Australian Risk Climate: New research reveals a significant rise in the number of ‘phoenix companies’ incorporated in the wake of the global financial crisis. Phoenix companies are businesses which are formed on the remnants of a failed company, and are often used as a means of evading creditors or creating the impression of a clean company history.

Veda Advantage found one in ten directors behind newly registered companies in March 2010 was linked to an adverse credit history with another company in the six months prior to starting the new company. Adverse credit history includes defaults, writs and judgments, court summons and bankruptcies.

Veda Advantage investigated external administration activity on its credit bureau from August 2007 to March 2010, and found directors of companies entering into external administration in March 2010 were twice as likely to start a new company within six months, than during the height of the global financial crisis in May 2008. Directors with some type of adverse incident on their credit file are seven times more likely to default in future than directors with a clean credit history.

Source: Veda Advantage Press Release

BIIA Newsletter July I – 2010