Phoenix traders prompt attack on bankruptcy law
The government's reform of bankruptcy laws has come under fire in theHouse of Commons for allowing unscrupulous 'phoenix traders' to carry on inbusiness.
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Orkney and Shetland Liberal Democrat Alistair Carmichaelprotested repeated cases of abuse had convinced him ministers had gotthe balance wrong.
Speaking in a Westminster Hall debate, he said: ‘The law is letting toomany chancers get away with economic murder. It is nothing short of achancer’s charter.’
Carmichael spoke out after raising the case of a wildlife tour firm inhis constituency whose owner placed an order with a boatbuilder for anew craft, and paid a deposit and stage payments on a contract underwhich the craft belonged to him, only to find it seized by theliquidator when the boatbuilder went bust.
He questioned an attempt by liquidator BN Jackson Norton, which hedescribed as ‘a very reputable firm’, to attempt to charge an’arbitrary’ £30,000 for the return of the uncompleted craft and allegedthat the former boatyard owner was still in business using assets thatare the property of the firm that went out of business.
Carmichael complained the law left small business customers of companies inliquidation at a disadvantage through lack of resources to fight theircorner and demanded a re-examination of the system and a toughercrackdown on phoenix traders, with an automatic disqualification of aminimum of two years.
Trade minister Melanie Johnson expressed sympathy for the touroperator’s plight but declined to comment on the case.
She insisted it was essential to have an insolvency regime ‘that, whileencouraging enterprise and reducing the stigma associated with failure,deals fairly and effectively with financial failure and deters fraud andmisconduct’.
She claimed mechanisms are in place to deter abuse by the unscrupulousand insisted: ‘I disagree that we have got the balance wrong on”chancers”.’
She said 1,413 disqualification orders had been made between April 2002and February 2003 and 13,082 since 1986 and said the Insolvency Servicewas pursuing all identified cases of serious misconduct, and drewattention to a hotline for the public to report the criminal managementof companies by the disqualified.