban on the same insolvency practitioner advising distressed companies both before and after administration, and practitioners having a duty to return any unsold goods without undue delay.