SFO - Serious Fraud Office

Asset stripping

What is asset stripping?

Asset stripping is taking company funds or assets of value while leaving behind the debts.

Company directors transfer only the assets of one company to another and not the liabilities. The result is a dormant company with large liabilities that cannot be met and it has to be put into liquidation

Stripping of company assets is normally done for two main reasons:

  • The fraudsters deliberately target a company or companies to take ownership, move the assets and then put the stripped entity into liquidation
  • "Phoenixing" - directors move assets from one limited company to another to 'secure' the benefits of their business and avoid the liabilities. Most or all the directors will usually be the same in both companies. This usually arises as a way of 'rescuing' the assets of a failing business rather than targeting a company

 

Where can I get more information?

Suspected phoenix firms and asset stripping are investigated by the

The Financial Services Authority (FSA)

External site - opens in new window

 

Companies Investigation Branch, (part of the regulatory arm of the Department for Business, Innovation and Skills).

 

Should I report to the SFO?

We only conduct investigations into asset stripping where the seriousness and complexity meets our acceptance criteria.  If you have information about asset stripping that fits this criteria, then please report it in confidence using our secure online reporting form. You can also send details to us in writing at: SFO Confidential, Serious Fraud Office, 2-4 Cockspur Street, London, SW1Y 5BS.

 

Case example

An owner of a whisky investment business was found guilty of fraud. A company was established with an issued share capital of 100 ordinary shares of £1 each. It was engaged in marketing to the general public investment opportunities, principally in single malt whisky, but also in champagne. The company went into liquidation a few years later with debts of over £0.5 million.

The founder immediately started to trade under another company which had remained dormant until then and was similarly named. This company engaged in the same activity, had the same supplier and client list. In effect there was no change, certainly in the mind of the investors. The "phoenix" company ceased to trade the year after. The marketing activities throughout the whole period of operation brought in over £4 million from around two thousand investors.