Q&As

When does the exemption to section 216 under the insolvency rules apply?

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Published on LexisPSL on 25/11/2013

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

  • When does the exemption to section 216 under the insolvency rules apply?
  • What is a prohibited name?
  • What is the available exemption?
  • How to effect the notice to gain the exemption
  • Potential issues
  • Be aware!

When does the exemption to section 216 under the insolvency rules apply?

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.

What is a prohibited name?

The rule is that a director of a company that goes into liquidation cannot use the name of that company in liquidation in a new business for five years, or he risks criminal and/or civil penalties. For further guidance see Practice Note: Prohibited names under section 216 of the Insolvency Act 1986.

What is the available exemption?

Under rule 4.228 of the Insolvency Rules 1986 if a director of an insolvent company who wishes to re use a prohibited name purchases the whole or substantially the whole of the business of that company under arrangements with its liquidator, or by an office holder acting as the company's administrator, administrative receiver or supervisor of a voluntary arrangement prior to the company going into insolvent liquidation; and gives notice of the purchase and the re-use of the prohibited name to creditors in advance of the use of the name, in the prescribed way, then he may be entitled to use the name notwithstanding it is prohibited.

How to effect the notice to gain the

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