In accordance with Section 216 of the Insolvency Act 1986 (“S216”), if you are a director or shadow director of the liquidating company, at any time in the 12 months before it goes into insolvent liquidation, you are prohibited for 5 years from being involved in another company with the same or a similar ‘prohibited name’ as the liquidating company.

A breach of s216 is a criminal office punishable by imprisonment, a fine, or both. You could also be disqualified from being a company director. Additionally, you can be made personally liable for the debts and liabilities which were incurred by the new company operating under the prohibited name during your management of it.

In 2022, it was reported that the director of Emergency Hotel Management Services Limited trading as Trades Hotel and Kaos Bar, which entered into liquidation on 28 June 2019, was continuing to use the trading name despite it being prohibited under the Insolvency Act 1986. The director pleaded guilty at the Blackpool Magistrates Court to the offence and was ordered to pay £1,550 in fines and costs.

These penalties can be avoided if any one of the following three exceptions to s216 apply:

  • Permission is granted by the courts for the new company to re-use the prohibited name. The application for permission must be made within 7 business days of the liquidating company entering liquidation. It grants temporary permission (a maximum of six weeks) to re-use the prohibited name.

  • Where you are a director of another company, (often a subsidiary company of the liquidating company) which has not been dormant, and which has already been trading using the ‘prohibited name’ for the whole 12-month period prior to the liquidating company’s liquidation. In this situation you may be able to retain the name without obtaining the court’s permission.

  • Where the whole, or substantially the whole of the liquidating company’s business or assets are sold by a licensed insolvency practitioner (liquidator) to a new company or business, of which you intend to be a director or be concerned in the promotion, formation or management of. In this situation, you may be able to re-use the prohibited name provided you first send a notice in a prescribed format to the liquidating company’s creditors and place this notice in the London Gazette within 28 days of the acquisition

If you would like any advice or assistance with the above, please contact our insolvency experts at Farleys on 0845 287 0939 or by email.