Reusing a company name
If your company has been through insolvent liquidation and you wish to start up a new company to take on the former business, you may be confused as to whether you can use the same company name or a similar one.
Some directors may wish to reuse the previous company name to retain the credibility, goodwill in the form of a ‘known name’ and status the old company will have built up over years of trading.
However, Section 216 of the Insolvency Act 1986 places restrictions on this practice. The potential outcomes for using a prohibited name are as follows:
- Imprisonment
- Fines
- Being personally liable for the new company’s liabilities jointly with the company
A ‘prohibited name’ is a name that the insolvent company had been known by in the 12 months prior to the liquidation date. This includes names similar enough to make it apparent that there may be links to the company in liquidation.
There are three exceptions here to Section 216:
- You can apply to court
An application to court must be made within 7 days of the company entering liquidation. A demonstration that the new company is financially secure to operate will need to be provided to the court.
- The name is already used – pre-existing name which has been in existence for 12 months or more prior to the liquidation date
- The appointed liquidator sells your/the company name, goodwill and substantially all of the liquidated company assets.
If your old trading name is to be reused, notices must be sent to The London Gazette within a 28 day period and to every creditor of the insolvent company.
This can be quite a difficult area of the law and if matters are not correctly dealt with problems can occur. Therefore it is better to take advice prior to setting up a new company.
For more information, please call Chamberlain & Co on 0113 242 0808 or email advice@chamberlain-co.co.uk
