It was historically a problem for businesses doing business with others, that they didn't always know who they were dealing with. When in business one name can often seem very like another and confusion can ensue. It was for this reason that legislation was enacted which specifically prevented a director of a limited company, setting up a new company from his old premises using a very similar name. The practice become notoriously known as phoenixing. It is possible to set up again from the same premises doing the same type of work, but special rules need to be applied for the names used.

If you are a company director looking to use a name similar to the company which you had put through an insolvency procedure, you need to read these rules.

Restriction of re-use of company names - S 216 - Insolvency Act (1986)

Now to combat the above, the Insolvency Act brought in a section which set rules on when and how a company name could be used again.

Can I use the company name again?

Section 216 of the Insolvency Act 1986 said that it is an offence for a person who has within 12 months of the day of the liquidation been a director or a shadow director of a company in insolvent liquidation, for a period of five years, to be a director or involved in any way in the management of any other company or business carried on under or known by a prohibited name, without leave of the court. The key here is the definition of a prohibited name, which is any name by which the liquidated company was known at any time in the 12 months prior to the liquidation, or any name so similar as to suggest an association with that company. The problem here may arise with what is a name so similar to suggest association.

Moving on Section 217 of The Insolvency Act 1986 provides, amongst other things, that a person who is involved in the management of a company (or a person acting on instruction of someone) in contravention of Section 216 of The Insolvency Act 1986 is personally liable for the debts of the company that are incurred during the period of that involvement. There can be a real problem with a company director who wishes to carry on with essentially the same business.

There are 3 exceptions to this prohibition:

Where a company acquires the whole or substantially the whole, of the business of an insolvent company, under arrangements made by an insolvency practitioner acting as its liquidator, administrator or administrative receiver, or as supervisor of a voluntary arrangement.

Creditors of the affected company must be notified.

Where an individual affected by section 216 applies for leave of the court to use the prohibited name. [There will be no breach within 7 days of the liquidation. If an application for leave is made there is no breach until six weeks and 1 day after the date of liquidation or the day on which the court disposes of the application (whichever is the earliest). ]
The court's leave is not required where the company, though known by the prohibited name within the meaning of the section has:

been known by that name for the whole period of 12 months ending with the day before the liquidating company went into liquidation, and

has not at any time in those 12 months been dormant.

If you have to apply for leave it always best to engage a specialist solicitor and with our extensive contact base we can do this for you.

Alternatively if you want to try the application for yourself you must follow these rules.

The relevant court for the application is any court having jurisdiction to wind up companies (S.216(5)1A). It is not necessarily the court where the liquidation is taking place. Remember that permission is also needed, following S.216(3) for any "business" carried on (otherwise than by a company) i.e. a sole trader or partnership and that neither of the excepted cases under rules 4.228 and 4.230 can apply to an unincorporated business.

The correct form of application is an originating application under Insolvency Rule 7.3. The application should be made without notice on notice to the Secretary of State for Business Innovation and Skills and the Official Receiver in compulsory liquidation cases. The Official Receiver, the Secretary of State and the liquidator should not be respondents to the application.

The evidence in support of the application may however be given by way of witness statement. This follows from the amendment made to the Insolvency Rules r.7.57 by the Insolvency (Amendment) (No 2) Rules 1999 which says "where the Rules provide for the use of an affidavit, a witness statement verified by a statement of truth may be used as an alternative".

The court may request the liquidator to make a report (r.4.227) and at the hearing the Secretary of State or the Official Receiver may appear and call the attention of the court to any matters which seem to him to be relevant. S.216(5) IA and the Official Receiver/Secretary of State is entitled to the costs of attending.

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