Updated: 8th February 2021
If your company has been liquidated and you are setting up a new business, you may want to use the same or a similar company name. Section 216 of the Insolvency Act, 1986, places severe restrictions on this practice, however, and you may find yourself facing serious repercussions if you go ahead.
Below we look at the specifics of this legislation, but first, why might you want to reuse the name of your liquidated company?
Some directors prefer to use the same company name, or one that is very similar, to retain goodwill built up over the years by the old company. This encourages trade, and helps to ensure the new business gets off to a good start.
The problem for the authorities, however, is controlling those directors who have increased creditor losses in the liquidated company, either via fraudulent activity/deliberate misconduct, or through negligence.
This is a serious issue, and the ongoing protection of consumers and trade customers is paramount. So what does Section 216 of the Insolvency Act say about reusing a company name after liquidation?
There are three potential outcomes if you use a prohibited name:
When your business, or a substantial part of the business, is sold on by a licensed insolvency practitioner, you may be able to reuse the name. You must provide legal notice of the purchase to creditors of the old company within 28 days, and place an advert to the same effect in the Gazette.
A court application must be made within seven days of liquidation. You need to demonstrate that the new company has a secure financial base from which to operate, and an experienced team to guide future finances.
If you have been director of another company with the same or similar name, often a subsidiary company, and it has been trading continuously for 12 months prior to the other company’s liquidation, you may be able to retain the name. Additionally, the company must have held the name for 12 months.
If you require further guidance on the reuse of a company name, Real Business Rescue can provide professional advice. We have an extensive network of 100 offices offering confidential director support across the UK.
13th October 2021
The Bank of England has said it anticipates that rates of corporate insolvency will increase in the coming weeks following the removal of restrictions on winding up petitions.Read More