Phoenix companies in the UK and evaluating the feasibility of the Phoenix company model in Malta

Abstract

The concept of phoenix companies has become a strategy implemented by struggling businesses to emerge afresh from financial distress. This dissertation initially focuses on the United Kingdom, and explores the establishment, regulations, and implications of phoenix companies. Focus then shifts onto Malta to explore the feasibility of the phoenix company model in Malta. Phoenixing is a term commonly associated with the activities carried out by insolvent companies who create a new entity to continue business operations while leaving debts with the insolvent company. Despite its legality under stringent regulations, phoenixing has faced criticism due to concerns regarding the protection of creditor’s rights. This phenomenon is better understood by assessing the legal frameworks governing insolvency in the United Kingdom. Shifting focus to Malta, the dissertation evaluates the applicability of the phoenix company model in Malta. This is done by drawing parallels between United Kingdom and Maltese legislation, including section 216 of the United Kingdom Insolvency Act 1986 and Article 317 of the Maltese Companies Act. Through this analysis, potential challenges and reforms for the Maltese Legal System are identified. A case study involving the bankruptcy of Air Malta and the establishment of KM Malta Airlines has been carried out to highlight the application and consequent implications of potential phoenixing situations. By examining the phoenix company model in both the United Kingdom and Malta, this dissertation contributes to the understanding of phoenixing practices and the impact on stakeholders. It concludes with discussions on the feasibility of the phoenix company model in Malta followed by suggestions for potential reforms to be implemented into the Maltese Legal System.