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Rising from the ashes - The reuse of a company's name or trading style
Published on: 18 March 2009
Under the provisions of sections 216 and 217 of the Insolvency Act, if you have been a director or shadow director of a company at some time in the year prior to it going into liquidation, you are not allowed for the five years after the commencement of liquidation to be a director, or even involved in the management of another company with a similar name or trading style.
If you breach this law, you are committing a criminal offence and will be liable for all the debts of the other company and may be disqualified from acting as a director for up to 15 years.
There are some exceptions to the general rule:
1. If the company purchases the business including goodwill from the liquidator, and notice in a prescribed form is given within 28 days to the liquidated company's creditors
2. If you apply to the court and the court gives you permission
3. If the company with a similar name as the one going into liquidation, has had a similar name or trading style and has been trading for the full 12 months prior to the liquidation.
This is a complicated area of law and, as can be seen, the penalties for falling foul can be severe. It is therefore always best if in any doubt to take specialist advice.
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