If your company had been placed into liquidation, you may be preparing for the future and considering whether your company name can be reused following this process.

Section 216 of the Insolvency Act 1986 places restrictions on the use of a liquidated company’s name – a law put in place to address the issues of ‘phoenixing’ (which you can find out more detail about here), in which a company may rack up debts before becoming insolvent and then returning as a new company with the same name, leaving third parties none the wiser.

By law, a director may not be a director of (or take part in the formation, promotion or management) a company with a ‘prohibited name’ for the five years following liquidation.

A prohibited name refers to the one that a company has been known as for the 12 months leading up to the date of liquidation. It’s also worth noting that this applies to a name that could be associated with the company (e.g. a similar name).

There are no mitigating factors that can be taken into account for this offence; If you do not comply with the restrictions of using a prohibited name, then you run the risk of facing any, or all, of the following consequences:

  • A fine
  • Imprisonment
  • Personal liability for the debts of your company

However, there are exceptions to this rule, and under the following three circumstances, these rules may not apply:

  • Your company has been bought from a liquidator
    If your business is sold on by a licensed insolvency practitioner, you may be able to reuse the name. To comply, a notice must be sent within 28 days to outstanding creditors to notify them of the purchase, alongside an advert placed in The London Gazette (currently, the cost to do so is £79.40 plus VAT).
  • You have received permission from the court to use the name
    You can apply to the court for permission to reuse the liquidated company’s name. This must be done so within seven days of the liquidation.
  • The name is already in use by another company

Prior to liquidation, if you have been the director of another company that has been trading for 12 months with the same (or similar name), it may be possible to keep the name for that company.

If you are the party buying the business from a liquidator and are wishing to retain the company name, it is important to ensure that you have followed the correct processes to comply with the law. You must:

  • Purchase the whole, or substantially the whole of the business from the liquidator
  • Within 28 days of sale completion, send notice to all known creditors of the insolvent company
  • Within 28 days of sale completion, advertise in The London Gazette (Rule 22.4 notice). Currently, the cost to do so is £79.40 plus VAT.
  • Ensure notice is given before the new company commences use of the name

If you are unsure on whether you qualify for the exceptional circumstances or would like to access advice on anything else insolvency-related, please do not hesitate to get in touch.

As one of the oldest and most recognised licenced insolvency practises in the country, with over 100 years of combined partner knowledge, Poppleton & Appleby has assisted many companies across the country and is more than happy to help.