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The "Phoenix Syndrome" describes the situation which arises when a company controlled by certain individuals goes out of business leaving substantial unpaid debts and little or no assets, and the business is taken over by another company under the control of those same individuals. In addition to the loss suffered by creditors of the first company, there is also concern that such individuals who abuse the protection of limited liability, gain an unfair competitive advantage over traders who meet their debt obligations. In most Phoenix Syndrome cases, tax is the major outstanding debt and the competitive advantage gained through non-payment of VAT and PAYE/PRSI can be very significant.
The Revenue Commissioners have recently announced plans to identify potential "Phoenix companies" and to challenge all aspects of their operation. In particular the Revenue announced their intention, where possible, to pursue debt recovery actions against directors of such companies for any Revenue unpaid debt and to initiate proceedings against them for fraudulent or reckless trading. It is understood that in future the Revenue will monitor the tax compliance record of any new companies sponsored by the promoters of "Phoenix companies" which went out of business owing large Revenue debts.
The Revenue have stressed that these measures will not be aimed at genuine business failures or the promoters of high risk ventures. Special care will be exercised to target only identified cases of "Phoenix Syndrome".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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