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Can you keep a company name after liquidation?

Question

Can you keep a company name after liquidation?

Answer

Section 216 of the Insolvency Act, 1986, states that company names cannot be retained post-liquidation, apart from in very limited circumstances. Similar names are also included in this ruling, which is intended to protect creditors from further financial loss and ensure that members of the public are not misled into thinking that the company still exists.

The rule applies to the 12-months prior to liquidation, and to all directors or shadow directors in office at the company during the same period. It is regarded as a serious offence to contravene these regulations, with the potential for severe penalties including fines and even a jail sentence in the most serious cases.

Three exceptions

These are the three exceptions to the ruling:

  • Directors can buy the company, its debt, and the company name – they must advertise the fact publicly by placing a notice in the Gazette within 28 days of purchasing the business. Company creditors must also be informed.
  • A court application can be made within seven days of liquidation, to retain the company name. A decision will be made by the court as to whether you can keep the name, but you are allowed to use it whilst the court decides, or for a period of up to six weeks.
  • If the company is part of a group, you may be permitted to keep the name if associated businesses could suffer otherwise.

Ramifications of ignoring these rules

It is a serious issue if you contravene the Insolvency Act. The rules are there to protect creditor interests, and prevent directors from escaping responsibility in insolvency. You could be held personally liable for company debts, receive a substantial fine, or even go to prison.

Begbies Traynor can offer further advice to company directors facing insolvency. Call one of the team for a same-day consultation free-of-charge.

Advice You Can Trust

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland
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