If A Company Goes Into Liquidation Can I Keep The Company Name?
Section 216 of The Insolvency Act 1986 restricts the re-use of the name of a limited company that has entered a liquidation process by a director of the Company.
The name of a limited company that has entered liquidation will be known as a prohibited name and applies to any name by which the company was known by in the 12 months prior to the liquidation starting. The restriction of using the name applies to the person/persons who were directors or shadow directors of the company any time within the 12 months before the liquidation.
The restriction prohibits a director and or shadow director being a director of a Company with the same name, or one so similar as to suggest an association, and also prohibits such a person from being involved in the promotion, formation or management of such a Company.
There are 2 exceptions to the re-use of a prohibited name.
You can purchase the whole of or substantially the whole of the business of the insolvent Company including the trading name from the insolvency practitioner who is appointed as Liquidator. If this happens then notices of the purchase must be advertised within the London Gazette and circulated to creditors of the insolvent Company.
You can apply to the court for permission to use the prohibited name. This application must be done within 7 business days of the start of the liquidation. While you are applying you may use the name for up to 6 weeks or until the court has made its decision.
Martin Buttriss, Licensed Insolvency Practitioner comments; “The purchase of the company name via an insolvency practitioner such as myself is not an un-common process. The director/s must be purchasing the whole or a substantial part of the business to allow for this sale to occur. As an insolvency practitioner our duty is to arrange the sale at a fair value.”
If section 216 is violated then this will be seen as a criminal offence and prosecution or a fine by BIS (The Department for Business Innovation and Skills) could be actioned.
To discuss this topic further you can always contact FA Simms & Partners who offer free, no obligation advice on all insolvency related issues.