Theoretically this is possible and it happens. A director may be a director of a company that has gone into liquidation for any number of reasons and these are not all due to a fault with the director. Sometimes there is a reasonable business that can be salvaged from the liquidation and a director may have built up years of goodwill and contacts and it makes sense for them to continue the viable part of the business in the future.
However, this must be balanced with the need to protect the public. Insolvency legislation walks the tightrope between encouraging entrepreneurs and new business, and in protecting the public from unscrupulous business owners go through numerous companies, shedding their debts and taking no responsibility for those debts.
Can I act as a company director again following a liquidation?
As long as you haven’t been disqualified as a company director under the Company Directors disqualification legislation then you can act as a director again in the future.
You can’t act as a company director if you are currently bankrupt or subject to a bankruptcy restriction order.
If you have been disqualified as a company director then unless you apply to the court for leave to act as a director of a particular company, you can’t act as a director for the period that you have been disqualified by the court. This can be anything between 2 and 15 years. If you do act as a director during that period or even direct somebody to act on your behalf, then there can be very serious personal repercussions, including a fine and/or a custodial sentence.
Can I reuse the name of my old company?
The starting point is that the reuse of a name of a company that has gone into insolvent liquidation is not allowed for a period of 5 years from the date of liquidation, unless an application is made to the court for consent, or the director and the company falls under one of the exceptions listed under insolvency legislation.
This legislation is particularly strict in order to protect creditors from being duped by directors into thinking that they are effectively dealing with the same company that owes them money, when in reality the company has ceased and that money is never going to be repaid to them.
However, there are exceptions as follows:-
- If a director of a company in liquidation has purchased the whole or substantially the whole of the business of the company in liquidation by arrangement with its liquidator, and gives prescribed notice to creditors at the right time, then it is possible to reuse that name.
- It is also possible to reuse the name if the new business has already been known by the prohibited name continuously for at least 12 months before the liquidation. This can’t be a shelf company, but has to have been a fully trading company throughout the period.
- If the director applies for leave of the court to use the name. In order to do this, the director will need to provide information on why this is necessary, and prove it will not disadvantage creditors of either the old or the new company.
If you are a director who wants to reuse the name of a company in liquidation, we can help, but it is very important to take legal advice from an expert as soon as possible to avoid falling foul of these insolvency provisions. Breach of the prohibited names legislation can lead to personal financial liability and imprisonment, so it is very important that the procedure is carried out correctly. If you are in this position, or are considering reusing the name of a company in liquidation, then contact us to talk through your options. Whatever your situation, we can help.