Re-use of a company name after liquidation (section 216 of The Insolvency Act 1986)

The law restricts the re-use of a name previously used by a company that has gone into liquidation (section 216 of The Insolvency Act 1986).  This restriction applies personally to a director of the company in liquidation.  The name which can’t be used is known as the “prohibited name”.

What is a prohibited name?

A prohibited name is a name by which the liquidated company was known at any time in the 12 months immediately before the liquidation: whether this is its registered name at Companies House, or its trading name, or any name so similar to its registered or trading name as to suggest an association with the liquidated company.

Who is restricted?

The restriction applies to a person who was registered as a director or acted as a director of the company in liquidation at any time during the 12 months immediately before the liquidation.

What is the restriction?

For 5 years from the date of liquidation, you are not permitted to be a director of or take part in the promotion, formation or management of a limited company that is using a prohibited name.  In addition you may not be concerned in or take any part in carrying on a business that is using a prohibited name if the business is not a limited company (for example, if it is a partnership or sole trader).

What is an example of a prohibited name?

Say the company in liquidation was registered at Companies House as ABC Limited and it used the trading name XYZ, then the following would apply:

• The registered name ABC Limited or XYZ Limited would be prohibited.
• The trading name ABC or XYZ would be prohibited.
• The trading name ABC or XYZ used by an unincorporated business (such as a sole trader or partnership) would be prohibited.
• If a company or business had a registered name or trading name so similar as to suggest an association with ABC or XYZ, the name would be prohibited.

Next week I will consider the ways Directors can circum navigate the Section 216 legislation via three exceptions to the restrictions.

Posted at 01:41PM Jun 16, 2009 by Kris Wigfield in Personal Finance  |  Comments[0]