If you’re a director of a company that has encountered financial problems and are contemplating liquidation, be aware that there are specific regulations regarding the reuse of your company name. That said, although you may establish another business with the same name as before, it is an intricate matter with certain intricacies to keep in consideration when looking at the reuse of company name. This article answers the question “Can I reuse my company name?”
Table of Contents
- Under what circumstances is the name legally restricted in accordance with Section 216?
- What criteria is used to identify a name as being “similar”?
- Consequences of reusing a prohibited company name
- Exceptions that may allow you to reuse a company name
- In summary
Under what circumstances is the name legally restricted in accordance with Section 216?
If a company name is to be a “prohibited name”, it must have been linked with the liquidated company ‘oldco’ for at least twelve months prior to liquidation. Furthermore, directors of a bankrupt business who wish to reuse the same or a comparable moniker within five years post-liquidation must abide by stringent regulations.
What criteria is used to identify a name as being “similar”?
If a third party can make the link between the liquidated company and new business through their respective trading names, then they are considered too similar.
Consequences of reusing a prohibited company name
Adherence to Section 216 of the Insolvency Act 1986 is not optional – if breached, consequences such as fines and imprisonment are sure to ensue. Moreover, directors who have operated under a prohibited name will be stripped of their limited liability privilege, meaning that any debts accumulated during their tenure would become a personal liability for them.
Exceptions that may allow you to reuse a company name
By examining the three exemptions listed below, it is possible to reuse a company name. However, we strongly advise that company directors consult with an experienced and licensed insolvency practitioner before making any final decisions on using a liquidated company title.
The three exceptions:
An individual or business can acquire the entire company, including its trading name, upon arrangements drafted by an insolvency specialist. This is commonly known as a phoenix company. Within 28 days of obtaining control over the organization’s assets, creditors must be notified and this fact must also be posted in The Gazette for public awareness.
Apply to the court for ‘leave’
A company director of the new company, known as ‘newco’, must seek permission from the court to use the name previously used by an insolvent company (‘oldco’). This application should be submitted within seven days after liquidation takes place and a decision will be made up to 6 weeks after. The court looks into various elements before rendering its judgment, such as whether newco has moral financial backing and a capable team who can provide guidance.
Name already in use by another company/group of companies
To protect groups of companies with the same or a similar trading name as an insolvent company from being forced to forfeit their own right to use that name during liquidation, certain criteria must be satisfied. This helps ensure that not all other members in the group are penalized when only one member is facing financial difficulties.
To be prohibited, the name must have been used by a company for at least 12 months leading up to the liquidation of an insolvent business.
Over the course of 12 months, companies that are applicable must have consistently traded and not been dormant for any duration.
Reusing a company name after liquidation is far from simple. Depending on your circumstances, it may be possible to reuse the same business name; however, it can still be difficult to determine if you can use the same or similar name. Professional advice should always be sought prior to making any decisions for the business as breaching Section 216 could have legal repercussions for both you and the new company and this could leave you personally liable. Contact Company Doctor on 0800 169 1536 for more advice.
Further Reading On Liquidation Related Matters
- How Does Liquidation Affect You Personally?
- What Happens To Employees When A Company Enters Liquidation?
- What To Expect In A Company Investigation During Liquidation
- The Compulsory Liquidation Process
- Company Liquidation Explained – A Helpful Guide
- A Guide To Applying For A Creditors Voluntary Liquidation
The government also has information here.