Can I Re-use an Insolvent Company's Name - 10 FAQs
Here you can download our Can I Re-Use An Insolvent Company's Name 10 Frequently Asked Questions answered booklet. An example of the useful information you can find in the booklet is featured below.
1. What Is A Phoenix Company?
A phoenix company is a commonly used term for a commercial entity that has emerged from the financial collapse or insolvency of a predecessor (the “phoenix” rising from the flames).
The phoenix company is often run or managed by the same individuals who operated the previous company and will usually trade using the same name as the previous company so that, for all intents and purposes, things look like business as usual.
2. Is It Legal To Run A Phoenix Company?
There is nothing wrong with establishing a new business from the remains of an insolvent company.
However the correct steps need to be taken to ensure that the transfer of business to the new entity is legal and that the management of the new “phoenix” company have complied with the statutory requirements that apply to the re-use of a company name.
These include properly acquiring the business from the Insolvency practitioner who is appointed over the insolvent company and paying fair consideration for that transaction. We would suggest that professional advice is sought by any party to these types of transactions.
3. Can All Directors Run A New Company Using The Same Name?
Any director of a failed company can become a director or be involved in the management of a new company unless they are:
(i) subject to a disqualification order or disqualification undertaking(and has not obtained permission from Court to continue to act as a director); or
(ii) is an un-discharged bankrupt;
(iii) is subject to a bankruptcy restrictions order or undertaking
There are however restrictions on whether the same trading name can be used again and we explore this in more detail below:
4. What Are The Prohibitions On Re-Use Of A Company Name?
It is an offence under section 216 of the Insolvency Act 1986 (“s216”) for a person who is a director or shadow director of a company in insolvent liquidation, or has been a director of shadow director of that company within a period of 12 months ending on the day before it went into liquidation, to be a director or involved in any way in the management of any other company or business which is known by or traded under a prohibited name.
There are however certain exceptions to this rule and more detail on these exceptions are provided below.
IN ORDER TO FIND OUT MORE ABOUT THIS SUBJECT AND THE ANSWERS TO THE QUESTIONS LISTED BELOW, DOWNLOAD OUR HANDY TIPS BOOKLET HERE.
ALTERNATIVELY, CONTACT THE TEAM ON 020 7841 0390
5. What Is The Purpose Of Prohibiting The Re-Use Of A Company Name?
6. What Is A Prohibited Name?
7. What Are The Consequences Of Using A Prohibited Name?
8. Are Other Directors Of The New Company Also Liable?
9. Exceptions To S.216 Restrictions
10. Who Is At Risk?
Should you require any further assistance at all with these matters, then please contact one of our corporate specialists on 020 7841 0390 and we will be happy to discuss this with you.