Duncan Lewis

Immigration

Asylum, Detention/ Fast Track

Managed Migration, Public Law

Why people like to go bankrupt in Britain?

Date: (26 November 2012)    |    

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Many would know the fact that British companies have their registered offices in Ireland to get advantage of efficient corporation taxation but very few would know that both businesses and individuals come to Britain to go bankrupt.
The practice is known as bankruptcy tourism and it is because England and Wales are more entrepreneur friendly bankruptcy and insolvency laws which are more lenient than EU counterparts for people who want to declare broke.
In England and Wales, a bankrupt typically face just 12 months in a state of financial veil where one cannot be a director of a company or borrow money, among other conditions, in Ireland it can be as much as 12 years.
Irish entrepreneur Phillip Marley brought this to Huff Post UK’s attention, saying his government’s refusal to get to grips with the issue of reforming its own bankruptcy laws was killing off growth in the Irish economy.
Bankruptcy is viewed as a dirty, horrible thing in Ireland, but it’s a badge of honour,” he said.
Without taking risks it is difficult to grow and risk-takers were being butchered he said if a footballer made a mistake he could be banned for a few games, but his legs are not cut off.
The phrase bankruptcy tourism was first coined in around 2006/7 when bankruptcy registrars began to notice high numbers of German men and women travelling to the UK to declare bankruptcy.
Following a change in the UK’s Enterprise Act, which brought the normal bankruptcy discharge time down from three years to one, England and Wales suddenly became more attractive to those staring into a financial abyss.
The reason for the change was to avoid what happened after the dotcom crash of 2000/2001, where hundreds of businessmen found their companies had failed, leaving them penniless and unable to become a director of a new venture for three years.
The government wanted to stimulate the British economy and make it easier for entrepreneurs and small businesses to get going again after suffering a failure.
Bankruptcy solicitor from an insolvency firm says that the perception from other European jurisdictions was that their own regulations seemed to be draconian.
The whole purpose was to get away from this notion of punishment for failing and to encourage entrepreneurs to have another go.
Germany had a bankruptcy period of seven years – and in the aftermath of the dotcom crash, a number of businesses set up and advertised trips to the UK to help literally bus-loads of Germans to travel over here to seek bankruptcy.
England and Wales were quickly labeled the 'bankruptcy brothel of Europe' and questions were asked about the legitimacy and morality of the bankrupts' claims.

 

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