One question we are regularly asked by our clients is if a new Company can have a similar name to an old Company. This question tends to crop up where an old business is placed into liquidation and a new company is formed. The law around the re-use of Company names is quite complex, but one of our Insolvency Practitioners may be able to find you a simple solution that lies in one of the exceptions.
Under s.216 of the Insolvency Act 1986, a person acting as the Director of a Company within twelve months prior to it being placed into liquidation commits an offence if they act as a Director of a new Company that uses the same or a similar Company name for a period of five years. There are severe penalties if a Director is found guilty of the offence, including fines, imprisonment and often most worryingly for Directors, personal liability for the new companies’ debts.
Whether the Company’s name is similar is an objective test; would the reasonable man on the street believe that the new Company was in any way connected to the liquidated Company?
The Three Exceptions
The Director of a Company which has been trading for more than 12 months prior to the liquidation of a similarly named Company is entitled to continue to trade under that name. This exception is useful where the liquidated Company is part of a group of Companies.
This exception can apply when a similarly named Company acquires the whole, or substantially the whole, of the business of an insolvent Company under arrangements made by an Insolvency Practitioner. There are various notices which must be given in order for this exception to apply, which an Insolvency Practitioner will be able to advise you on.
If at the point of liquidation of the old Company a Director wishes to be the Director of a similarly named new Company, an application can be made to the Court seeking permission to do so. There are strict time restrictions on this exception, which one of our Insolvency Practitioners would be able to discuss with you further.
Are you thinking of opening a Company with a similar name? Perhaps your client is considering putting just one out of a group of Companies into liquidation? Our Group Development Director, Andy Platt, can give you free advice on which one of the exceptions may best apply to your situation. Please drop him a line on 0161 214 7913 or email firstname.lastname@example.org.