Prohibited names under section 216 of the Insolvency Act 1986
Prohibited names under section 216 of the Insolvency Act 1986

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Prohibited names under section 216 of the Insolvency Act 1986
  • The purpose of section 216 of the Insolvency Act 1986
  • Who is bound by IA 1986, s 216?
  • What names are restricted?
  • What is restricted?
  • The consequences of breaching IA 1986, s 216

The purpose of section 216 of the Insolvency Act 1986

Section 216 of the Insolvency Act 1986 (IA 1986) is aimed at preventing phoenix companies from causing a disadvantage to creditors by creating more transparency surrounding the re-use of company names.

A phoenix company may typically be where a director or directors trade a successive company with a similar name, taking the valuable parts of the company in liquidation, 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. This practice (known as phoenixing) is therefore met with distrust by creditors.

The Insolvency Service has produced guidance on the law relating to the practice of carrying on a business through a series of companies where each becomes insolvent, ie 'phoenix companies'. It has also provided information on its role in investigating director misconduct. See: Guidance on phoenix companies published (LNB News 08/10/2015 87) and the Guidance (Phoenix companies and the role of the Insolvency Service).

In some circumstances however, the purchase of the business and assets of the company in liquidation and the continuation of the business can be positive, especially for employees, and can be a way of bringing money into the liquidated company by way of sale proceeds which may not otherwise