"We’ve heard that some firms just go bust and then reinvent themselves. Then nothing seems to happen."

What we say

There is plenty happening. We are taking a keen interest in this and we know that firms doing business the proper way want to see an end to this.

We use the phrase "phoenix firms" to describe firms that rise from the "ashes" of another, with the new firm often pretty much identical — the directors have transferred the business almost wholly across, often with the same address, staff and customers.

Of course, there is nothing wrong with a firm closing down in an orderly way and then re-emerging with a new name to start afresh. It is a problem, however, if the old firm is closed down purely to avoid its existing liabilities, with the directors hoping to avoid their obligations to customers, other firms or creditors, and hoping that the FSA will not notice. Be assured we do notice.

Some firms are attempting to walk away from commercial debts, others from mis-selling claims. We have even seen some mortgage advice firms try to shut down in an attempt to deflect attention away from possible fraudulent practice. The individuals concerned then plan to re-enter the market as appointed representatives. Others have tried to set up new firms to allow them to continue business after being struck off lenders' panels for sending in fraudulent mortgage applications.

What is the FSA doing?

We want firms planning to cancel to show their commitment to protecting their existing customers when there is a change of legal entity.

Although we can’t prevent firms becoming insolvent, we are taking steps to minimise the impact.

• We will refuse the application for authorisation of the new business where the directors of the departing firm will not make reasonable arrangements for claims that arise out of their previous business, or cannot show that they shut down their previous business in an orderly manner
• We will make sure the clients of the old firm are contacted and told about the closure.  
• We will refer individuals to the FSA's enforcement team if their actions have actively disadvantaged customers.

If you have information on a potential ‘phoenix’ firm, you should call the our contact centre on 0845 606 9966.

For more information on authorisation and cancellation see

Applying to cancel

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