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Another firm attempts to rise from the ashes

The phoenix firm phenomenon continues to sweep the mortgage and loan industries despite the Financial Services Authority announcing a crackdown on the practice.

Positive Lending Limited, a mortgage and loan brokerage, is the latest company to rise from the ashes.

The firm will be liquidated on January 5 but will then morph into a new company, Positive Lending UK.

It is unclear whether it has applied for FSA authorisation but Christopher Fairfax, director of Positive Lending Ltd, was granted a consumer credit licence for the new firm by the Office of Fair Trading on November 19. He listed it as a mortgage brokerage.

Paul McGonigle, managing director of Positive Lending Ltd, will work on a consultancy basis for the phoenix firm.

The extent of Positive Lending Ltd’s liabilities has not been revealed but it is understood that some creditors will be paid by the firm while others will be reimbursed by Positive Lending UK.

But Jay Jones, managing director of Cardiff-based IT consultancy ABC IT, says his firm is owed £2,700 by Positive Lending and adds that the firm’s adoption of the phoenix approach is a kick in the teeth.

He says: “We supported Positive Lending Ltd for years but have been told by its administrators that we will not receive any of the money we are owed.

“We are a small firm and £2,700 is a lot of money to us. We helped the business move offices and set up its IT system but if this is the way it treats its most important suppliers, I wouldn’t like to see how it treats its customers.”

The FSA defines a phoenix firm as any business where directors seek to transfer its assets to a different entity while abandoning past liabilities.

The same directors remain at the helm of the new firm, often keeping the same business address and retaining the customers and staff of the previous company.

The regulator is asking directors to sign undertakings pledging to honour liabilities and ring-fence funds for future liabilities.

An FSA spokesman says: “We are looking to refuse authorisation of new firms where liabilities have not been met and businesses have not been closed in an orderly manner.”

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