Q&As

Where an individual judgment creditor (A), prior to taking action to enforce its judgment against the judgment debtor B (a limited company) discovers that the sole director and shareholder of B has resigned and subsequently set up a new limited company (C) trading out of B’s offices and carrying on the same business as B, can A seek to enforce against C the judgment it has obtained against B? It is assumed that the actions in setting up C have been carried out as a means of B avoiding an effective enforcement against B.

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Produced in partnership with Leigh Callaway of Fladgate
Published on LexisPSL on 05/02/2018

The following Dispute Resolution Q&A produced in partnership with Leigh Callaway of Fladgate provides comprehensive and up to date legal information covering:

  • Where an individual judgment creditor (A), prior to taking action to enforce its judgment against the judgment debtor B (a limited company) discovers that the sole director and shareholder of B has resigned and subsequently set up a new limited company (C) trading out of B’s offices and carrying on the same business as B, can A seek to enforce against C the judgment it has obtained against B? It is assumed that the actions in setting up C have been carried out as a means of B avoiding an effective enforcement against B.

Where an individual judgment creditor (A), prior to taking action to enforce its judgment against the judgment debtor B (a limited company) discovers that the sole director and shareholder of B has resigned and subsequently set up a new limited company (C) trading out of B’s offices and carrying on the same business as B, can A seek to enforce against C the judgment it has obtained against B? It is assumed that the actions in setting up C have been carried out as a means of B avoiding an effective enforcement against B.

In answering this Q&A, we have taken into consideration the ‘phoenix’ situation. The term ‘phoenix’ refers to a company that has been incorporated, in order to purchase the assets from a predecessor company that is no longer viable, or otherwise continue with the business of the predecessor company through a new corporate vehicle. A phoenix company can have the same directors as its predecessor, and typically is able to carry on the relevant business where the predecessor left off. However, while on its face there is nothing inherently wrong with establishing a phoenix company, it is obviously an option that is open to abuse by debtors seeking to avoid their debts.

It is not clear from the above whether:

  1. the actions taken by the sole shareholder and director of B (hereinafter referred

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