At the insolvency liquidation of a Company a person who was a director of that Company at any time within the 12 months prior to that date can not be a director of another company with the same or similar name, except with the permission of the Court.
This rule is designed to curtail the worst excesses of phoenix situations ie where one Company closes down leaving unsecured creditors without payment, only to open the next day with the same or similar name.
The Insolvency Act 1986 s216 makes it an offence to act in contravention of this prohibition. The former director guilty of this offence can also be liable for the debts of the new company.
The continuity of trading and value of goodwill in a business mean that a new company or its trading name will have to be the same or similar to the old Company that is now in insolvent liquidation.
The law allows the re-use of a Prohibited Name in the following circumstances –
Ordinarily, the most cost effective option is to file the Relevant Notice but there are circumstances in which that is not possible.
In those circumstances the directors should lose no time in instructing lawyers to make the relevant application at Court.
To further discuss any area of Insolvency Claims with an experienced lawyer please contact us or call us on 07460 005 769.
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