If your company’s gone through liquidation, you might want to start again, maybe even under the same name or a similar one. But under UK insolvency law, this isn’t always simple.
Sections 216 and 217 of the Insolvency Act 1986 set strict rules on reusing company names linked to insolvent liquidations. Breaching them can have serious personal consequences, including fines, disqualification, or even criminal liability.
Let’s look at what those rules mean in plain English, when you can legally re-use a company name, and how to stay compliant if you want to start afresh.
What the law says
Section 216 applies to directors (and shadow directors) of a company that’s gone into Creditors’ Voluntary Liquidation (CVL) or Compulsory Liquidation. It prevents those directors from being involved in another company with the same or similar name for five years after liquidation, unless specific exceptions apply.
This rule exists to stop “phoenix companies” misleading creditors into thinking they’re dealing with the same, debt-free business.
Section 217 sets out what happens if the rule is breached. In short: the director becomes personally liable for the debts of the new company incurred during the period of the offence. That means the limited liability protection that normally shields you as a director disappears.
What counts as the ‘same or similar’ name?
The legislation doesn’t define this precisely, so the courts look at how similar the name sounds or appears, not just exact matches.
For example:
- “ABC Builders Ltd” and “A.B.C. Builders (UK) Ltd” would be considered similar
- “TechServ Ltd” and “Tech Services Ltd” might also be considered similar
- Even trading names (not just registered company names) can count
If a reasonable person could assume there’s a connection between the two businesses, it’s likely to fall within the restriction.
Who does this apply to?
The restriction applies to:
- Any person who was a director or shadow director of the liquidated company at any time during the 12 months before liquidation
- Anyone who acts as a director or takes part in the management of another company using the prohibited name
It’s not limited to registered directorships. If you’re effectively managing or influencing the business, the law still applies.
The three exceptions that make re-use legal
There are only three ways to legally re-use a prohibited name:
1. Court permission
You can apply to the court for permission to use the name.
- The application must be made within seven days of the liquidation.
- You must stop using the name immediately if permission hasn’t been granted within six weeks of the liquidation.
The court will consider whether using the name is fair and whether creditors could be misled or disadvantaged.
2. Existing business use
If a sister or group company has been using the same or a similar name continuously for at least 12 months before your company went into liquidation, and wasn’t dormant during that period, the restriction doesn’t apply.
This rule is meant for ongoing group structures that were already in place before the liquidation, not for setting up a new company after the event.
3. Purchasing the business from the liquidator
If you buy the old company’s business from the liquidator, you can re-use the name provided that:
- You give formal written notice to all known creditors, and
- You publish an advertisement in the London Gazette within 28 days of the purchase.
This is known as a Rule 22 notice, and it must be done correctly to rely on this exception.
What happens if you ignore the rules?
If you re-use a prohibited name without meeting one of the exceptions, you’re breaking the law. The consequences can be severe:
- Criminal penalties: up to two years in prison or a fine.
- Personal liability: you could be personally responsible for the new company’s debts.
- Director disqualification: you could be banned from acting as a director for up to 15 years.
In practice, the Insolvency Service and HMRC are alert to phoenix activity, particularly when unpaid taxes are involved. If you’re unsure whether your new company name might breach the restriction, it’s far safer to check before you start trading.
Why these rules exist
The restriction isn’t designed to punish honest directors who’ve suffered a business failure. It’s there to protect creditors and the public. Without it, directors could liquidate one company to escape debt, then set up an identical one, leaving suppliers, lenders and HMRC unpaid.
Handled properly, though, the law still allows legitimate business continuity. Many directors go on to start new, successful ventures, often under similar branding, provided they follow the correct process and act transparently.
How to safely start again
If you’re thinking about starting a new company after liquidation:
- Get advice early. A licensed insolvency practitioner can confirm whether section 216 applies to you and what your options are.
- Choose your name carefully. If there’s any risk it could be seen as “similar”, get legal confirmation before registration.
- If you’re buying the business, act quickly. The 28-day creditor notice and Gazette advertisement are crucial. Missing these steps voids the protection.
- Document everything. Keep clear records of decisions, advice taken and notifications sent.
- Communicate honestly. Let suppliers and customers know about the new company’s status. Transparency helps avoid accusations of deception.
Key takeaways
- You can’t automatically re-use your old company name after liquidation.
- The restriction lasts for five years under section 216 of the Insolvency Act 1986.
- Breaching it can make you personally liable for new company debts under section 217.
- There are three exceptions: court permission, existing business use or purchasing the old company’s business with correct notices.
- Always take professional advice before registering or trading under a similar name.
We’re here to help you restart safely
If you’re considering liquidating your company and starting again, you’re not alone. Many directors rebuild stronger businesses after closure. But doing so legally is vital.
Our licensed insolvency practitioners can explain exactly how insolvency law works, whether it applies to you and how to set up your new company without putting yourself at risk. Get in touch today for free, confidential advice.
