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Phoenix company fraud

It happens when the directors of a firm file for bankruptcy, and at the same time, a Phoenix company is started by them with the assets bought at below-market rates from the previous. 

Such an organisation is not illegal, but fraud is committed if they declare insolvency and do not pay for the losses or try to reduce the funds available to creditors by selling assets at lower prices. 

In such cases, if you are a creditor, you get a small portion of the money owed, resulting in losses, affecting your ability to trade and remain solvent. Further, the customer of such creditors will be affected, and suppliers may impose restrictions on payments.  

Anyone who was a director in a failed firm can become a director of a new company. However, they are subject to disqualification and bankruptcy restrictions if they indulge in any such acts. 

Who Is Affected By Such Schemes?

Trade creditors who owe funds from the insolvent companies. 
Those who cannot contact or get paid suffer losses for giving trade credit to the other business.

How To Protect Yourself?

  • If you have a complaint against such firms, do not give up on it.

  • Be assured to get the claims that the liabilities of the insolvent organisation are not yours. 

  • Report the matter to the authorised agencies.

  • If you are a creditor facing insolvency, you need to understand the cause of failure. You need to investigate and report evidence in case of compulsory liquidation. If you suspect the firm holds information about its assets, report it to the insolvency practitioner.

  • You should be careful while dealing with such firms. Always try to look for reliable trade references and the credentials of the directors before contacting for business. 

  • Find out the reasons and ways the previous company failed. Try to find out if the directors are not serial abusers. Try to get information about the company directors and extend trade credits if you are assured that you will be paid on time.  

  • If you suspect a breach of a bankruptcy order, report it to the authorised agencies. Such acts are considered a criminal offence and can lead to disqualification of undertaking or bankruptcy restrictions. In addition, it can become the personal liability of the involved persons.

Date Published: Jan 27, 2022

Types of fraud

A-Z of fraud

To help understand which fraud you've been affected by, we've categorised them into an alphabetical list.

What is fraud and cyber crime?

Cybercrimes can be of two types. First, it can be cyber dependent, where the fraudsters use online devices to convince the victim to accept their offers.

Advance fee fraud

If you are trying to get a loan for a house or a car, they ask to meet the provider to get the financing arrangement and pay the finder's fee in advance.

Corporate fraud

Corporate frauds can be complicated, committed either by the firm or an individual. Nevertheless, it mostly involves cheating where the employee or the firm.

Individual fraud

There are many types of individual frauds related to advance fees, investments, insurance brokers, bogus tradespeople, Ponzi schemes, pension liberation.

Online fraud

Hence the number of cases of online fraud is increasing each year, and most such cases include – account takeover, direct frauds, or scams related domain names.

Identity fraud and identity theft

The criminal uses the stolen identity of another person living or deceased to conduct unlawful activities like obtaining goods or services in another's name.
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