Phoenix companies revived in pre-pack deals more likely to fail again, study finds

Insolvent businesses reacquired by their previous management through pre-pack administrations are much more likely to fail again and repay far less to creditors, according to new research for the Guardian. The study highlights the controversial practice of 'phoenixism', where directors liquidate a company only to start a new entity free of old debts. The research found that these revived companies have a significantly higher failure rate compared to other insolvency outcomes. Creditors, including suppliers and tax authorities, often receive minimal returns, sometimes pennies on the pound. The findings raise fresh concerns about the fairness and transparency of pre-pack deals, which allow quick business sales without creditor approval. Experts argue that while pre-packs can preserve jobs, the lack of oversight may enable abuse by directors who repeatedly walk away from debts. The study adds pressure on regulators to reform insolvency rules to better protect creditors and ensure accountability.