Restrictions on a company name after Liquidation
14 December 2022
Are you using a prohibited company name?
When a company enters insolvent liquidation, insolvency legislation prevents the same name as that of the insolvent company, or any name which is similar, being used again by the company directors.
If you’ve been a director of a company (at any time during the 12-month period before it enters insolvent liquidation), you’re automatically prohibited from being a director of, or directly or indirectly being concerned in or taking part in in the promotion, formation or management of a company with the same or similar name to the liquidated company, for a period of 5 years.
If you’re concerned that you might be using a prohibited name, or wish to fully explore your options, then we strongly recommend you seek professional advice about your position, alongside the advice provided by us when dealing with the relevant insolvent process. We’ll be happy to introduce an appropriate lawyer practising in the relevant area.
There are three exceptions set out within the relevant legislation…
- If a new company purchases the whole, or substantially the whole of the business in liquidation then a similar name may be used. Critically this is subject to notice of the purchase being sent to all known creditors of the insolvent company, and it must be advertised in the London Gazette within 28 days of the sale being completed.
- Where a new company’s established, that hasn’t purchased the whole or substantially the whole of the business of the insolvent company, the new company can make an application to court within 7 days of the liquidation. The name can be used for a six-week period following the liquidation, or until the court’s heard the application (whichever is the earlier).
- If a previously established company’s been trading continuously for at least 12 months prior to the liquidation of the insolvent company, and whilst trading has been using what would otherwise be a prohibited name, an exemption may apply.
If you’re in any doubt as to whether an exemption applies, you should seek legal advice.
What are the consequences for violating the rules?
It’s a criminal offence to contravene Section 216 of the Insolvency Act 1986 (“IA 1986”) and if you act in contravention of this section, you’re liable on conviction to imprisonment and/or a fine.
Additionally, Section 217 of the IA 1986 provides that a person who does so is personally liable for any debts of the company incurred during the period of that involvement.