Q&As

When does notice need to be served if you intend to use the exception to rule 4.228(1) in any relation to the Insolvency Act 1986, s 216 concerning prohibited names?

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Published by a LexisNexis Restructuring & Insolvency expert
Published on: 15 June 2016
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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.

Rule 4.228 of the Insolvency Rules 1986 (IR 1986), SI 1986/1925 permits a director of an insolvent company to act as a director of a new company with a prohibited name provided that the business of the insolvent company has been acquired under arrangements made by an insolvency practitioner and notice has been given to the creditors of the insolvent company.

The new notice procedure in SI 1986/1925, rule 4.228, as amended on 6 August 2007, allows notice to be served after the old company is in liquidation in certain circumstances.

Detailed commentary on the application for this rule can be found in Mithani: directors' Disqualification at The present

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Insolvency definition
What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

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