Q&As

Does sending a notice to creditors under Insolvency (England and Wales) Rules 2016, SI 2016/1024, r 22.4 only allow for the director to use a prohibited name in respect of the successor company which has bought the business of the liquidated company, or can the notice also provide for the use of a prohibited name by other associated companies which haven't bought the business but which the individual is a director of and which uses the prohibited name?

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Produced in partnership with Helen Kavanagh
Published on LexisPSL on 05/04/2019

The following Restructuring & Insolvency Q&A produced in partnership with Helen Kavanagh provides comprehensive and up to date legal information covering:

  • Does sending a notice to creditors under Insolvency (England and Wales) Rules 2016, SI 2016/1024, r 22.4 only allow for the director to use a prohibited name in respect of the successor company which has bought the business of the liquidated company, or can the notice also provide for the use of a prohibited name by other associated companies which haven't bought the business but which the individual is a director of and which uses the prohibited name?

This Q&A focuses on sales by liquidation. Sales by other office-holders when company is not in liquidation are not considered.

A director of a company that goes into liquidation cannot use the name of that company in liquidation in a new business for a period of five years, or they risk criminal and/or civil penalties under section 216 of the Insolvency Act 1986 (IA 1986). For further information, see Practice Note: Prohibited names under section 216 of the Insolvency Act 1986.

IA 1986, s 216 was designed to counteract the 'phoenix' phenomenon, where directors put their insolvent company into liquidation, set up a new company using the same name, and then seemingly carried on the same business with no material change, leaving behind its creditors. The re-use of the name is seen by many as a way of deceiving creditors into thinking they are dealing with the same company, without being aware that it has actually gone into insolvent liquidation.

It was recognised by the legislature that a balance had to be found between the need to ensure creditors are fully awa

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