Why Business Collapses Feel Sudden And Why They Never Really Are

Using the Prax Group’s downfall to understand structural weakness, blind spots, and business fragility

In July 2025, Prax Group, an international oil, fuel, and refinery operation with global interests, collapsed into insolvency. On paper, it seemed to happen overnight: operations frozen, key sites handed over to the Official Receiver, and directors uncontactable. The disappearance of founder Winston Soosaipillai made for the kind of news cycle that thrives on spectacle: vanished billionaire, abandoned refinery, £250 million in unpaid tax. But beneath the tabloid headlines lies something far more instructive and more useful for those of us concerned with risk, governance, and business resilience.

The truth is that most corporate collapses don’t happen overnight. They just look sudden to those who weren’t watching closely. This blog takes the Prax implosion as a case study, but the lesson is broader. We’ll explore how collapses typically unfold, why key stakeholders miss the warning signs, and what can be learned by examining the gradual decline that was hidden behind the appearance of a functioning business.

 

The Illusion of Sudden Collapse

There is a psychological allure to the idea that a company can fall apart in a matter of days. The shock value gives it drama and narrative punch. But in reality, collapses are almost always long processes masked by short-term optimism or wilful blindness.

In the case of Prax, there were early signs. The group paid its owners a £3.7 million dividend in the same year it recorded £22 million in losses. Tax liabilities ballooned. Corporate structure became opaque, with multiple entities helmed by a single individual, and minimal separation of responsibilities. None of these alone would necessarily cause a collapse, but together, they pointed to a brittle foundation.

For analysts, investors, and regulators alike, the real question becomes: why weren’t these patterns enough to provoke earlier scrutiny?

 

Structural Weakness Hides in Plain Sight

At the heart of many failures is a kind of structural fragility that hides in complexity. A group of companies like Prax can survive for years under the illusion of strength, diversified assets, global footprint, and multi-sector exposure while relying on weak internal controls and high-risk financial decisions.

This fragility often stems from a combination of factors that are, on the surface, easy to overlook but deeply corrosive over time.

1. Over-centralised decision-making is one of the most common and dangerous forms of structural weakness. When one or two individuals hold disproportionate control over the direction, finances, and daily operations of a company, they create a single point of failure. In the Prax case, Winston Soosaipillai reportedly maintained tight control over multiple legal entities, limiting visibility and creating conditions where independent oversight was not just lacking, it was structurally impossible.

2- Insufficient governance compounds this issue, particularly where there is little separation between ownership and management. When directors are also shareholders, or where there are no truly independent board members, oversight becomes compromised by personal interest. This blurring of roles can foster an environment where critical decisions go unchallenged, risk is rationalised rather than mitigated, and strategic missteps are amplified. 

3- Excessive leverage or tax exposure adds further stress to already brittle systems. While borrowing is a normal part of business growth, over-reliance on debt, especially without contingency planning, can leave a company vulnerable to sudden changes in cash flow, interest rates, or regulatory scrutiny. In the case of Prax, its massive tax liability became a critical weak point. When revenue softens or margins tighten, companies with high tax or debt burdens have very little room to manoeuvre. 

4- Opaque reporting is the final compounding factor. When internal dysfunction is masked through complex ownership webs, vague disclosures, or inconsistent financial data, external stakeholders are left operating in the dark. Without clarity, problems fester. With clarity, even difficult realities can be managed. 

The key issue is that these traits are often interpreted as normal or even efficient until the tipping point is reached. And when that point comes, usually a liquidity crunch, regulatory intervention, or investor panic, there is little time left to respond.

Pattern Recognition vs Hindsight Bias

It’s easy to look back and say, “we should have seen it coming.” But part of the risk challenge is distinguishing genuine warning signs from normal commercial variance. Many successful companies take risks. Many report temporary losses. Many make decisions that look unwise in hindsight.

The job of an analyst, investor, or partner isn’t to avoid all risk, it’s to recognise dangerous patterns while they are still reversible.

In Prax’s case, the dividend payout during losses, the tight control of leadership, and the mounting tax debts formed a constellation of risks that, when connected, told a clearer story. But without tools to synthesise that data, and without a culture that encourages questioning assumptions, those dots often remain unconnected until it’s too late.

This is not just about Prax. It’s about how we all interpret complexity and what our defaults are when we encounter it. Do we probe further, or assume competence? Do we accept opacity, or challenge it?

 

Governance Is Not Just Compliance

One of the most valuable lessons from the Prax case is the danger of treating governance as a box-ticking exercise. A business can meet minimum statutory requirements and still function in a deeply fragile way.

Fiduciary duty, which is  the responsibility of directors to act in the best interests of the company and its stakeholders, is often seen as legal boilerplate. But it is also a behavioural threshold. When directors prioritise short-term personal gain over long-term business health, as alleged in the Prax case, the real risk isn’t just legal exposure; it’s a fundamental misalignment of incentives that threatens the viability of the company itself.

What starts as mild opportunism, treating the business as a personal asset, can evolve into structural weaknesses. And unless challenged early, this behaviour becomes embedded in corporate culture. At that point, even strong operations may no longer be enough to save the business.

 

What Can Collapse Teach Us?

Collapse, when analysed carefully, is not just a story of failure. It is an X-ray of how risk behaves in the real world. It teaches us about false confidence, internal weaknesses, and the social dynamics that suppress questioning or scrutiny.

From Prax, we learn several core lessons:

• Opacity should never be the norm. When financial or structural details are hard to access or interpret, it should raise, not lower, our curiosity.
  
  
• Single-person control breeds concentration risk. Even the most competent founders are fallible. Distributed oversight is not a luxury; it’s protection.
  
  
• Narratives must match numbers. If a business says one thing and the financials say another, believe the numbers.
  
  
• Dividend timing matters. Paying out while incurring losses is not inherently corrupt, but it demands explanation. If none is forthcoming, assume there’s more beneath the surface.
  
  

Different Names, Same Pattern

Prax is far from unique. Its downfall echoes recent collapses of major, globally recognised companies such as Silicon Valley Bank (SVB) in 2023, the cryptocurrency exchange FTX, and the beleaguered UK energy giant Bulb Energy. 

SVB’s sudden failure shocked markets worldwide but was preceded by warning signs like risky lending and liquidity pressures. FTX, once a dominant crypto exchange, imploded amid allegations of misused client funds and poor governance. Bulb Energy’s collapse highlighted vulnerabilities in business models overly dependent on volatile energy prices, combined with mismanagement and regulatory gaps. 

These iconic cases share a common narrative: rapid growth coupled with unchecked risk-taking, inadequate oversight, and a culture that normalised warning signs until systemic failure was inevitable. The lesson is clear: regardless of size or sector, no business is immune to collapse when foundational risks are ignored or concealed.

 

What Lies Beneath the Collapse

In many ways, the most interesting thing about the Prax case is not the dramatic exit, but the years leading up to it. There’s a valuable discomfort in studying these slow-motion failures, not to assign blame, but to learn how risk can become normalised.

For professionals in due diligence, strategy, governance, or finance, cases like Prax challenge us to improve our filters. They ask us not just to seek red flags, but to develop a sensitivity to structural integrity. That sensitivity is harder to define than a checklist, but it is the mark of real competence.

When we read the news of another “sudden” collapse, we’d do well to remember: what looked like a snap was almost always a slow break.