Q&As

How do you bring an action against a director under section 216 of the Insolvency Act 1986 (for use of a prohibited name)?

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Published on LexisPSL on 10/04/2015

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • How do you bring an action against a director under section 216 of the Insolvency Act 1986 (for use of a prohibited name)?
  • Consequences of breaching section 216 of the Insolvency Act 1986
  • Criminal sanctions
  • Civil sanctions
  • Bringing an action against a person in breach of section 216 of the Insolvency Act 1986

How do you bring an action against a director under section 216 of the Insolvency Act 1986 (for use of a prohibited name)?

STOP PRESS: From 6 April 2017, the Insolvency Rules 1986, SI 1986/1925 were revoked and replaced by the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024. The content in this Q&A may have been affected by this change.

Consequences of breaching section 216 of the Insolvency Act 1986

A person breaching section 216 of the Insolvency Act 1986 (IA 1986) is committing a criminal offence and is also open to civil sanctions.

Criminal sanctions

Breaching IA 1986, s 216 is a strict liability offence which may lead to a fine or imprisonment or both—see IA 1986, s 430 and Sch 10. No knowledge or intention to deceive or defraud is needed due to the strict liability nature of this offence.

Civil sanctions

A breach of IA 1986, s 216 can lead to the person in breach having personal liability for the relevant debts of the new company under IA 1986, s 217.

IA 1986, s 217(1) states that a person is personally responsible for all the relevant debts of a company if at any time:

  1. in contravention of section 216, he is involved in the management of the company, or

  2. as a person who is involved in the management of the company, he acts or is willing

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