UK Recruitment Firm Emerges from Insolvency for Third Time, Leaving Millions in Tax Debts
A UK recruitment business based in Hampshire has been acquired out of administration for the third time in just four years, in a series of deals that have allowed former management to remain in place while leaving millions of pounds owed to the public purse. This pattern highlights the controversial practice of phoenixism, where companies are liquidated and directors rise from the ashes with new entities, often free of previous debts.
The Chain of Insolvencies and Phoenixism
HM Revenue and Customs (HMRC) has estimated that phoenixism, which is generally legal, costs the exchequer approximately 22% of the £3.8 billion in tax losses reported from 2022 to 2023. This amounts to around £800 million annually, a significant burden on taxpayers. The latest case involves two Hampshire-based recruitment companies, Sert Group and Sert Training, which collapsed in January and were acquired for £196,304 by an unconnected buyer, Meraki 6.
Despite the change in ownership, the previous management, including Sert chief executive Mark Edwards and chief financial officer Ben Knight, remained in place. This management team had also run two earlier iterations of the same business that had previously entered administration. Together, these three insolvencies appear to have left creditors £7.6 million out of pocket, with about £4.5 million owed to HMRC, according to research by business data firm Tech City Labs.
History of Repeated Insolvencies
The sequence of events began in February 2022, when Edwards and Knight were directors of a recruitment business called 3R Global. Its assets were acquired by Sert Workforce Solutions for £60,000 after it collapsed into administration. At the same time, the pair were also directors of Sert Workforce Solutions, which itself entered administration in October 2024. Its assets were then acquired by Sert Training for £50,000 and 7.5% of future profits.
Sert Training, which had the same owners as the previous two versions of the business, with Edwards and Knight listed as holding director roles, lasted another 15 months before its administration and sale to Meraki 6. The administrator's report on Sert Training noted that there were two offers to buy the insolvent business, both contingent on the existing management remaining in post. Following discussions, it was confirmed by Sert management that they would only work with Meraki 6, leading the other interested party to withdraw.
Legal Defenses and Ongoing Roles
Lawyers for Meraki 6 argued that its purchase of the Sert business was not a case of phoenixism, as Meraki is not connected with the previous Sert owners and there are no common directors. They added that the deal saved jobs and that Meraki was unaware of the business's previous insolvencies. However, after the acquisition, Edwards continued to be listed as the Sert chief executive and was advertised as the main contact for job promotions to candidates. Edwards and Meraki stated that he is leaving the business and is now on gardening leave.
Knight continues to work for Sert, where a colleague identified him to the Guardian as still serving as the business's chief financial officer. Meraki clarified that Knight is no longer a statutory director or a shareholder. Edwards and Knight did not comment on the previous administrations.
Broader Context in the Staffing Sector
This case is not isolated in the staffing sector. Last month, the Guardian reported on Premier Group Recruitment, which went bust owing HMRC and other creditors almost £3 million, only to re-emerge after being repurchased by its former owner for an initial £10,000, with promises to send staff on an all-expenses-paid trip to Las Vegas. Such instances underscore the widespread nature of phoenixism and its impact on tax revenues and corporate governance.
The repeated insolvencies and acquisitions raise serious questions about the effectiveness of current regulations in preventing phoenixism and protecting public funds. As HMRC continues to grapple with billions in tax losses, cases like Sert highlight the need for tighter scrutiny and potential reforms to curb these practices in the recruitment industry and beyond.
