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Business forum urges government to rethink 'phoenix' companies decision

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By The Drum Team, Editorial

January 27, 2012 | 2 min read

The Forum of Private Business has criticised the government's decision to cancel planned legislation which was designed to clamp down on 'phoenix' companies starting again while leaving creditors unpaid.

Scores of suppliers to advertising, design and digital agencies have been left out of pocket by agencies closing down without paying off their bills only to reappear again soon after.

Legislation was intended to improve the pre-pack insolvency sales process, but employment minister Edward Davey has now said that the proposed controls are outweighed by adherence to the government's current "moratorium" on new regulations.

This was met with dismay by The Forum of Private Business. Its senior policy adviser, Alex Jackman, said: "Cutting red tape is hugely important but, against the backdrop of the Government’s de-regulatory agenda this is one area where tighter legislation would protect more firms from ‘phoenix’ companies abusing the pre-pack insolvency process by starting again while failing to pay them.

“Late payment – or in this case non-payment – devastates firms’ ability to maintain any kind of healthy cash flow and threatens their very survival. The Government is working on some extremely positive projects at present to help firms minimise the problem and offering them more protection in this way would also be of great benefit.”

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